SECURITIES AND EXCHANGE COMMISSION
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date: November 11, 2003
UBS AG
Bahnhofstrasse 45, Zurich, Switzerland, and
Aeschenvorstadt 1, Basel, Switzerland
(Registrant’s Address)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
This Form 6-K consists of the Third Quarter 2003 Report, which appears immediately following this page.
Financial Reporting
Third Quarter 2003 Report
11 November 2003
UBS Financial Highlights
1 | Operating expenses/operating income less credit loss expense or recovery. | |
2 | For the EPS calculation, see Note 8 to the Financial Statements. | |
3 | Year to date annualized net profit/average shareholders’ equity less dividends. | |
4 | Includes hybrid Tier 1 capital, please refer to the BIS capital and ratios table in the UBS Results section. | |
5 | Excludes the amortization of goodwill and other intangible assets. | |
6 | Details of significant financial events can be found in the UBS Results section on page 7. | |
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 | Net profit less the amortization of goodwill and other intangible assets and significant financial events (after tax)/weighted average shares outstanding. | |
9 | Net profit for diluted EPS less the amortization of goodwill and other intangible assets and significant financial events (after tax)/weighted average shares outstanding for diluted EPS. | |
10 | Year to date annualized net profit less the amortization of goodwill and other intangible assets and significant financial events (after tax)/average shareholders’ equity less dividends. |
Throughout this report, 2002 segment results have been restated to reflect the transfer of the Private Banks & GAM to Corporate Center.
All financial information included in this report is unaudited, except for balance sheet information as at 31 December 2002, which is audited.
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Income statement key figures | ||||||||||||||||||||||||||||
Operating income | 8,490 | 9,111 | 8,000 | (7 | ) | 6 | 25,374 | 26,597 | ||||||||||||||||||||
Operating expenses | 6,353 | 6,788 | 6,788 | (6 | ) | (6 | ) | 19,318 | 21,801 | |||||||||||||||||||
Operating profit before tax | 2,137 | 2,323 | 1,212 | (8 | ) | 76 | 6,056 | 4,796 | ||||||||||||||||||||
Net profit | 1,673 | 1,639 | 942 | 2 | 78 | 4,526 | 3,636 | |||||||||||||||||||||
Cost/income ratio (%)1 | 75.1 | 74.7 | 83.9 | 76.0 | 81.3 | |||||||||||||||||||||||
Per share data (CHF) | ||||||||||||||||||||||||||||
Basic earnings per share2 | 1.52 | 1.44 | 0.79 | 6 | 92 | 4.00 | 2.98 | |||||||||||||||||||||
Diluted earnings per share2 | 1.47 | 1.42 | 0.76 | 4 | 93 | 3.93 | 2.84 | |||||||||||||||||||||
Return on shareholders’ equity (%)3 | 16.9 | 11.8 | ||||||||||||||||||||||||||
% change from | ||||||||||||||||||||||||||||
CHF million, except where indicated | ||||||||||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 31.12.02 | 30.6.03 | 31.12.02 | |||||||||||||||||||||||
Balance sheet key figures | ||||||||||||||||||||||||||||
Total assets | 1,328,140 | 1,365,491 | 1,181,118 | (3 | ) | 12 | ||||||||||||||||||||||
Shareholders’ equity | 35,704 | 36,692 | 38,991 | (3 | ) | (8 | ) | |||||||||||||||||||||
Market capitalization | 84,440 | 88,219 | 79,448 | (4 | ) | 6 | ||||||||||||||||||||||
BIS capital ratios | ||||||||||||||||||||||||||||
Tier 1 (%)4 | 11.5 | 12.0 | 11.3 | |||||||||||||||||||||||||
Total BIS (%) | 13.3 | 14.0 | 13.8 | |||||||||||||||||||||||||
Risk-weighted assets | 241,533 | 243,032 | 238,790 | (1 | ) | 1 | ||||||||||||||||||||||
Invested assets (CHF billion) | 2,182 | 2,168 | 2,037 | 1 | 7 | |||||||||||||||||||||||
Headcount (full-time equivalents) | ||||||||||||||||||||||||||||
Switzerland | 26,901 | 27,209 | 27,972 | (1 | ) | (4 | ) | |||||||||||||||||||||
Europe (excluding Switzerland) | 9,922 | 10,063 | 10,009 | (1 | ) | (1 | ) | |||||||||||||||||||||
Americas | 25,506 | 25,914 | 27,350 | (2 | ) | (7 | ) | |||||||||||||||||||||
Asia/Pacific | 3,824 | 3,787 | 3,730 | 1 | 3 | |||||||||||||||||||||||
Total | 66,153 | 66,973 | 69,061 | (1 | ) | (4 | ) | |||||||||||||||||||||
Long-term ratings | ||||||||||||||||||||||||||||
Fitch, London | AA+ | AAA | AAA | |||||||||||||||||||||||||
Moody’s, New York | Aa2 | Aa2 | Aa2 | |||||||||||||||||||||||||
Standard & Poor’s, New York | AA+ | AA+ | AA+ | |||||||||||||||||||||||||
Earnings adjusted for significant financial events and pre-goodwill5, 6
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Operating income | 8,490 | 8,950 | 8,000 | (5 | ) | 6 | 25,213 | 26,442 | ||||||||||||||||||||
Operating expenses | 6,115 | 6,550 | 6,483 | (7 | ) | (6 | ) | 18,600 | 20,858 | |||||||||||||||||||
Operating profit before tax | 2,375 | 2,400 | 1,517 | (1 | ) | 57 | 6,613 | 5,584 | ||||||||||||||||||||
Net profit | 1,911 | 1,875 | 1,247 | 2 | 53 | 5,242 | 4,454 | |||||||||||||||||||||
Cost/income ratio (%)7 | 72.2 | 73.4 | 80.1 | 73.6 | 78.2 | |||||||||||||||||||||||
Basic earnings per share (CHF)8 | 1.73 | 1.65 | 1.04 | 5 | 66 | 4.64 | 3.65 | |||||||||||||||||||||
Diluted earnings per share (CHF)9 | 1.68 | 1.62 | 1.01 | 4 | 66 | 4.55 | 3.50 | |||||||||||||||||||||
Return on shareholders’ equity (%)10 | 19.5 | 14.6 | ||||||||||||||||||||||||||
Third Quarter 2003 Report
11 November 2003
Contents
Shareholders’ Letter | 2 | |||
UBS Results | 4 | |||
Wealth Management & Business Banking | 16 | |||
Global Asset Management | 25 | |||
Investment Bank | 31 | |||
Wealth Management USA | 40 | |||
Corporate Center | 45 | |||
Financial Statements | ||||
UBS Income Statement | 47 | |||
UBS Balance Sheet | 48 | |||
UBS Statement of | ||||
Changes in Equity | 49 | |||
UBS Statement of Cash Flows | 50 | |||
Notes to the Financial Statements | 51 | |||
UBS Registered Shares | 60 |
Financial Calendar | ||
Publication of Fourth Quarter 2003 results | Tuesday, 10 February 2004 | |
Publication of Annual Report 2003 | Wednesday, 17 March 2004 | |
Annual General Meeting | Thursday, 15 April 2004 | |
Publication of First Quarter 2004 results | Tuesday, 4 May 2004 | |
UBS Investor Relations | ||||
Hotline: +41 1 234 4100 | email: sh-investorrelations@ubs.com | Web: www.ubs.com/investors | ||
Zurich | New York | |||||
Christian Gruetter | +41 1 234 4360 | Richard Feder | +1 212 713 6142 | |||
Oliver Lee | +41 1 234 2733 | Christopher McNamee | +1 212 713 3091 | |||
Cate Lybrook | +41 1 234 2281 | |||||
Fax | +41 1 234 3415 | Fax | +1 212 713 1381 | |||
UBS AG | UBS Americas Inc. | |
Investor Relations G41B | Investor Relations | |
P.O. Box | 135 West 50th Street, 10th Floor | |
CH-8098 Zurich | New York, NY 10020 | |
Switzerland | United States of America | |
UBS Shareholder Services | US Transfer Agent | |||||
UBS AG | Mellon Investor Services | |||||
Shareholder Services GUMV | Overpeck Centre | |||||
P.O. Box | 85 Challenger Road | |||||
CH-8098 Zurich | Ridgefield Park, NJ 07660 | |||||
Switzerland | United States of America | |||||
Phone: | +4112356202 | |||||
Fax: | +4112353154 | calls from the US | +1 866 541 9689 | |||
email: | sh-shareholder-services@ubs.com | calls outside the US | +1 201 329 8451 | |||
Fax: | +1 201 296 4801 | |||||
UBS Media Relations | ||||
Hotline: +41 1 234 8500 | email: sh-gpr@ubs.com | Web: www.ubs.com/media | ||
Interactive Third Quarter 2003 Report
Other reports
1
Third Quarter 2003 Report
11 November 2003
Shareholders’ Letter
Dear Shareholders, | ||
We are pleased to report our most profitable quarter in three years. We have benefited from recovering equity markets and improving sentiment while securing substantial competitive gains – demonstrated most visibly by the CHF 20 billion in net new assets that clients have brought to UBS in third quarter. At the same time, we have retained our cost discipline, pushing our pre-goodwill cost/income ratio to its lowest since PaineWebber became part of UBS. In particular, we were able to significantly reduce costs in our Swiss domestic and US wealth management businesses. | ||
Net profit for the quarter was CHF 1,673 million (up 78% from third quarter 2002). Before goodwill, net profit was CHF 1,911 million, up 53% from a year earlier. All our businesses have increased profits and improved their |
cost / income ratios compared to third quarter 2002. This strong business performance, combined with our continued share buybacks, has helped us significantly improve shareholder returns, with pre-goodwill return on equity for the year close to 20%.
2
The performance of our credit portfolio reflects the initial signs of global economic recovery. We realized a net recovery of CHF 26 million this quarter, compared to a net credit loss expense of CHF 95 million a year ago.
The progress of our organic growth drivecontinues. In Asia, for example, we were the first financial services firm to offer clients direct access to the Chinese domestic financial market. This strategy of organic growth has been boosted by a series of small acquisitions that expand the presence of our core businesses. For example, our recently announced acquisition of Merrill Lynch’s German private client business will significantly enhance our profile in the German market for wealthy individuals. It is a further step in our systematic effort to expand in our European target markets following the acquisition of Lloyds TSB’s French wealth management business earlier this summer. At the same time, our Investment Bank continues to invest in growth areas, most clearly evidenced by our acquisition of ABN AMRO’s US prime brokerage operations in September.
The success of a companyis not only due to pure commercial factors, but also depends on the quality of governance and management. We were therefore pleased when ethos, a Swiss investment foundation, and the Cantonal Bank of Zurich confirmed the quality of our governance structures and financial disclosure in two separate studies released recently which rated us top among Swiss companies. Continuous strengthening of our leadership and clear succession planning are also key priorities for us. In that context, we were pleased to announce the reintroduction of the Chief Financial Officer role with the appointment of current Asia Pacific CEO Clive Standish to that post, effective 1 April 2004. On 1 January 2004, Mark B. Sutton will succeed Joseph J. Grano, Jr. as CEO of Wealth Management USA. We are also proposing that Stephan Haeringer, currently Deputy CEO, be elected to the Board of Directors at the next Annual General Meeting, and that Chief Credit Officer Marco Suter be proposed to the Board a year later, in 2005, to succeed retiring Vice Chairman Alberto Togni. We have also re-established the title of Chief Executive Officer.
The use of employee stock options has been broadly debated in recent times – it is a discussion that you as investors may have been following closely. We recently reviewed the use of options in our compensation schemes. Our conclusion is that the selective use of stock options as an element in our overall compensation strategy gives employees an appropriate long-term incentive to pursue sustainable share price appreciation. Consequently, we will continue to use options, but from 2004 onwards we will be granting them far more selectively than before. We will use them solely to encourage voluntary investments in UBS shares, or offer them as a targeted incentive to those who make key contributions to our long-term success.
Outlook –Throughout the year, market conditions have fluctuated, with trading opportunities shifting from one area to another. We have proven to be well positioned to capture those opportunities at the right times. Our diversified revenue mix, with its stable core of wealth and asset management income, has helped us contain market-driven volatility. Underlying these fluctuations, however, global economies and market conditions have been gradually improving. The stronger and more certain that recovery proves, the more positive the effect on our revenues.
11 November 2003 | ||
UBS | ||
Marcel Ospel | Peter Wuffli | |
Chairman | Chief Executive Officer |
3
UBS Results
11 November 2003
UBS Results
Performance Against Targets
Year to date, annualized | 30.9.03 | 30.6.03 | 30.9.02 | |||||||||
RoE (%) | ||||||||||||
as reported1 | 16.9 | 15.7 | 11.8 | |||||||||
before goodwill and adjusted for significant financial events2 | 19.5 | 18.3 | 14.6 | |||||||||
For the quarter ended | 30.9.03 | 30.6.03 | 30.9.02 | |||||||||
Basic EPS (CHF) | ||||||||||||
as reported3 | 1.52 | 1.44 | 0.79 | |||||||||
before goodwill and adjusted for significant financial events4 | 1.73 | 1.65 | 1.04 | |||||||||
Cost/income ratio (%) | ||||||||||||
as reported5 | 75.1 | 74.7 | 83.9 | |||||||||
before goodwill and adjusted for significant financial events6 | 72.2 | 73.4 | 80.1 | |||||||||
Net new money, wealth management units (CHF billion)7 | ||||||||||||
Wealth Management | 9.4 | 6.5 | 9.3 | |||||||||
Wealth Management USA | 5.7 | 3.9 | 3.4 | |||||||||
Total | 15.1 | 10.4 | 12.7 | |||||||||
1 | Year to date annualized net profit/average shareholders’ equity less dividends. | |
2 | Year to date annualized net profit less the amortization of goodwill and other intangible assets and significant financial events (after tax)/average shareholders’ equity less dividends. | |
3 | For the EPS calculation, see 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 | Operating expenses/operating income less credit loss expense or recovery. | |
6 | 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. | |
7 | Excludes interest and dividend income. | |
8 | Wealth Management and Wealth Management USA. |
4
Initiatives and achievements
Senior executive appointments
Use of options in compensation
Fair value disclosure of options
Results
In third quarter 2003, UBS reported net profit of CHF 1,673 million, up 78% from CHF 942 million in the same quarter a year earlier. Before goodwill amortization, net profit rose 53% in the same period. It was our best quarterly result since 2000 and reflects continued cost management initiatives as well as our ability to capture revenue growth where opportunities arise. All our Business Groups showed an increase in pre-tax profit when compared to a year ago. Operating expenses were at their second lowest level since PaineWebber became part of UBS in fourth quarter 2000. Fee and commission income recovered in third quarter from a year earlier, reflecting improving financial markets, with private equity writedowns falling substantially over the same period.
5
UBS Results
11 November 2003
CHF 1.52 in third quarter, against CHF 0.79 in the same quarter a year earlier. The cost/income ratio was 75.1% in third quarter 2003, an improvement from 83.9% in the same period a year earlier.
UBS targets
UBS’s performance is reported in accordance with IFRS. Additionally, we provide comments and analysis on an adjusted basis which excludes from the reported amounts certain items we term significant financial events (SFEs). An additional adjustment we use in our results discussion is the exclusion of the amortization of goodwill and other acquired intangible assets.
to our shareholders. These targets are evaluated on this adjusted basis.
– | For the first nine months of 2003 our annualized return on equity was 19.5% – its highest level since 2000, up from 14.6% in the same period a year ago and close to the top of our target range of 15–20%. The increase reflects improving net profit combined with a lower average level of equity due to our continued buyback programs. |
– | Basic earnings per share – at their third highest level ever – increased by 66% to CHF 1.73 in third quarter 2003 from CHF 1.04 in the same quarter a year ago. The increase was driven by significantly higher profit as well as the reduced average number of shares outstanding, reflecting our continuous buyback activities. Without the buyback programs in place since 2000, our earnings per share would now have been 14% lower. |
– | The cost/income ratio was 72.2% in third quarter 2003, an improvement from 80.1% in the same period last year. This drop pushes the ratio down to its lowest level since the merger with PaineWebber, with improvements in all our Business Groups compared to a year ago. Our ongoing cost management initiatives resulted in lower absolute cost bases in most of our business units, led by significant declines in the Business Banking Switzerland and Wealth Management USA businesses. |
Invested Assets
Quarter ended | % change from | |||||||||||||||||||
CHF billion | 30.9.03 | 30.6.03 | 30.9.02 | 30.6.03 | 30.9.02 | |||||||||||||||
UBS | 2,182 | 2,168 | 2,070 | 1 | 5 | |||||||||||||||
Wealth Management & Business Banking | ||||||||||||||||||||
Wealth Management | 693 | 691 | 655 | 0 | 6 | |||||||||||||||
Business Banking Switzerland | 208 | 209 | 202 | 0 | 3 | |||||||||||||||
Global Asset Management | ||||||||||||||||||||
Institutional | 305 | 297 | 273 | 3 | 12 | |||||||||||||||
Wholesale Intermediary | 267 | 270 | 270 | (1 | ) | (1 | ) | |||||||||||||
Investment Bank | 3 | 3 | 3 | 0 | 0 | |||||||||||||||
Wealth Management USA | 626 | 622 | 597 | 1 | 5 | |||||||||||||||
Corporate Center | ||||||||||||||||||||
Private Banks & GAM | 80 | 76 | 70 | 5 | 14 | |||||||||||||||
6
Net New Money1
Quarter ended | Year to date | |||||||||||||||||||
CHF billion | 30.9.03 | 30.6.03 | 30.9.02 | 30.9.03 | 30.9.02 | |||||||||||||||
UBS | 20.2 | 14.4 | 15.2 | 51.7 | 27.9 | |||||||||||||||
Wealth Management & Business Banking | ||||||||||||||||||||
Wealth Management | 9.4 | 6.5 | 9.3 | 23.3 | 14.9 | |||||||||||||||
Business Banking Switzerland | (2.4 | ) | 0.3 | 4.3 | (4.0 | ) | 6.4 | |||||||||||||
Global Asset Management | ||||||||||||||||||||
Institutional | 6.3 | 1.1 | (3.6 | ) | 11.3 | (3.8 | ) | |||||||||||||
Wholesale Intermediary | (1.4 | ) | 1.3 | 0.8 | 3.3 | (5.5 | ) | |||||||||||||
Investment Bank | 0.2 | 0.1 | 0.1 | 0.3 | 0.4 | |||||||||||||||
Wealth Management USA | 5.7 | 3.9 | 3.4 | 13.3 | 12.2 | |||||||||||||||
Corporate Center | ||||||||||||||||||||
Private Banks & GAM | 2.4 | 1.2 | 0.9 | 4.2 | 3.3 | |||||||||||||||
Management USA) remained very strong. Inflows in third quarter, at CHF 15.1 billion, were at their third highest level ever and significantly above the CHF 10.4 billion recorded in second quarter. The Wealth Management unit, buoyed by particularly strong results in our European wealth management business and in Asia, attracted a record net new money inflow of CHF 9.4 billion in third quarter. Our Wealth Management USA business, continuing to outperform peers, also saw a strong CHF 5.7 billion inflow in third quarter, up from CHF 3.9 billion in second quarter.
Significant financial events
There were no significant financial events in second or third quarter 2002 or in first and third quarter 2003, but there was one significant financial event in second quarter 2003 and one in first quarter 2002.
– | We realized a net gain of CHF 2 million (pre-tax CHF 161 million) in second quarter 2003 from the sale of Wealth Management USA’s Correspondent Services Corporation (CSC) business. A substantial portion of CSC’s net assets comprised goodwill stemming from the PaineWebber acquisition. After deducting taxes of CHF 159 million (based on the purchase price) and the writedown of the goodwill associated with CSC, the net gain from the transaction was CHF 2 million. |
– | In first quarter 2002, we realized a net gain of CHF 125 million (pre-tax CHF 155 million) from the sale of private bank Hyposwiss. |
Details of significant financial events are shown in the table on page 8.
UBS results
Operating income
7
UBS Results
11 November 2003
Significant Financial Events (SFE)
For the quarter ended
UBS | ||||||||||||||||||
CHF million | Line affected in Income Statement | 30.9.03 | 30.9.02 | |||||||||||||||
Net profit | ||||||||||||||||||
As reported | 1,673 | 942 | ||||||||||||||||
No significant financial events | ||||||||||||||||||
Adjusted net profit | 1,673 | 942 | ||||||||||||||||
Amortization of goodwill and other intangible assets | 238 | 305 | ||||||||||||||||
Adjusted net profit before goodwill | 1,911 | 1,247 | ||||||||||||||||
Wealth | ||||||||||||||||||
Year to date | Management | Corporate | ||||||||||||||||
UBS | USA | Center | ||||||||||||||||
CHF million | Line affected in Income Statement | 30.9.03 | 30.9.02 | 30.9.03 | 30.9.02 | |||||||||||||
Operating income | ||||||||||||||||||
As reported | 25,374 | 26,597 | 3,900 | 2,085 | ||||||||||||||
Less: Gain on disposal of Correspondent Services Corporation | Other income | 161 | 161 | |||||||||||||||
Less: Gain on disposal of Hyposwiss | Other income | 155 | 155 | |||||||||||||||
Adjusted operating income | 25,213 | 26,442 | 3,739 | 1,930 | ||||||||||||||
Operating expenses | ||||||||||||||||||
As reported | 19,318 | 21,801 | 3,895 | 1,778 | ||||||||||||||
No significant financial events | ||||||||||||||||||
Adjusted operating expenses | 19,318 | 21,801 | 3,895 | 1,778 | ||||||||||||||
Operating profit | ||||||||||||||||||
Operating profit before tax and minority interests | 6,056 | 4,796 | 5 | 307 | ||||||||||||||
SFE adjustments, net | (161 | ) | (155 | ) | (161 | ) | (155 | ) | ||||||||||
Adjusted operating profit before tax and minority interests | 5,895 | 4,641 | (156 | ) | 152 | |||||||||||||
Net profit | ||||||||||||||||||
As reported | 4,526 | 3,636 | ||||||||||||||||
SFE adjustments, net | (161 | ) | (155 | ) | ||||||||||||||
Tax effect of significant financial events, net | Tax expense | 159 | 30 | |||||||||||||||
Adjusted net profit | 4,524 | 3,511 | ||||||||||||||||
Amortization of goodwill and other intangible assets | 718 | 943 | ||||||||||||||||
Adjusted net profit before goodwill | 5,242 | 4,454 | ||||||||||||||||
est income and net trading income, we analyze the total according to the business activities that give rise to the income, rather than by the type of income generated.
ness, the latter reflecting higher interest margins. These factors were mostly offset by lower interest margins on cash and savings accounts, declining revenues from our reduced recovery portfolio as well as falling interest revenues in Swiss franc terms from US dollar cash accounts.
8
Net Interest and Trading Income
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Net interest income | 3,357 | 3,026 | 2,726 | 11 | 23 | 9,292 | 7,849 | |||||||||||||||||||||
Net trading income | 642 | 1,333 | 1,027 | (52 | ) | (37 | ) | 3,236 | 4,906 | |||||||||||||||||||
Total net interest and trading income | 3,999 | 4,359 | 3,753 | (8 | ) | 7 | 12,528 | 12,755 | ||||||||||||||||||||
Breakdown by business activity
Quarter ended | % change from | Year to date | |||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Net income from interest margin products | 1,267 | 1,292 | 1,238 | (2 | ) | 2 | 3,844 | 3,979 | |||||||||||||||||||||
Equities | 743 | 700 | 807 | 6 | (8 | ) | 1,758 | 2,272 | |||||||||||||||||||||
Fixed income | 1,568 | 1,794 | 1,389 | (13 | ) | 13 | 5,362 | 4,991 | |||||||||||||||||||||
Foreign exchange | 351 | 419 | 287 | (16 | ) | 22 | 1,140 | 1,172 | |||||||||||||||||||||
Other | 83 | 85 | 59 | (2 | ) | 41 | 244 | 199 | |||||||||||||||||||||
Net income from trading activities | 2,745 | 2,998 | 2,542 | (8 | ) | 8 | 8,504 | 8,634 | |||||||||||||||||||||
Net income from treasury activities | 334 | 354 | 328 | (6 | ) | 2 | 1,072 | 1,232 | |||||||||||||||||||||
Other1 | (347 | ) | (285 | ) | (355 | ) | (22 | ) | 2 | (892 | ) | (1,090 | ) | ||||||||||||||||
Total net interest and trading income | 3,999 | 4,359 | 3,753 | (8 | ) | 7 | 12,528 | 12,755 | |||||||||||||||||||||
to CHF 743 million this quarter. The drop was due to the weakening of the US dollar against the Swiss franc. Excluding currency effects, equity trading income was actually stronger this quarter than a year earlier, reflecting improving market conditions and an increase in client activity levels. Fixed income trading income increased 13% to CHF 1,568 million in third quarter from CHF 1,389 million a year earlier. Revenues remained very strong, and particularly good results were reported by our Mortgage, Government Bonds, Investment Grade and High Yield trading businesses. Revenues, however, did not match the exceptionally strong results achieved in the buoyant markets of second quarter 2003 due to market-driven declines in Fixed Income and Principal Finance. Results were also pushed down by the continued narrowing of credit spreads, which led to negative revenues of CHF 192 million relating to Credit Default Swaps (CDSs) hedging existing credit exposure in the loan book. In the same quarter a year ago, we recorded a mark to market gain of CHF 321 million from these positions. At CHF 351 million in third quarter 2003, foreign exchange revenues increased by 22% from CHF 287 million a year earlier, reflecting the continued
strong growth of our business, especially in online transactions.
9
UBS Results
11 November 2003
CHF 528 million in the same period a year earlier. The drop was mostly due to the weakening of the US dollar and other major currencies against the Swiss franc. Equity underwriting revenues dropped by 13%, whereas fixed income underwriting revenues increased slightly by 1%. Corporate finance fees rose 13% to CHF 188 million in third quarter from CHF 167 million a year earlier. This reflects a slightly better environment for corporate finance activities, with the overall fee pool growing by 5% from the same quarter a year ago. It was also due to an increase in our US revenues. Net brokerage fees dropped 2% to CHF 1,075 million in third quarter 2003 from CHF 1,098 million in the same quarter a year ago. The drop was mainly related to currency fluctuations as well as due to the absence of revenues from our CSC business, which we sold last quarter. Excluding the impact of the Swiss franc’s strengthening, net brokerage fees would have increased by 2%, reflecting improving client activity levels. Investment fund fees increased 8% to CHF 1,031 million in third quarter, from CHF 951 million in the same quarter in 2002, mainly reflecting higher asset-based fees. At CHF 1,022 million in third quarter 2003, portfolio and other
management and advisory fees were up by 9% from third quarter 2002. This increase was mainly due to higher performance and portfolio fees, which mirrored higher equity market levels.
Operating expenses
Allowances and provisions for credit risk
Wealth Management & | ||||||||||||
Business Banking | ||||||||||||
CHF million | ||||||||||||
As at | 30.9.03 | 30.6.03 | ||||||||||
Loans to banks (gross) | 4,233 | 4,146 | ||||||||||
Loans to customers (gross) | 170,621 | 171,109 | ||||||||||
Gross loans | 174,854 | 175,255 | ||||||||||
Non-performing loans | 4,178 | 4,518 | ||||||||||
Other impaired loans | 2,393 | 2,636 | ||||||||||
Total impaired loans | 6,571 | 7,154 | ||||||||||
Allowances for non-performing loans | 2,398 | 2,705 | ||||||||||
Allowances for other impaired loans | 484 | 487 | ||||||||||
Total allowances for impaired loans | 2,882 | 3,192 | ||||||||||
Other allowances and provisions | 348 | 396 | ||||||||||
Total allowances and provisions | 3,230 | 3,588 | ||||||||||
of which country allowances and provisions | 515 | 499 | ||||||||||
Ratios | ||||||||||||
Impaired loans as a % of gross loans | 3.8 | 4.1 | ||||||||||
Non-performing loans as a % of gross loans | 2.4 | 2.6 | ||||||||||
Allowances and provisions for credit loss as a % of gross loans | 1.8 | 2.0 | ||||||||||
Allocated allowances as a % of impaired loans | 43.9 | 44.6 | ||||||||||
Allocated allowances as a % of non-performing loans | 57.4 | 59.9 | ||||||||||
10
year earlier. Almost all categories of costs dropped. General and administrative expenses dropped sharply by 17% to their second lowest level since 1999. Amortization expenses, down 22%, also decreased considerably and were at their lowest level since PaineWebber became a part of UBS. Overall, the decline in expenses was helped by the weakening of major currencies against the Swiss franc and last year’s sale of Klinik Hirslanden. From a business perspective, the Business Banking Switzerland and Wealth Management USA businesses have led the way in cutting costs.
17% lower than the CHF 1,720 million in third quarter 2002, reflecting our continued cost cutting initiatives as well as the weakening of major currencies against the Swiss franc. Declines were registered in all categories of costs except rent, maintenance and professional fees. Significant drops were registered in provisions, occupancy and in IT, outsourcing, telecommunication and administration costs.
Tax
Global | Wealth Management | |||||||||||||||||||||||||||||||||||||||
Asset Management | Investment Bank | USA | Corporate Center | UBS | ||||||||||||||||||||||||||||||||||||
30.9.03 | 30.6.03 | 30.9.03 | 30.6.03 | 30.9.03 | 30.6.03 | 30.9.03 | 30.6.03 | 30.9.03 | 30.6.03 | |||||||||||||||||||||||||||||||
233 | 196 | 30,702 | 35,463 | 1,307 | 1,086 | 2,733 | 3,164 | 39,208 | 44,055 | |||||||||||||||||||||||||||||||
26 | 19 | 35,725 | 31,258 | 12,348 | 11,847 | 1,973 | 1,985 | 220,693 | 216,218 | |||||||||||||||||||||||||||||||
259 | 215 | 66,427 | 66,721 | 13,655 | 12,933 | 4,706 | 5,149 | 259,901 | 260,273 | |||||||||||||||||||||||||||||||
0 | 0 | 791 | 886 | 28 | 28 | 1 | 1 | 4,998 | 5,433 | |||||||||||||||||||||||||||||||
0 | 0 | 614 | 805 | 0 | 0 | 3 | 4 | 3,010 | 3,445 | |||||||||||||||||||||||||||||||
0 | 0 | 1,405 | 1,691 | 28 | 28 | 4 | 5 | 8,008 | 8,878 | |||||||||||||||||||||||||||||||
0 | 0 | 627 | 730 | 28 | 28 | 1 | 1 | 3,054 | 3,464 | |||||||||||||||||||||||||||||||
0 | 0 | 397 | 431 | 0 | 0 | 3 | 5 | 884 | 923 | |||||||||||||||||||||||||||||||
0 | 0 | 1,024 | 1,161 | 28 | 28 | 4 | 6 | 3,938 | 4,387 | |||||||||||||||||||||||||||||||
0 | 0 | 300 | 306 | 3 | 4 | 0 | 0 | 651 | 706 | |||||||||||||||||||||||||||||||
0 | 0 | 1,324 | 1,467 | 31 | 32 | 4 | 6 | 4,589 | 5,093 | |||||||||||||||||||||||||||||||
0 | 0 | 257 | 256 | 0 | 0 | 0 | 0 | 772 | 755 | |||||||||||||||||||||||||||||||
2.1 | 2.5 | 0.2 | 0.2 | 0.1 | 0.1 | 3.1 | 3.4 | |||||||||||||||||||||||||||||||||
1.2 | 1.3 | 0.2 | 0.2 | 0.0 | 0.0 | 1.9 | 2.1 | |||||||||||||||||||||||||||||||||
2.0 | 2.2 | 0.2 | 0.2 | 0.1 | 0.1 | 1.8 | 2.0 | |||||||||||||||||||||||||||||||||
72.9 | 68.7 | 100.0 | 100.0 | 100.0 | 120.0 | 49.2 | 49.4 | |||||||||||||||||||||||||||||||||
79.3 | 82.4 | 100.0 | 100.0 | 100.0 | 100.0 | 61.1 | 63.8 | |||||||||||||||||||||||||||||||||
11
UBS Results
11 November 2003
Actual credit loss (expense)/recovery
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Wealth Management & Business Banking | 29 | 68 | (57 | ) | (57 | ) | 33 | (178 | ) | |||||||||||||||||||
Investment Bank | (5 | ) | (41 | ) | (30 | ) | 88 | 83 | (86 | ) | (37 | ) | ||||||||||||||||
Wealth Management USA | 0 | (3 | ) | (10 | ) | 100 | 100 | (3 | ) | (14 | ) | |||||||||||||||||
Corporate Center | 2 | 0 | 2 | 0 | 2 | 12 | ||||||||||||||||||||||
UBS | 26 | 24 | (95 | ) | 8 | (54 | ) | (217 | ) | |||||||||||||||||||
nine months of the year. Excluding the effect of the sale of CSC, our effective tax rate for the year to date is 19.1% compared to 2002’s full-year rate of 16.5% (before significant financial events). The particularly low 2002 rate was driven by lower progressive tax rates in Switzerland, the ability to benefit from tax losses in the US and UK and a high proportion of earnings generated in lower tax jurisdictions. The low third quarter tax rate was due to a shift in the regional profit mix, as well as the impact of the enactment of new tax legislation in Zurich on deferred tax liabilities. We believe that an underlying tax rate of around 19% (before significant financial events) is a reasonable indicator for full-year 2003.
Credit risk
Our credit exposures continued to perform well as the global economy showed signs of a slow recovery. In third quarter 2003, we realized an aggregate net writeback of loan loss provisions of CHF 26 million, almost unchanged from the CHF 24 million experienced in second quarter. In third quarter 2002, we reported a net credit loss expense of CHF 95 million.
reported a net credit loss of CHF 41 million and in the third quarter 2002 CHF 30 million. The few new impairments recorded during the quarter were to a large extent offset by recoveries as the strong market for distressed credits allowed the disposal of positions at better than anticipated rates.
Market risk
Market risk is incurred primarily through UBS’s trading activities, which are centered in the Investment Bank Business Group.
12
UBS: Value at Risk (10-day 99% confidence)
Quarter ended 30.9.03 | Quarter ended 30.6.03 | |||||||||||||||||||||||||||||||||||
CHF million | Limits | Min. | Max. | Average | 30.9.03 | Min. | Max. | Average | 30.6.03 | |||||||||||||||||||||||||||
Business Groups | ||||||||||||||||||||||||||||||||||||
Investment Bank | 450 | 317.9 | 420.2 | 364.4 | 351.3 | 303.3 | 410.9 | 345.1 | 383.8 | |||||||||||||||||||||||||||
Wealth Management USA | 50 | 8.4 | 18.8 | 12.6 | 11.7 | 9.4 | 18.7 | 12.1 | 11.3 | |||||||||||||||||||||||||||
Global Asset Management1 | 30 | 9.2 | 13.7 | 11.4 | 11.1 | 7.0 | 14.6 | 10.7 | 10.4 | |||||||||||||||||||||||||||
Wealth Management & Business Banking2 | 30 | 0.7 | 1.2 | 0.9 | 0.9 | 3.0 | 3.9 | 3.4 | 3.5 | |||||||||||||||||||||||||||
Corporate Center2, 3 | 150 | 39.7 | 62.7 | 48.5 | 44.9 | 48.3 | 76.5 | 62.3 | 56.4 | |||||||||||||||||||||||||||
Reserve | 170 | |||||||||||||||||||||||||||||||||||
Diversification effect | 4 | 4 | (71.3 | ) | (65.9 | ) | 4 | 4 | (77.0 | ) | (75.1 | ) | ||||||||||||||||||||||||
Total | 600 | 313.9 | 412.6 | 366.5 | 354.0 | 315.2 | 421.8 | 356.6 | 390.3 | |||||||||||||||||||||||||||
Investment Banking & Securities: Value at Risk (10-day 99% confidence)
Quarter ended 30.9.03 | Quarter ended 30.6.03 | |||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 30.9.03 | Min. | Max. | Average | 30.6.03 | ||||||||||||||||||||||||||||
Risk type | ||||||||||||||||||||||||||||||||||||
Equities | 169.1 | 194.3 | 182.8 | 179.5 | 160.5 | 188.9 | 173.8 | 182.8 | ||||||||||||||||||||||||||||
Interest rates | 280.8 | 400.7 | 325.4 | 332.8 | 260.9 | 345.1 | 305.0 | 331.7 | ||||||||||||||||||||||||||||
Foreign exchange | 26.2 | 81.5 | 47.2 | 38.5 | 19.5 | 67.4 | 38.0 | 56.4 | ||||||||||||||||||||||||||||
Other1 | 9.4 | 23.0 | 13.4 | 14.3 | 9.5 | 20.4 | 15.0 | 14.4 | ||||||||||||||||||||||||||||
Diversification effect | 2 | 2 | (204.4 | ) | (213.8 | ) | 2 | 2 | (186.7 | ) | (201.5 | ) | ||||||||||||||||||||||||
Total | 317.9 | 420.2 | 364.4 | 351.3 | 303.3 | 410.9 | 345.1 | 383.8 | ||||||||||||||||||||||||||||
in 2003, compared with levels in 2002, reflects the growth of our fixed income business, particularly in the US, which has brought increased trading opportunities and a commensurate increase in risk exposure. Equity markets have continued the steady recovery that began in the second quarter 2003, which, along with UBS’s involvement in a number of large transactions, resulted in generally higher VaR for equities risk than in the previous quarter. Higher VaR does not signal any fundamental change in our approach to risk — where opportunities arise we are prepared to take risks and manage them prudently within defined parameters.
tables above, is also shown in this graph for information. Revenues over this period were within the range predicted by the VaR model.
13
UBS Results
11 November 2003
BIS Capital and Ratios
% change from | ||||||||||||||||||||
CHF million, except where indicated | ||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 31.12.02 | 30.6.03 | 31.12.02 | |||||||||||||||
Risk-weighted assets | 241,533 | 243,032 | 238,790 | (1 | ) | 1 | ||||||||||||||
BIS Tier 1 capital | 27,728 | 29,145 | 27,047 | (5 | ) | 3 | ||||||||||||||
of which hybrid Tier 1 capital1 | 3,426 | 3,517 | 3,182 | (3 | ) | 8 | ||||||||||||||
BIS total capital | 32,124 | 33,949 | 33,009 | (5 | ) | (3 | ) | |||||||||||||
BIS Tier 1 capital ratio (%) | 11.5 | 12.0 | 11.3 | |||||||||||||||||
of which hybrid Tier 1 capital (%)1 | 1.4 | 1.4 | 1.3 | |||||||||||||||||
BIS total capital ratio (%) | 13.3 | 14.0 | 13.8 | |||||||||||||||||
UBS also routinely assesses potential stress loss against a standard set of forward-looking scenarios. Stress events modeled in our standard scenarios include crises in equity, corporate bond and emerging markets, and severe currency and interest rate movements. These scenarios are kept under constant review and fine-tuned as necessary. We also monitor our positions against more specific scenarios that target individual sectors or are based on current concerns. Stress loss exposure in the quarter followed a similar pattern to VaR – slightly higher than the previous quarter on average but ending the quarter lower than at the end of the previous quarter, and well within limits.
Capital management
We remain committed to being one of the best-capitalized financial services firms in the world and will therefore continue to manage our balance sheet prudently. This clear focus and our ongoing strong cash flow generation means that we have been able to keep our BIS Tier 1 ratio
high while continuing our share buyback programs.
Buyback program
UBS Shares and Market Capitalization
% change from | |||||||||||||||||||||
Number of shares, except where indicated | |||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 30.9.02 | 30.6.03 | 30.9.02 | ||||||||||||||||
Total ordinary shares issued | 1,182,486,491 | 1,258,031,067 | 1,254,852,158 | (6 | ) | (6 | ) | ||||||||||||||
Second trading line treasury shares | |||||||||||||||||||||
2002 first program | (67,700,000 | ) | (62,811,279 | ) | |||||||||||||||||
2002 second program | (8,270,080 | ) | |||||||||||||||||||
2003 program | (42,940,000 | ) | (11,270,000 | ) | |||||||||||||||||
Shares outstanding for market capitalization | 1,139,546,491 | 1,170,790,987 | 1,192,040,879 | (3 | ) | (4 | ) | ||||||||||||||
Share price (CHF) | 74.10 | 75.35 | 61.30 | (2 | ) | 21 | |||||||||||||||
Market capitalization (CHF million) | 84,440 | 88,219 | 73,072 | (4 | ) | 16 | |||||||||||||||
Total treasury shares | 98,068,507 | 139,778,748 | 68,752,679 | (30 | ) | 43 | |||||||||||||||
14
price of CHF 73.94 for a total value of CHF 3.2 billion. The program will run until 6 March 2004 and allows us to buy a maximum value of CHF 5 billion in UBS shares. These shares will be canceled following approval at next year’s Annual General Meeting.
Treasury shares
Of the currently held treasury shares, 42,940,000 were bought for cancelation whereas the other 55,128,507 shares cover employee share and option programs, and to a limited extent market-making activities in the Investment Bank. The Investment Bank acts as a market-maker in UBS shares as well as in derivatives related to those shares and may hold UBS shares as a hedge for derivatives issued to retail and institutional investors. Changes in the trading approach can lead to fluctuations in the size of our direct holding of UBS shares.
Fitch lowers UBS ratings
15
Wealth Management & Business Banking
11 November 2003
Wealth Management & Business Banking
Georges Gagnebin
Marcel Rohner
In third quarter 2003, Wealth Management’s pre-tax profit was CHF 714 million, up 9% from second quarter 2003. Net new money, at a record high of CHF 9.4 billion, included further strong inflows into our European wealth management business and in Asia. Business Banking Switzerland’s pre-tax profit was CHF 528 million in third quarter 2003, 9% below the second quarter result, which benefited from divestment gains.
Business Group Reporting
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Income | 3,042 | 3,108 | 3,039 | (2 | ) | 0 | 9,016 | 9,327 | ||||||||||||||||||||
Credit loss expense1 | (26 | ) | (43 | ) | (74 | ) | (40 | ) | (65 | ) | (126 | ) | (248 | ) | ||||||||||||||
Total operating income | 3,016 | 3,065 | 2,965 | (2 | ) | 2 | 8,890 | 9,079 | ||||||||||||||||||||
Personnel expenses | 1,145 | 1,175 | 1,167 | (3 | ) | (2 | ) | 3,466 | 3,448 | |||||||||||||||||||
General and administrative expenses | 529 | 527 | 598 | 0 | (12 | ) | 1,573 | 1,704 | ||||||||||||||||||||
Depreciation | 80 | 109 | 101 | (27 | ) | (21 | ) | 283 | 330 | |||||||||||||||||||
Amortization of goodwill and other intangible assets | 20 | 19 | 21 | 5 | (5 | ) | 58 | 71 | ||||||||||||||||||||
Total operating expenses | 1,774 | 1,830 | 1,887 | (3 | ) | (6 | ) | 5,380 | 5,553 | |||||||||||||||||||
Business Group performance before tax | 1,242 | 1,235 | 1,078 | 1 | 15 | 3,510 | 3,526 | |||||||||||||||||||||
Business Group performance before tax and amortization of goodwill and other intangible assets | 1,262 | 1,254 | 1,099 | 1 | 15 | 3,568 | 3,597 | |||||||||||||||||||||
Additional information | ||||||||||||||||||||||||||||
Regulatory equity allocated (average) | 8,950 | 8,800 | 8,600 | 2 | 4 | |||||||||||||||||||||||
Cost/income ratio (%)2 | 58 | 59 | 62 | 60 | 60 | |||||||||||||||||||||||
Cost/income ratio before goodwill (%)3 | 58 | 58 | 61 | 59 | 59 | |||||||||||||||||||||||
16
Wealth Management
1 | In management accounts, statistically derived actuarial expected loss adjusted by deferred releases rather than the net IFRS actual credit loss is reported in the Business Groups (see Note 2 to the Financial Statements). | |
2 | Excludes interest and dividend income. | |
3 | Annualized income/average invested assets. | |
4 | Operating expenses/income. | |
5 | Operating expenses less the amortization of goodwill and other intangible assets/income. | |
6 | Operating expenses less the amortization of goodwill and other intangible assets and expenses for the European wealth management initiative/income less income for the European wealth management initiative. |
Business Unit Reporting
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Income | 1,751 | 1,732 | 1,614 | 1 | 8 | 5,058 | 5,114 | |||||||||||||||||||||
Credit loss expense1 | (1 | ) | (2 | ) | (3 | ) | (50 | ) | (67 | ) | (5 | ) | (16 | ) | ||||||||||||||
Total operating income | 1,750 | 1,730 | 1,611 | 1 | 9 | 5,053 | 5,098 | |||||||||||||||||||||
Personnel expenses | 495 | 496 | 477 | 0 | 4 | 1,465 | 1,404 | |||||||||||||||||||||
General and administrative expenses | 504 | 536 | 501 | (6 | ) | 1 | 1,565 | 1,547 | ||||||||||||||||||||
Depreciation | 17 | 23 | 21 | (26 | ) | (19 | ) | 61 | 63 | |||||||||||||||||||
Amortization of goodwill and other intangible assets | 20 | 19 | 21 | 5 | (5 | ) | 58 | 71 | ||||||||||||||||||||
Total operating expenses | 1,036 | 1,074 | 1,020 | (4 | ) | 2 | 3,149 | 3,085 | ||||||||||||||||||||
Business unit performance before tax | 714 | 656 | 591 | 9 | 21 | 1,904 | 2,013 | |||||||||||||||||||||
Business unit performance before tax and amortization of goodwill and other intangible assets | 734 | 675 | 612 | 9 | 20 | 1,962 | 2,084 | |||||||||||||||||||||
KPI’s | ||||||||||||||||||||||||||||
Invested assets (CHF billion) | 693 | 691 | 655 | 0 | 6 | |||||||||||||||||||||||
Net new money (CHF billion)2 | 9.4 | 6.5 | 9.3 | 23.3 | 14.9 | |||||||||||||||||||||||
Gross margin on invested assets (bps)3 | 101 | 104 | 97 | (3 | ) | 4 | 101 | 98 | ||||||||||||||||||||
Cost/income ratio (%)4 | 59 | 62 | 63 | 62 | 60 | |||||||||||||||||||||||
Cost/income ratio before goodwill (%)5 | 58 | 61 | 62 | 61 | 59 | |||||||||||||||||||||||
Cost/income ratio before goodwill and excluding the European wealth management initiative (%)6 | 50 | 53 | 54 | 53 | 52 | |||||||||||||||||||||||
Client advisors (full-time equivalents) | 3,174 | 3,121 | 2,973 | 2 | 7 | |||||||||||||||||||||||
International Clients | ||||||||||||||||||||||||||||
Income | 1,215 | 1,226 | 1,125 | (1 | ) | 8 | 3,529 | 3,550 | ||||||||||||||||||||
Invested assets (CHF billion) | 485 | 485 | 456 | 0 | 6 | |||||||||||||||||||||||
Net new money (CHF billion)2 | 9.0 | 6.6 | 9.8 | 22.6 | 17.8 | |||||||||||||||||||||||
Gross margin on invested assets (bps)3 | 100 | 105 | 98 | (5 | ) | 2 | 101 | 99 | ||||||||||||||||||||
European wealth management initiative (part of International Clients) | ||||||||||||||||||||||||||||
Income | 74 | 61 | 47 | 21 | 57 | 187 | 139 | |||||||||||||||||||||
Invested assets (CHF billion) | 44 | 39 | 27 | 13 | 63 | |||||||||||||||||||||||
Net new money (CHF billion)2 | 2.8 | 3.3 | 2.5 | 9.1 | 5.6 | |||||||||||||||||||||||
Client advisors (full-time equivalents) | 658 | 582 | 547 | 13 | 20 | |||||||||||||||||||||||
Swiss Clients | ||||||||||||||||||||||||||||
Income | 536 | 506 | 489 | 6 | 10 | 1,529 | 1,564 | |||||||||||||||||||||
Invested assets (CHF billion) | 208 | 206 | 199 | 1 | 5 | |||||||||||||||||||||||
Net new money (CHF billion)2 | 0.4 | (0.1 | ) | (0.5 | ) | 0.7 | (2.9 | ) | ||||||||||||||||||||
Gross margin on invested assets (bps)3 | 104 | 102 | 94 | 2 | 11 | 102 | 94 | |||||||||||||||||||||
% change from | ||||||||||||||||||||||||||||
Additional information | �� | |||||||||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | |||||||||||||||||||||||
Client assets (CHF billion) | 849 | 845 | 797 | 0 | 7 | |||||||||||||||||||||||
Regulatory equity allocated (average) | 2,750 | 2,600 | 2,800 | 6 | (2 | ) | ||||||||||||||||||||||
Headcount (full-time equivalents) | 9,258 | 9,228 | 9,364 | 0 | (1 | ) | ||||||||||||||||||||||
17
Wealth Management & Business Banking
11 November 2003
Key performance indicators
Net new money in third quarter 2003 was CHF 9.4 billion, the highest quarterly inflow ever recorded, and up from CHF 6.5 billion in the previous quarter. The International Clients business reported CHF 9.0 billion in net new money, helped by a positive inflow of CHF 2.8 billion into our European wealth management business as well as a strong performance in Asia. Net new money in our Swiss Clients business was CHF 0.4 billion.
Invested assets on 30 September 2003 were CHF 693 billion, up from CHF 691 billion on 30 June 2003. The strong inflow of new money, the first-time consolidation of CHF 1.6 billion in assets from the acquisition of Lloyds TSB’s French wealth management business, and slightly improving markets all contributed to the gain. The positive influence of these three factors, however, was mostly offset by the declines of the US dollar and euro against the Swiss franc.
The pre-goodwill cost / income ratio, at 58% in third quarter 2003, improved three percentage points from second quarter 2003. Despite the disposal gain in second quarter, operating income rose on higher fee income, reflecting an increased average asset base and gains in transaction-based income. Operating expenses fell in third quarter as a result of stringent cost control measures. Excluding the European wealth management business, the pre-goodwill cost / income ratio was 50% in the third quarter 2003, down 3 percentage points from second quarter.
European wealth management
Although below the record previous quarter, our European wealth management business con-
18
tinued to report very strong inflows of net new money. The inflow this quarter totaled CHF 2.8 billion, with a particularly good performance once again in Germany and the UK. For the first nine months of 2003, net new money inflows were CHF 9.1 billion, corresponding to an annualized growth rate of 43%.
The level of invested assets rose to a new high of CHF 44 billion at the end of September 2003, up from CHF 39 billion at the end of June, as a result of the strong inflow of net new money and the first time inclusion of CHF 1.6 billion in assets from the acquisition of Lloyds TSB’s French business.
Income in third quarter 2003 was CHF 74 million, up from CHF 61 million in second quarter 2003, reflecting higher revenues from our expanded asset base and higher transaction activity levels from clients.
includes 29 client advisors previously employed by Lloyds TSB’s French business.
Purchase of Merrill Lynch’s German private client business
Initiatives and achievements
Launch of new product lines
19
Wealth Management & Business Banking
11 November 2003
Results
In third quarter 2003, Wealth Management’s pre-tax profit was CHF 714 million, up CHF 58 million or 9% from second quarter 2003. Despite the disposal gains in second quarter 2003, operating income increased on rising fee-based revenues as a result of a higher average asset base and increased client activity levels. Operating expenses fell because of declining IT and marketing costs, and depreciation. These factors led to an improvement in the cost/income ratio, which fell to 59% this quarter from 62% in second quarter.
Operating income
Operating expenses
495 million in third quarter, virtually unchanged from the previous quarter. General and administrative expenses fell by 6% or CHF 32 million to CHF 504 million. This was mainly due to lower charges for services rendered by other parts of the firm, especially related to IT projects and marketing. Depreciation fell to a record low of CHF 17 million in third quarter 2003, reflecting lower charges for IT equipment.
Headcount
Outlook
The Wealth Management business achieved a good result in third quarter 2003, benefiting from a higher average asset base as well as a rebound in investor activity. The strong net new money result that we have achieved in the last few quarters is clear evidence of the trust our clients place in our services, capabilities and expertise.
20
Business Banking Switzerland
Business Unit Reporting
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Income | 1,291 | 1,376 | 1,425 | (6 | ) | (9 | ) | 3,958 | 4,213 | |||||||||||||||||||
Credit loss expense1 | (25 | ) | (41 | ) | (71 | ) | (39 | ) | (65 | ) | (121 | ) | (232 | ) | ||||||||||||||
Total operating income | 1,266 | 1,335 | 1,354 | (5 | ) | (6 | ) | 3,837 | 3,981 | |||||||||||||||||||
Personnel expenses | 650 | 679 | 690 | (4 | ) | (6 | ) | 2,001 | 2,044 | |||||||||||||||||||
General and administrative expenses | 25 | (9 | ) | 97 | (74 | ) | 8 | 157 | ||||||||||||||||||||
Depreciation | 63 | 86 | 80 | (27 | ) | (21 | ) | 222 | 267 | |||||||||||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
Total operating expenses | 738 | 756 | 867 | (2 | ) | (15 | ) | 2,231 | 2,468 | |||||||||||||||||||
Business unit performance before tax | 528 | 579 | 487 | (9 | ) | 8 | 1,606 | 1,513 | ||||||||||||||||||||
Business unit performance before tax and amortization of goodwill and other intangible assets | 528 | 579 | 487 | (9 | ) | 8 | 1,606 | 1,513 | ||||||||||||||||||||
KPI’s | ||||||||||||||||||||||||||||
Invested assets (CHF billion) | 208 | 209 | 202 | 0 | 3 | |||||||||||||||||||||||
Net new money (CHF billion)2 | (2.4 | ) | 0.3 | 4.3 | (4.0 | ) | 6.4 | |||||||||||||||||||||
Cost/income ratio (%)3 | 57 | 55 | 61 | 56 | 59 | |||||||||||||||||||||||
Cost/income ratio before goodwill (%)4 | 57 | 55 | 61 | 56 | 59 | |||||||||||||||||||||||
Non-performing loans/gross loans (%) | 3.0 | 3.2 | 4.0 | |||||||||||||||||||||||||
Impaired loans/gross loans (%) | 4.7 | 5.0 | 6.5 | |||||||||||||||||||||||||
% change from | Year to date | |||||||||||||||||||||||||||
Additional information | ||||||||||||||||||||||||||||
As at or for the period ended | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Deferred releases included in credit loss expense1 | 104 | 88 | 61 | 18 | 70 | 269 | 170 | |||||||||||||||||||||
Client assets (CHF billion) | 573 | 545 | 504 | 5 | 14 | |||||||||||||||||||||||
Regulatory equity allocated (average) | 6,200 | 6,200 | 5,800 | 0 | 7 | |||||||||||||||||||||||
Headcount (full-time equivalents) | 17,910 | 18,018 | 18,942 | (1 | ) | (5 | ) | |||||||||||||||||||||
Key performance indicators
Our cost/income ratio rose to 57% in third quarter 2003, up from 55% in second quarter 2003, when the ratio benefited from CHF 80 million in divestment gains. Excluding the gains, the ratio would have dropped by one percentage point, reflecting a slight rise in underlying operating income and concurrent decline in operating expenses.
Net new money was negative CHF 2.4 billion in third quarter 2003, due to a CHF 2.3 billion reduction in the corporate clients area, partly as a result of individual companies making transfers from their short-term deposits to their current accounts, which are not classified as invested assets.
21
Wealth Management & Business Banking
11 November 2003
Invested assets were CHF 208 billion on 30 September 2003, down marginally from CHF 209 billion on 30 June 2003, mainly due to net outflows from corporate clients. The decline was only partially compensated by positive market performance.
workout of the recovery portfolio, which fell to CHF 6.6 billion on 30 September 2003 from CHF 7.4 billion on 30 June 2003. The non-performing loans ratio improved to 3.0% on 30 September 2003, down from 3.2% on 30 June 2003, while the impaired loans ratio dropped to 4.7% from 5.0% in the same period.
Business Banking Switzerland’s net interest income in third quarter 2003 fell slightly in comparison to second quarter, mainly reflecting lower interest margins on cash and savings accounts due to the low interest rate environment, as well as lower interest income from our reduced recovery portfolio. This decrease could
Small Caps M&A – Giving Swiss companies access to the world
Rather than tout the size and volume of their last major deal, investment bankers in the M&A Small Caps Switzerland team prefer to talk about how they use UBS’s global network to help Swiss companies that need or want to find new business partners.
edge with UBS’s global M&A business, tools and expertise, giving Swiss clients an added dimension in terms of international reach. In practice, it means that when the team gets a new mandate, it can use the Investment Bank’s global network and database to systematically look for the most suitable partners inside and outside Switzerland, and take advantage of its product specialists and industry sector experts.
the cues, keeping its pipeline focused on middle-sized companies and deals that range from approximately CHF 10 million to CHF 100 million in transaction value, with anything larger generally handled by the Investment Bank.
22
only be partly offset by higher fixed-rate mortgage volumes.
Initiatives and achievements
CLS service signs four new clients
New IT platform reaches milestone
dation that will help us further increase the overall flexibility of our products while providing our clients with more transparent information and data.
Results
In third quarter 2003, Business Banking Switzerland reported pre-tax profit of CHF 528 million. Although below the second quarter figure, it was still the second highest quarterly result ever. And, if the previous quarter’s divestment gains of CHF 80 million were not taken into account, third quarter pre-tax profit would have risen by 6% from second quarter. Total operating income – excluding the divestment gain – increased by CHF 11 million, reflecting higher
managed by the second generation of the Flachsmann family who were looking to make a decision about the company’s future and wanted to evaluate different options and scenarios in an effort to find the best partner able to further develop the business. The family mandated the UBS Small Caps team to look for investors and potential partners around the world and to advise on the sale process. Shortly afterwards, the team came up with a number of solutions that included the possibility of selling the business to a larger company in the industry or allowing Flachsmann management itself to buy the company with the assistance of a financial investor. Seeing the different options allowed the family to
evenly weigh which would ensure the future of the business. The process helped to confirm the family’s belief that a sale to a strategic buyer would be ideal and the UBS team then helped the family to successfully conclude the sale to Frutarom.
tive and complicated task that involved coordinating meetings and negotiations across three different time zones. In the end, the sale, which was concluded at the end of March, not only resulted in the fulfillment of the solution NSK had believed was best for the Swiss business from the outset, but also helped establish a fruitful relationship between NSK and the Investment Bank.
23
Wealth Management & Business Banking
11 November 2003
fee income and lower credit loss expenses. The positive development was helped by falling personnel expenses and depreciation.
Operating income
Operating expenses
land provides a significant number of services to other business units, mainly Wealth Management. In accounting terms, the costs for these services are charged to the receiving unit as general and administrative expenses, and then offset by lower general and administrative expense in the provider unit.
Headcount
Outlook
Business Banking Switzerland delivered another good result in third quarter, as productivity levels remained competitively high. The saturation in Switzerland’s market for financial services will continue to present a challenge that will demand the most efficient structures and processes. Due to the fact that productivity gains in this business are achievable primarily through progressive automation of processes, we expect headcount to continue to decrease at a similar rate to this year, allowing us to stay at the forefront of efficient and profitable banking.
24
Global Asset Management
11 November 2003
Global Asset Management
John A.Fraser
Global Asset Management
1 Operating expenses/operating income. |
2 Operating expenses less the amortization of goodwill and other intangible assets/operating income. |
3 Excludes interest and dividend income. |
4 Annualized operating income/average invested assets. |
Pre-tax profit in third quarter 2003 was CHF 87 million, marginally lower than the strong CHF 89 million result achieved in second quarter. Despite outflows of CHF 8.1 billion from lower margin money market funds, net new money was CHF 4.9 billion, driven by buoyant asset inflows into alternative and quantitative investments as well as into equity and asset allocation mandates.
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Institutional fees | 253 | 243 | 176 | 4 | 44 | 694 | 642 | |||||||||||||||||||||
Wholesale Intermediary fees | 218 | 194 | 183 | 12 | 19 | 592 | 612 | |||||||||||||||||||||
Total operating income | 471 | 437 | 359 | 8 | 31 | 1,286 | 1,254 | |||||||||||||||||||||
Personnel expenses | 221 | 207 | 168 | 7 | 32 | 616 | 583 | |||||||||||||||||||||
General and administrative expenses | 116 | 96 | 106 | 21 | 9 | 311 | 323 | |||||||||||||||||||||
Depreciation | 6 | 6 | 6 | 0 | 0 | 19 | 18 | |||||||||||||||||||||
Amortization of goodwill and other intangible assets | 41 | 39 | 46 | 5 | (11 | ) | 120 | 145 | ||||||||||||||||||||
Total operating expenses | 384 | 348 | 326 | 10 | 18 | 1,066 | 1,069 | |||||||||||||||||||||
Business Group performance before tax | 87 | 89 | 33 | (2 | ) | 164 | 220 | 185 | ||||||||||||||||||||
Business Group performance before tax and amortization of goodwill and other intangible assets | 128 | 128 | 79 | 0 | 62 | 340 | 330 | |||||||||||||||||||||
KPI’s | ||||||||||||||||||||||||||||
Cost/income ratio (%)1 | 82 | 80 | 91 | 83 | 85 | |||||||||||||||||||||||
Cost/income ratio before goodwill (%)2 | 73 | 71 | 78 | 74 | 74 | |||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||||||
Invested assets (CHF billion) | 305 | 297 | 273 | 3 | 12 | |||||||||||||||||||||||
of which: money market funds | 16 | 17 | 18 | (6 | ) | (11 | ) | |||||||||||||||||||||
Net new money (CHF billion)3 | 6.3 | 1.1 | (3.6 | ) | 11.3 | (3.8 | ) | |||||||||||||||||||||
of which: money market funds | (0.9 | ) | (1.9 | ) | (3.8 | ) | (3.4 | ) | (4.1 | ) | ||||||||||||||||||
Gross margin on invested assets (bps)4 | 34 | 35 | 24 | (3 | ) | 42 | 32 | 28 | ||||||||||||||||||||
Wholesale Intermediary | ||||||||||||||||||||||||||||
Invested assets (CHF billion) | 267 | 270 | 270 | (1 | ) | (1 | ) | |||||||||||||||||||||
of which: money market funds | 102 | 107 | 117 | (5 | ) | (13 | ) | |||||||||||||||||||||
Net new money (CHF billion)3 | (1.4 | ) | 1.3 | 0.8 | 3.3 | (5.5 | ) | |||||||||||||||||||||
of which: money market funds | (7.2 | ) | (3.9 | ) | 0.3 | (10.5 | ) | (4.5 | ) | |||||||||||||||||||
Gross margin on invested assets (bps)4 | 32 | 30 | 26 | 7 | 23 | 30 | 27 | |||||||||||||||||||||
% change from | ||||||||||||||||||||||||||||
Additional information | ||||||||||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | |||||||||||||||||||||||
Client assets (CHF billion) | 572 | 567 | 543 | 1 | 5 | |||||||||||||||||||||||
Regulatory equity allocated (average) | 1,000 | 1,000 | 1,050 | 0 | (5 | ) | ||||||||||||||||||||||
Headcount (full-time equivalents) | 2,674 | 2,714 | 2,743 | (1 | ) | (3 | ) | |||||||||||||||||||||
25
Global Asset Management
11 November 2003
Key performance indicators
The pre-goodwill cost/income ratio was 73% in third quarter 2003, up from 71% in second quarter. Increased revenues from higher performance fees and asset-based revenues, which rose on the back of improving financial markets, were offset by the rise in overall expenses.
Institutional
Net new money was CHF 6.3 billion in third quarter 2003, up from CHF 1.1 billion in second quarter, and our best result since 2000. Inflows into alternative investments, particularly into funds of hedge funds, equity and asset allocation mandates more than offset the impact of the CHF 0.9 billion outflow from
lower margin money market funds. Positive inflows into equity mandates were recorded in all regions, particularly in the UK and US, with additional strong inflows into asset allocation mandates in the UK.
The gross margin, at 34 basis points in third quarter 2003, was slightly lower than the second quarter gross margin of 35 basis points due to lower seed capital gains.
Wholesale Intermediary
26
ed net outflows, and total investments in money market funds dropped from CHF 107 billion on 30 June 2003 to CHF 102 billion on 30 September 2003.
In the US, the Investment Company Institute reported industry-wide net outflows of USD 80.2 billion in third quarter 2003, mainly out of money market funds.In Switzerland, Lipper, a Reuters company, recorded net outflows of CHF 0.8 billion in third quarter 2003, primarily due to CHF 2.1 billion in outflows from money market funds.
Investment capabilities and performance
Equity markets improved, led by the US and Japan, as they benefited from increasing optimism for global economic growth and rising corporate earnings expectations, with technology stocks performing particularly well.
Annualized | ||||||||||||||||
Composite | 1 Year | 3 Years | 5 Years | 10 Years | ||||||||||||
Global Equity Composite vs. MSCI World Equity (Free) Index | – | + | + | + | ||||||||||||
Global Bond Composite vs. Citigroup World Government Bond Index | + | + | + | + | ||||||||||||
Global Securities Composite vs. Global Securities Markets Index | + | + | + | + | ||||||||||||
(+) above benchmark; (–) under benchmark. All after fees. |
27
Global Asset Management
11 November 2003
a number of strategies, the O’Connor multi-strategy Global Equity Arbitrage fund posted positive returns in third quarter. The O’Connor currency and rates portfolio performed very strongly, as did our DSI quantitative long/short products.
Initiatives and achievements
New Swiss pension services network launched
provide pension funds with integrated and tailored asset management and advisory services, as well as operational management, administration and insurance.
Real estate business – Meeting client demand for property investments
If anything, the turbulence experienced by financial markets in recent years has significantly increased demand by investors for less volatile investments. Because of that, many have turned to property investments, which historically have proven to be a strong source of income and total returns, not to mention being notable for their limited volatility and lack of correlation to other asset classes. This was not lost on Global Asset Management, and was the reason for creating a consolidated global real estate business earlier this year. Although property investments had been actively pursued by Global Asset Management for a number of years, the new platform now provides a centralized infrastructure and management with specialized property investment expertise. This gives clients a focused and global organization and the Business
Group itself a base from which to considerably expand its global range of real estate capabilities.
warehouses and hotels – as well as over 30,000 residential apartments. Also part of the Americas business is AgriVest, a farmland investment subsidiary. Farmland investments have similar return characteristics to property and provide solid risk-adjusted total returns with a significant income component. AgriVest has generated strong performance relative to the National Council of Real Estate Investment Fiduciaries (NCREIF) Farmland Index over its 12 year history.
28
Results
Global Asset Management’s pre-tax profit was CHF 87 million in third quarter 2003, a decrease of CHF 2 million from second quarter 2003. Positive market developments and higher performance fees were major contributing factors to growing revenues, although they were offset by increased general and administrative and personnel expenses, reflecting higher incentive-based compensation. This resulted in a higher cost / income ratio of 82% in third quarter, up from 80% in second quarter.
Operating income
enues, partially offset by lower seed capital gains at O’Connor.
Operating expenses
in retail, 33% in offices and 24% industrial. In Asia Pacific, CHF 1.35 billion in retail real estate is managed through a Tokyo-based joint venture with Mitsubishi Corporation.
Databankawards. In Japan, the joint venture has proven to be a highly successful, growing business. The Japan Retail Fund, a publicly traded J-REIT (Japan Real Estate Investment Trust), has risen more than 30% between the time of its launch in March 2002 and the end of September this year.
fund of funds in second quarter 2004. In Continental Europe, the real estate platform was significantly expanded in July with the hiring of a senior management team previously employed by Lend Lease Real Estate Investments Europe. Their experience will assist the planned launch of an open-ended Euro real estate fund for wholesale clients. Additionally, several closed-end funds and individual client account investment vehicles will be targeted at European institutional investors. With an expanding line of products and deep worldwide management expertise, Global Asset Management’s real estate business is in a prime position to satisfy the increasing demand for an array of property investment products from institutional, high net worth and affluent investors.
29
Global Asset Management
11 November 2003
chase of additional licensing fees for global trading and client relationship systems and investments in a new fund administration platform.
Headcount
Outlook
Strong market performance in all global financial markets allows Global Asset Management to look to the future with cautious optimism. The
net new money inflows this year, predominantly into our higher-margin asset classes, as well as our outperformance versus investment benchmarks, should provide the basis to further improve our market position.
30
Investment Bank
11 November 2003
Investment Bank
Investment Bank
In third quarter 2003, the Investment Bank as a whole posted a pre-tax profit of CHF 891 million. Due to strong results in Fixed Income, Rates and Currencies and robust client commissions in Equities, pre-tax profit at the Investment Banking & Securities business rose to CHF 965 million, up 35% from a year earlier, although 9% lower than the exceptionally strong second quarter.
Business Group Reporting
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Income | 3,428 | 3,803 | 2,865 | (10 | ) | 20 | 10,497 | 9,932 | ||||||||||||||||||||
Credit loss expense1 | (12 | ) | (48 | ) | (22 | ) | (75 | ) | (45 | ) | (97 | ) | (88 | ) | ||||||||||||||
Total operating income | 3,416 | 3,755 | 2,843 | (9 | ) | 20 | 10,400 | 9,844 | ||||||||||||||||||||
Personnel expenses | 1,866 | 2,093 | 1,821 | (11 | ) | 2 | 5,753 | 6,357 | ||||||||||||||||||||
General and administrative expenses | 508 | 538 | 534 | (6 | ) | (5 | ) | 1,524 | 1,706 | |||||||||||||||||||
Depreciation | 81 | 74 | 89 | 9 | (9 | ) | 238 | 283 | ||||||||||||||||||||
Amortization of goodwill and other intangible assets | 70 | 69 | 100 | 1 | (30 | ) | 209 | 288 | ||||||||||||||||||||
Total operating expenses | 2,525 | 2,774 | 2,544 | (9 | ) | (1 | ) | 7,724 | 8,634 | |||||||||||||||||||
Business Group performance before tax | 891 | 981 | 299 | (9 | ) | 198 | 2,676 | 1,210 | ||||||||||||||||||||
Business Group performance before tax and amortization of goodwill and other intangible assets | 961 | 1,050 | 399 | (8 | ) | 141 | 2,885 | 1,498 | ||||||||||||||||||||
Additional information | ||||||||||||||||||||||||||||
Cost/income ratio (%)2 | 74 | 73 | 89 | 74 | 87 | |||||||||||||||||||||||
Cost/income ratio before goodwill (%)3 | 72 | 71 | 85 | 72 | 84 | |||||||||||||||||||||||
Net new money (CHF billion)4 | 0.2 | 0.1 | 0.1 | 0.3 | 0.4 | |||||||||||||||||||||||
Invested assets (CHF billion) | 3 | 3 | 3 | 0 | 0 | |||||||||||||||||||||||
Client assets (CHF billion) | 127 | 129 | 135 | (2 | ) | (6 | ) | |||||||||||||||||||||
Regulatory equity allocated (average) | 12,550 | 12,700 | 13,100 | (1 | ) | (4 | ) | |||||||||||||||||||||
31
Investment Bank
11 November 2003
Investment Banking & Securities
Business Unit Reporting
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Investment Banking | 349 | 445 | 379 | (22 | ) | (8 | ) | 1,081 | 1,376 | |||||||||||||||||||
Equities | 1,288 | 1,377 | 1,453 | (6 | ) | (11 | ) | 3,484 | 4,417 | |||||||||||||||||||
Fixed Income, Rates and Currencies | 1,849 | 2,038 | 1,424 | (9 | ) | 30 | 6,122 | 5,440 | ||||||||||||||||||||
Income | 3,486 | 3,860 | 3,256 | (10 | ) | 7 | 10,687 | 11,233 | ||||||||||||||||||||
Credit loss expense1 | (12 | ) | (48 | ) | (22 | ) | (75 | ) | (45 | ) | (97 | ) | (88 | ) | ||||||||||||||
Total operating income | 3,474 | 3,812 | 3,234 | (9 | ) | 7 | 10,590 | 11,145 | ||||||||||||||||||||
Personnel expenses2 | 1,859 | 2,095 | 1,809 | (11 | ) | 3 | 5,742 | 6,307 | ||||||||||||||||||||
General and administrative expenses | 503 | 508 | 519 | (1 | ) | (3 | ) | 1,480 | 1,659 | |||||||||||||||||||
Depreciation | 77 | 74 | 89 | 4 | (13 | ) | 234 | 282 | ||||||||||||||||||||
Amortization of goodwill and other intangible assets | 70 | 69 | 100 | 1 | (30 | ) | 209 | 288 | ||||||||||||||||||||
Total operating expenses | 2,509 | 2,746 | 2,517 | (9 | ) | 0 | 7,665 | 8,536 | ||||||||||||||||||||
Business unit performance before tax | 965 | 1,066 | 717 | (9 | ) | 35 | 2,925 | 2,609 | ||||||||||||||||||||
Business unit performance before tax and amortization of goodwill and other intangible assets | 1,035 | 1,135 | 817 | (9 | ) | 27 | 3,134 | 2,897 | ||||||||||||||||||||
KPI’s | ||||||||||||||||||||||||||||
Compensation ratio (%)3 | 53 | 54 | 56 | 54 | 56 | |||||||||||||||||||||||
Cost/income ratio (%)4 | 72 | 71 | 77 | 72 | 76 | |||||||||||||||||||||||
Cost/income ratio before goodwill (%)5 | 70 | 69 | 74 | 70 | 73 | |||||||||||||||||||||||
Non-performing loans/gross loans (%) | 1.2 | 1.3 | 2.2 | |||||||||||||||||||||||||
Impaired loans/gross loans (%) | 2.1 | 2.5 | 4.5 | |||||||||||||||||||||||||
Average VaR (10-day 99%) | 364 | 345 | 284 | 6 | 28 | |||||||||||||||||||||||
% change from | Year to date | |||||||||||||||||||||||||||
Additional information | ||||||||||||||||||||||||||||
As at or for the period ended | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Deferred releases included in credit loss expense1 | (10 | ) | (14 | ) | 10 | 29 | (32 | ) | (2 | ) | ||||||||||||||||||
Regulatory equity allocated (average) | 12,100 | 12,250 | 12,600 | (1 | ) | (4 | ) | |||||||||||||||||||||
Headcount (full-time equivalents) | 15,289 | 15,557 | 16,137 | (2 | ) | (5 | ) | |||||||||||||||||||||
32
Key performance indicators
We continued to show sustained profitability in third quarter 2003 due to our strict management of costs, with revenues from the Fixed Income, Rates and Currencies business and client commissions in the Equities business both higher than a year earlier. The pre-goodwill cost/income ratio was 70% in third quarter 2003, slightly higher than the record low of 69% in second quarter 2003, but well below the 74% posted in the third quarter a year earlier.
The compensation ratio in third quarter 2003 fell to 53% from 56% in the same period a year earlier but remained roughly in line with the 54% posted in second quarter. Accrual levels for incentive-based compensation are driven by the revenue mix across business areas and managed in line with market levels. The exact level of annual performance-related payments is determined in the fourth quarter.
Market risk for the Investment Bank, as measured by the average 10-day 99% confidence level Value at Risk (VaR) for the quarter, increased from CHF 345 million to CHF 364 million, but
remained within a similar range to the previous two quarters. The general increase in VaR in 2003, compared with levels in 2002, reflects the growth of the fixed income business, particularly in the US.
Total loans held by the Investment Bank were CHF 66.4 billion on 30 September 2003. While the exposure did not materially change from second quarter 2003 (CHF 66.7 billion), we experienced a reallocation from interbank exposure to loans to customers. The non-performing loans to gross loans ratio decreased from 1.3% to 1.2%. The impaired loans to gross loans ratio decreased from 2.5% to 2.1%.
League table rankings
Mergers and acquisitions
33
Investment Bank 11
November 2003
Key performance indicators: league table rankings
30.9.03 | 30.6.03 | 30.9.02 | ||||||||||||||||||||||
Market | Market | Market | ||||||||||||||||||||||
Rank | share % | Rank | share % | Rank | share % | |||||||||||||||||||
Global mergers and acquisitions (completed)1 | 11 | 8.1 | 12 | 6.6 | 8 | 9.5 | ||||||||||||||||||
International equity new issues2 | 4 | 7.6 | 4 | 8.3 | 4 | 9.8 | ||||||||||||||||||
share in the year to date to 12.0% from 10.4% respectively. We ranked eleventh in completed merger and acquisition deals in third quarter with a year to date market share of 8.1%, up from twelfth with a 6.6% market share in second quarter. Among the most significant transactions we advised on in the quarter:
– | Financial advisor to Comcast, the largest US cable television operator, on the USD 7.9 billion sale of its 57% stake in QVC Inc to Liberty Media Corporation |
– | Joint advisor to industrial group Suez on the USD 4.35 billion sale of its water treatment subsidiary Ondeo Nalco to a consortium of private equity firms |
– | Sole advisor to Vodafone on the JPY 261.3 billion (USD 2.2 billion) leveraged disposal of fixed-line subsidiary Japan Telecom to Ripplewood, a US private equity group. |
Equity underwriting
– | Joint bookrunner on a USD 1.2 billion convertible bond for European chip manufacturer STMicroelectronics |
– | Lead manager for Chunghwa Telecom’s USD 1.37 billion initial public offering. |
Fixed income underwriting
generally came from the high level of activity in Europe and Asia Pacific, which was slightly offset by declines in the US due to challenging interest rate conditions over summer. According toThompson SDC, our international bond underwriting ranking fell to ninth with a 4.6% market share in third quarter from eighth with a 4.7% market share in second quarter. While we still aim to reach a top five rank, maintaining profitability remains our overarching priority and we have managed that successfully so far this year. Notable deals in third quarter included:
– | Lead-managed automobile manufacturer Ford’s USD 3 billion re-entry into the US market, when they priced 5-year and 10-year benchmark bond issues |
– | Joint bookrunner on a 7-year EUR 1 billion issue for Russian natural gas producer Gazprom |
– | Joint arranger and bookrunner on AUD 1 billion Hybrid Tier 1 bond issue for Australian/ New Zealand financial services group ANZ. |
Initiatives and achievements
ABN AMRO’s US prime brokerage operations acquired
34
Corporate clients
Institutional clients
exchange across all categories. In the repurchase agreement (repo) categories, we received six first place rankings and we merited a significant number of top rankings in the interest rate categories.
Research
Results
Pre-tax profit in third quarter 2003 was CHF 965 million, up 35% from the same period last year. Compared to the exceptionally strong second quarter 2003, however, profit fell 9%. Because of a sustained strong performance in our Fixed Income, Rates and Currencies business and robust results in the Equities business, it emerges as our second best quarterly performance of the last two years.
35
Investment Bank
11 November 2003
Operating income
Investment Banking revenues stood at CHF 349 million, 8% lower than a year earlier due to the weakening of the US dollar against major currencies. Advisory revenues improved significantly because of the large number of high profile merger and acquisition transactions we participated in. Debt Capital Markets revenues increased compared to a year earlier, but due to low market activity in July and August, they did not reach the high level recorded in second quarter when clients took advantage of favorable conditions for capital raising.
continue to come from the US and is therefore significantly affected by the year on year movements of the US dollar against the Swiss franc. Additionally, the third quarter result was impacted by negative revenue of CHF 192 million related to credit default swaps hedging credit exposures in the loan book, compared to a gain of CHF 321 million a year earlier. All major business lines generated improved revenues compared to third quarter 2002. The overall revenues in the Fixed Income, Rates and Currencies business were 9% lower than in second quarter as revenues from Fixed Income and Principal Finance declined on seasonal effects.
Operating expenses
36
Headcount
Outlook
With markets showing signs of a pick-up in activity, especially in the US and Asia, there is reason to be cautiously optimistic. We believe that 2003 will be a better year for the industry than we have
seen for some time and we expect a consistent improvement in market conditions for the next couple of quarters. Despite that, we do not believe that activity will return to the levels seen in 1999 or 2000 for the foreseeable future.
37
Investment Bank
11 November 2003
Private Equity
Business Unit Reporting
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Total operating income | (58 | ) | (57 | ) | (391 | ) | (2 | ) | 85 | (190 | ) | (1,301 | ) | |||||||||||||||
Personnel expenses | 7 | (2 | ) | 12 | (42 | ) | 11 | 50 | ||||||||||||||||||||
General and administrative expenses | 5 | 30 | 15 | (83 | ) | (67 | ) | 44 | 47 | |||||||||||||||||||
Depreciation | 4 | 0 | 0 | 4 | 1 | |||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
Total operating expenses | 16 | 28 | 27 | (43 | ) | (41 | ) | 59 | 98 | |||||||||||||||||||
Business unit performance before tax | (74 | ) | (85 | ) | (418 | ) | 13 | 82 | (249 | ) | (1,399 | ) | ||||||||||||||||
Business unit performance before tax and amortization of goodwill and other intangible assets | (74 | ) | (85 | ) | (418 | ) | 13 | 82 | (249 | ) | (1,399 | ) | ||||||||||||||||
KPI’s | ||||||||||||||||||||||||||||
Value creation (CHF billion) | 0.0 | (0.1 | ) | (0.6 | ) | 100 | 100 | (0.2 | ) | (1.1 | ) | |||||||||||||||||
% change from | ||||||||||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | |||||||||||||||||||||||
Investment (CHF billion)1 | 2.8 | 3.0 | 3.6 | (7 | ) | (22 | ) | |||||||||||||||||||||
% change from | ||||||||||||||||||||||||||||
Additional information | ||||||||||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | |||||||||||||||||||||||
Portfolio fair value (CHF billion) | 3.6 | 3.6 | 4.4 | 0 | (18 | ) | ||||||||||||||||||||||
Regulatory equity allocated (average) | 450 | 450 | 500 | 0 | (10 | ) | ||||||||||||||||||||||
Headcount (full-time equivalents) | 52 | 54 | 78 | (4 | ) | (33 | ) | |||||||||||||||||||||
1 | Historical cost of investments made, less divestments and impairments. |
Key performance indicators
The level of our private equity investments stood at CHF 2.8 billion on 30 September 2003, compared to CHF 3.0 billion on 30 June 2003, reflecting writedowns, exits and currency fluctuations. Unfunded commitments, at CHF 1.8 billion, remained stable.
2003, higher than the level of CHF 683 million on 30 June 2003 due to selected valuation gains 2003, higher than the level of CHF 683 million
38
Results
Results reflect the continued difficult market conditions for private equity. This protracted period of difficulty has affected the performance of a number of the companies in our portfolio. In third quarter, the pre-tax loss was CHF 74 million, a marked improvement from the CHF 418 million loss a year earlier, reflecting the significantly lower level of writedowns.
Headcount
Headcount levels remained relatively stable. There were 52 employees on 30 September 2003, against 54 on 30 June 2003 and 78 at the end of the third quarter a year earlier.
Outlook
The private equity business will continue to focus on managing existing assets in order to maximize value for UBS shareholders and for investors in UBS funds. Consistent with the de-emphasis of this asset class, we continue to capitalize on orderly exit opportunities for investments when they arise and to reduce exposure to private equity funds. In that context, the recently announced sale of Global Garden Products to ABN AMRO Capital, and the structured third party funds transaction with Harbourvest are together expected to reduce our current level of private equity investments by approximately USD 0.5 billion. As the portfolio shrinks, our performance will continue to be linked to the economic conditions prevailing in the markets of our underlying investments.
39
Wealth Management USA
11 November 2003
Wealth Management USA
Joseph J. Grano, Jr.
Chairman and CEO,
Wealth Management USA
Mark B. Sutton
President and Chief Operating Officer,
Wealth Management USA
In third quarter 2003, Wealth Management USA’s pre-tax loss was CHF 43 million compared to pre-tax income of CHF 143 million in second quarter 2003. Excluding acquisition costs and a divestment gain in second quarter, pre-tax profit decreased 12% to CHF 170 million. On the same basis, but in US dollars, the operating result was 13% lower than the record US dollar performance achieved in second quarter, reflecting an industry-wide decline in the municipal securities business and the absence of revenues from the Correspondent Services business, which was sold in second quarter 2003. The performance in the private clients business remained strong, with US dollar recurring fees reaching record levels.
Business Group Reporting
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Income | 1,284 | 1,457 | 1 | 1,315 | (12 | ) | (2 | ) | 3,907 | 1 | 4,346 | |||||||||||||||||
Credit loss expense2 | (2 | ) | (3 | ) | (6 | ) | (33 | ) | (67 | ) | (7 | ) | (11 | ) | ||||||||||||||
Total operating income | 1,282 | 1,454 | 1,309 | (12 | ) | (2 | ) | 3,900 | 4,335 | |||||||||||||||||||
Personnel expenses3 | 970 | 924 | 1,010 | 5 | (4 | ) | 2,782 | 3,318 | ||||||||||||||||||||
General and administrative expenses | 229 | 263 | 278 | (13 | ) | (18 | ) | 738 | 986 | |||||||||||||||||||
Depreciation | 42 | 38 | 36 | 11 | 17 | 118 | 113 | |||||||||||||||||||||
Amortization of goodwill and other intangible assets | 84 | 86 | 109 | (2 | ) | (23 | ) | 257 | 350 | |||||||||||||||||||
Total operating expenses | 1,325 | 1,311 | 1,433 | 1 | (8 | ) | 3,895 | 4,767 | ||||||||||||||||||||
Business Group performance before tax | (43 | ) | 143 | (124 | ) | 65 | 5 | (432 | ) | |||||||||||||||||||
Business Group reporting excluding acquisition costs and significant financial events | ||||||||||||||||||||||||||||
Total operating income | 1,282 | 1,293 | 4 | 1,309 | (1 | ) | (2 | ) | 3,739 | 4 | 4,335 | |||||||||||||||||
Add back: Net goodwill funding5 | 62 | 58 | 95 | 7 | (35 | ) | 181 | 301 | ||||||||||||||||||||
Operating income excluding acquisition costs | 1,344 | 1,351 | 1,404 | (1 | ) | (4 | ) | 3,920 | 4,636 | |||||||||||||||||||
Total operating expenses | 1,325 | 1,311 | 1,433 | 1 | (8 | ) | 3,895 | 4,767 | ||||||||||||||||||||
Retention payments | (67 | ) | (67 | ) | (81 | ) | 0 | 17 | (201 | ) | (271 | ) | ||||||||||||||||
Amortization of goodwill and other intangible assets | (84 | ) | (86 | ) | (109 | ) | 2 | 23 | (257 | ) | (350 | ) | ||||||||||||||||
Operating expenses excluding acquisition costs | 1,174 | 1,158 | 1,243 | 1 | (6 | ) | 3,437 | 4,146 | ||||||||||||||||||||
Business Group performance before tax and excluding acquisition costs | 170 | 193 | 161 | (12 | ) | 6 | 483 | 490 | ||||||||||||||||||||
40
Wealth Management USA (continued)
KPI’s | Quarter ended | % change from | Year to date | |||||||||||||||||||||||||
30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Invested assets (CHF billion) | 626 | 622 | 597 | 1 | 5 | |||||||||||||||||||||||
Net new money (CHF billion)1 | 5.7 | 3.9 | 3.4 | 13.3 | 12.2 | |||||||||||||||||||||||
Interest and dividend income (CHF billion)2 | 4.0 | 3.8 | 5.3 | 5 | (25 | ) | 11.8 | 14.5 | ||||||||||||||||||||
Gross margin on invested assets (bps)3 | 82 | 98 | 85 | (16 | ) | (4 | ) | 87 | 83 | |||||||||||||||||||
Gross margin on invested assets excluding acquisition costs and SFEs (bps)4 | 86 | 91 | 91 | (5 | ) | (5 | ) | 87 | 89 | |||||||||||||||||||
Cost/income ratio (%)5 | 103 | 90 | 109 | 100 | 110 | |||||||||||||||||||||||
Cost/income ratio excluding acquisition costs and SFEs (%)6 | 87 | 86 | 88 | 88 | 89 | |||||||||||||||||||||||
Recurring fees7 | 512 | 455 | 522 | 13 | (2 | ) | 1,421 | 1,713 | ||||||||||||||||||||
Financial advisors (full-time equivalents) | 8,001 | 8,284 | 8,587 | (3 | ) | (7 | ) | |||||||||||||||||||||
% change from | ||||||||||||||||||||||||||||
Additional information | ||||||||||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | |||||||||||||||||||||||
Client assets (CHF billion) | 668 | 658 | 661 | 2 | 1 | |||||||||||||||||||||||
Regulatory equity allocated (average) | 5,550 | 5,750 | 7,000 | (3 | ) | (21 | ) | |||||||||||||||||||||
Headcount (full-time equivalents) | 18,204 | 18,566 | 19,363 | (2 | ) | (6 | ) | |||||||||||||||||||||
41
Wealth Management USA
11 November 2003
Key performance indicators
Invested assets were CHF 626 billion on 30 September 2003, up 1% from CHF 622 billion on 30 June 2003. In US dollar terms, invested assets have increased 3% in the quarter, reflecting positive inflows of net new money and the effects of market appreciation on invested assets. Compared to the third quarter a year earlier, invested assets have increased 5%. In US dollar terms, invested assets were 18% higher on 30 September 2003 when compared to a year earlier.
The inflow of net new money was a very strong CHF 5.7 billion in third quarter 2003, significantly higher than CHF 3.9 billion in second quarter 2003 and CHF 3.4 billion reported for the third quarter a year earlier. Including interest and dividends, net new money in third quarter 2003 was CHF 9.7 billion, up from CHF 7.7 billion in second quarter 2003 and comparing very favorably to the net new money performance reported by competitors.
Gross margin on invested assets was 82 basis points in third quarter 2003, compared to 98 basis points in second quarter. Before acquisi-
tion costs (goodwill and intangible asset amortization, net goodwill funding and retention payments) and excluding the gain from the sale of Correspondent Services Corporation (CSC) in second quarter, gross margin on invested assets decreased 5 basis points to 86 basis points. This reflects the decline in municipal securities revenues and the absence of CSC revenues, although their impact was somewhat offset by higher recurring fees.
The cost/income ratio before acquisition costs was 87% in third quarter 2003, compared to 86% in second quarter 2003. The slight change is a result of a seasonal slowdown in client activity that impacted the level of non-recurring fees and the industry-wide decline in municipal securities activity. Compared to third quarter last year, the cost/income ratio improved by one percentage point, reflecting recovering revenues and the benefits of cost management initiatives.
Recurring fees were CHF 512 million in third quarter 2003, 13% higher than CHF 455 mil-
42
lion in second quarter 2003. Excluding the effects of currency fluctuations, recurring fees were up 11% on managed account fee gains resulting from increased asset levels, with clients investing more than USD 2.6 billion into them. Recurring fees also benefited from the higher level of fees for mutual fund products. In USD terms, third quarter recurring fees were at their highest level since PaineWebber became part of UBS.
The number of financial advisors was 8,001 on 30 September 2003, down 283 from 8,284 on 30 June 2003. We have been restricting the number of new trainees in our financial advisor training program and turnover rates have remained high for less productive advisors. We continue to invest in and recruit highly productive and experienced financial advisors. Additionally, given the improved market conditions, we have now resumed hiring new trainees.
Initiatives and achievements
UBS Bank USA opens successfully
had USD 5.1 billion in assets, of which USD 3.4 billion were client borrowings under Premier Fixed and Premier Variable Credit Lines, partially funded by USD 2.2 billion in deposits.
Results
Investors were generally optimistic about economic and financial markets in third quarter, although latent concerns about inflation moderated their outlook. During the quarter, investor activity tailed off slightly, with average daily trading volumes down 2% because of a slowdown in July and August. The UBS Index of Investor Optimism fell in September from its level in June.
43
Wealth Management USA
11 November 2003
business. The performance in the private clients business remained strong, despite a seasonal decrease in client activity levels. Compared to third quarter 2002, operating pre-tax profit in US dollars increased 16%.
Operating income
Operating expenses
Personnel expenses were CHF 970 million, up 5% from second quarter 2003. On a US dollar basis they increased 3% reflecting higher performance-related compensation in our private client business.
Headcount
Outlook
Toward the end of third quarter, investors in the US expressed increasing optimism about equity market developments, despite persistent concerns about inflation and future economic prospects. Given the recent improvement in market conditions, we are cautiously optimistic about the future. But, in view of the remaining uncertainty about market developments, our costs and staffing levels will continue to be tightly monitored and controlled.
44
Corporate Center
11 November 2003
Corporate Center
Business Group Reporting
Quarter ended | % change from | Year to date | |||||||||||||||||||||||||||
CHF million, except where indicated | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Income | 239 | 282 | 517 | (15 | ) | (54 | ) | 722 | 1,9551 | ||||||||||||||||||||
Credit loss (expense)/recovery2 | 66 | 118 | 7 | (44 | ) | 843 | 176 | 130 | |||||||||||||||||||||
Total operating income | 305 | 400 | 524 | (24 | ) | (42 | ) | 898 | 2,085 | ||||||||||||||||||||
Personnel expenses | 170 | 220 | 245 | (23 | ) | (31 | ) | 576 | 797 | ||||||||||||||||||||
General and administrative expenses | 40 | 176 | 204 | (77 | ) | (80 | ) | 273 | 513 | ||||||||||||||||||||
Depreciation | 112 | 104 | 120 | 8 | (7 | ) | 330 | 379 | |||||||||||||||||||||
Amortization of goodwill and other intangible assets | 23 | 25 | 29 | (8 | ) | (21 | ) | 74 | 89 | ||||||||||||||||||||
Total operating expenses | 345 | 525 | 598 | (34 | ) | (42 | ) | 1,253 | 1,778 | ||||||||||||||||||||
Business Group performance before tax | (40 | ) | (125 | ) | (74 | ) | 68 | 46 | (355 | ) | 307 | ||||||||||||||||||
Business Group reporting excluding significant financial events | |||||||||||||||||||||||||||||
Total operating income | 305 | 400 | 524 | (24 | ) | (42 | ) | 898 | 1,9303 | ||||||||||||||||||||
Total operating expenses | 345 | 525 | 598 | (34 | ) | (42 | ) | 1,253 | 1,778 | ||||||||||||||||||||
Business Group performance before tax | (40 | ) | (125 | ) | (74 | ) | 68 | 46 | (355 | ) | 152 | ||||||||||||||||||
Business Group performance before tax and amortization of goodwill and other intangible assets | (17 | ) | (100 | ) | (45 | ) | 83 | 62 | (281 | ) | 241 | ||||||||||||||||||
Private Banks & GAM | |||||||||||||||||||||||||||||
Performance before tax | 63 | 43 | 46 | 47 | 37 | 162 | 1503 | ||||||||||||||||||||||
Performance before tax and amortization of goodwill and other intangible assets | 83 | 63 | 68 | 32 | 22 | 223 | 2203 | ||||||||||||||||||||||
Invested assets (CHF billion) | 80 | 76 | 70 | 5 | 14 | ||||||||||||||||||||||||
Net new money (CHF billion)4 | 2.4 | 1.2 | 0.9 | 4.2 | 3.3 | ||||||||||||||||||||||||
Headcount (full-time equivalents) | 1,657 | 1,673 | 1,719 | (1 | ) | (4 | ) | ||||||||||||||||||||||
% change from | |||||||||||||||||||||||||||||
Additional information | |||||||||||||||||||||||||||||
As at | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | ||||||||||||||||||||||||
Regulatory equity allocated (average) | 9,650 | 9,500 | 10,150 | 2 | (5 | ) | |||||||||||||||||||||||
Total headcount (full-time equivalents) | 2,766 | 2,836 | 2,925 | (2 | ) | (5 | ) | ||||||||||||||||||||||
45
Corporate Center
11 November 2003
Results
In third quarter 2003, Corporate Center recorded a pre-tax loss of CHF 40 million, compared to a pre-tax loss of CHF 74 million in the same quarter a year earlier.
Headcount
Private Banks & GAM
Invested assets were CHF 80 billion on 30 September 2003, up from CHF 76 billion on 30 June 2003, reflecting strong net new money inflows and positive financial markets.
Headcount Private Banks & GAM
46
Financial Statements
11 November 2003
Financial Statements
UBS Income Statement (unaudited)
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||||||
CHF million, except per share data | Note | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||||
Operating income | ||||||||||||||||||||||||||||||||
Interest income | 3 | 10,144 | 10,644 | 10,409 | (5 | ) | (3 | ) | 30,420 | 31,266 | ||||||||||||||||||||||
Interest expense | 3 | (6,787 | ) | (7,618 | ) | (7,683 | ) | (11 | ) | (12 | ) | (21,128 | ) | (23,417 | ) | |||||||||||||||||
Net interest income | 3,357 | 3,026 | 2,726 | 11 | 23 | 9,292 | 7,849 | |||||||||||||||||||||||||
Credit loss (expense)/recovery | 26 | 24 | (95 | ) | 8 | (54 | ) | (217 | ) | |||||||||||||||||||||||
Net interest income after credit loss expense | 3,383 | 3,050 | 2,631 | 11 | 29 | 9,238 | 7,632 | |||||||||||||||||||||||||
Net fee and commission income | 4 | 4,386 | 4,313 | 4,299 | 2 | 2 | 12,525 | 13,985 | ||||||||||||||||||||||||
Net trading income | 3 | 642 | 1,333 | 1,027 | (52 | ) | (37 | ) | 3,236 | 4,906 | ||||||||||||||||||||||
Other income | 5 | 79 | 415 | 43 | (81 | ) | 84 | 375 | 74 | |||||||||||||||||||||||
Total operating income | 8,490 | 9,111 | 8,000 | (7 | ) | 6 | 25,374 | 26,597 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
Personnel expenses | 6 | 4,372 | 4,619 | 4,411 | (5 | ) | (1 | ) | 13,193 | 14,503 | ||||||||||||||||||||||
General and administrative expenses | 7 | 1,422 | 1,600 | 1,720 | (11 | ) | (17 | ) | 4,419 | 5,232 | ||||||||||||||||||||||
Depreciation of property and equipment | 321 | 331 | 352 | (3 | ) | (9 | ) | 988 | 1,123 | |||||||||||||||||||||||
Amortization of goodwill and other intangible assets | 238 | 238 | 305 | 0 | (22 | ) | 718 | 943 | ||||||||||||||||||||||||
Total operating expenses | 6,353 | 6,788 | 6,788 | (6 | ) | (6 | ) | 19,318 | 21,801 | |||||||||||||||||||||||
Operating profit before tax and minority interests | 2,137 | 2,323 | 1,212 | (8 | ) | 76 | 6,056 | 4,796 | ||||||||||||||||||||||||
Tax expense | 383 | 592 | 202 | (35 | ) | 90 | 1,285 | 887 | ||||||||||||||||||||||||
Net profit before minority interests | 1,754 | 1,731 | 1,010 | 1 | 74 | 4,771 | 3,909 | |||||||||||||||||||||||||
Minority interests | (81) | (92 | ) | (68 | ) | (12 | ) | 19 | (245 | ) | (273 | ) | ||||||||||||||||||||
Net profit | 1,673 | 1,639 | 942 | 2 | 78 | 4,526 | 3,636 | |||||||||||||||||||||||||
Basic earnings per share (CHF) | 8 | 1.52 | 1.44 | 0.79 | 6 | 92 | 4.00 | 2.98 | ||||||||||||||||||||||||
Diluted earnings per share (CHF) | 8 | 1.47 | 1.42 | 0.76 | 4 | 93 | 3.93 | 2.84 | ||||||||||||||||||||||||
47
Financial Statement
11 November 2003
UBS Balance Sheet(unaudited)
% change from | ||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 31.12.02 | 31.12.02 | ||||||||||||
Assets | ||||||||||||||||
Cash and balances with central banks | 4,790 | 5,231 | 4,271 | 12 | ||||||||||||
Due from banks | 38,694 | 43,605 | 32,468 | 19 | ||||||||||||
Cash collateral on securities borrowed | 184,328 | 179,218 | 139,052 | 33 | ||||||||||||
Reverse repurchase agreements | 310,470 | 346,320 | 294,086 | 6 | ||||||||||||
Trading portfolio assets | 436,278 | 446,137 | 371,436 | 17 | ||||||||||||
Positive replacement values | 92,264 | 87,376 | 82,092 | 12 | ||||||||||||
Loans | 216,895 | 211,937 | 211,647 | 2 | ||||||||||||
Financial investments | 6,166 | 6,616 | 8,391 | (27 | ) | |||||||||||
Accrued income and prepaid expenses | 7,186 | 6,322 | 6,453 | 11 | ||||||||||||
Investments in associates | 1,870 | 1,710 | 705 | 165 | ||||||||||||
Property and equipment | 7,443 | 7,529 | 7,869 | (5 | ) | |||||||||||
Goodwill and other intangible assets | 12,128 | 12,684 | 13,696 | (11 | ) | |||||||||||
Other assets | 9,628 | 10,806 | 8,952 | 8 | ||||||||||||
Total assets | 1,328,140 | 1,365,491 | 1,181,118 | 12 | ||||||||||||
Total subordinated assets | 4,218 | 4,018 | 3,652 | 15 | ||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 115,295 | 119,801 | 83,178 | 39 | ||||||||||||
Cash collateral on securities lent | 46,436 | 40,280 | 36,870 | 26 | ||||||||||||
Repurchase agreements | 395,213 | 428,846 | 366,858 | 8 | ||||||||||||
Trading portfolio liabilities | 137,053 | 136,038 | 106,453 | 29 | ||||||||||||
Negative replacement values | 103,831 | 92,963 | 81,282 | 28 | ||||||||||||
Due to customers | 330,589 | 328,305 | 306,876 | 8 | ||||||||||||
Accrued expenses and deferred income | 15,481 | 12,294 | 15,331 | 1 | ||||||||||||
Debt issued | 123,275 | 146,141 | 129,411 | (5 | ) | |||||||||||
Other liabilities | 21,384 | 20,178 | 12,339 | 73 | ||||||||||||
Total liabilities | 1,288,557 | 1,324,846 | 1,138,598 | 13 | ||||||||||||
Minority interests | 3,879 | 3,953 | 3,529 | 10 | ||||||||||||
Shareholders’ equity | ||||||||||||||||
Share capital | 946 | 1,006 | 1,005 | (6 | ) | |||||||||||
Share premium account | 7,114 | 12,545 | 12,638 | (44 | ) | |||||||||||
Net gains/(losses) not recognized | ||||||||||||||||
in the income statement, net of tax | (196 | ) | (173 | ) | (159 | ) | (23 | ) | ||||||||
Retained earnings | 34,866 | 33,193 | 32,638 | 7 | ||||||||||||
Treasury shares | (7,026 | ) | (9,879 | ) | (7,131 | ) | 1 | |||||||||
Total shareholders’ equity | 35,704 | 36,692 | 38,991 | (8 | ) | |||||||||||
Total liabilities, minority interests and shareholders’ equity | 1,328,140 | 1,365,491 | 1,181,118 | 12 | ||||||||||||
Total subordinated liabilities | 8,531 | 8,702 | 10,102 | (16 | ) | |||||||||||
48
UBS Statement of Changes in Equity(unaudited)
CHF million | ||||||||
For the nine month period ended | 30.9.03 | 30.9.02 | ||||||
Issued and paid up share capital | ||||||||
Balance at the beginning of the period | 1,005 | 3,589 | ||||||
Issue of share capital | 2 | 5 | ||||||
Capital repayment by par value reduction | 0 | (2,509 | ) | |||||
Cancelation of second trading line treasury shares | (61 | ) | (81 | ) | ||||
Balance at the end of the period | 946 | 1,004 | ||||||
Share premium | ||||||||
Balance at the beginning of the period | 12,638 | 14,408 | ||||||
Premium on shares issued and warrants exercised | 115 | 81 | ||||||
Net premium/(discount) on treasury share and own equity derivative activity | (171 | ) | (53 | ) | ||||
Cancelation of second trading line treasury shares | (5,468 | ) | (2,209 | ) | ||||
Balance at the end of the period | 7,114 | 12,227 | ||||||
Net gains/(losses) not recognized in the income statement, net of taxes Foreign currency translation | ||||||||
Balance at the beginning of the period | (849 | ) | (769 | ) | ||||
Movements during the period | (165 | ) | 307 | |||||
Subtotal — balance at the end of the period | (1,014 | ) | (462 | ) | ||||
Net unrealized gains/(losses) on available for sale investments, net of taxes | ||||||||
Balance at the beginning of the period | 946 | 1,035 | ||||||
Net unrealized gains/(losses) on available for sale investments | (59 | ) | (196 | ) | ||||
Impairment charges reclassified to the income statement | 271 | 639 | ||||||
Gains reclassified to the income statement | (163 | ) | (500 | ) | ||||
Losses reclassified to the income statement | 20 | 10 | ||||||
Subtotal — balance at the end of the period | 1,015 | 988 | ||||||
Change in fair value of derivative instruments designated as cash flow hedges, net of taxes | ||||||||
Balance at the beginning of the period | (256 | ) | (459 | ) | ||||
Net unrealized gains/(losses) on the revaluation of cash flow hedges | 121 | 37 | ||||||
Net (gains)/losses reclassified to the income statement | (62 | ) | (156 | ) | ||||
Subtotal — balance at the end of the period | (197 | ) | (578 | ) | ||||
Balance at the end of the period | (196 | ) | (52 | ) | ||||
Retained earnings | ||||||||
Balance at the beginning of the period | 32,638 | 29,103 | ||||||
Net profit for the period | 4,526 | 3,636 | ||||||
Dividends paid1 | (2,298 | ) | 0 | |||||
Balance at the end of the period | 34,866 | 32,739 | ||||||
Treasury shares, at cost | ||||||||
Balance at the beginning of the period | (7,131 | ) | (3,377 | ) | ||||
Acquisitions | (6,722 | ) | (6,076 | ) | ||||
Disposals | 1,298 | 2,041 | ||||||
Cancelation of second trading line treasury shares | 5,529 | 2,290 | ||||||
Balance at the end of the period | (7,026 | ) | (5,122 | ) | ||||
Total shareholders’ equity | 35,704 | 40,796 | ||||||
Out of the total number of 98,068,507 treasury shares on 30 September 2003, 42,940,000 shares have been repurchased for cancelation. On 30 September 2003, a maximum of 7,432,025 shares can be issued against the exercise of options from former PaineWebber employee option plans.
49
Financial Statements
11 November 2003
UBS Statement of Cash Flows(unaudited)
CHF million | |||||||||
For the nine month period ended | 30.9.03 | 30.9.02 | |||||||
Cash flow from/(used in) operating activities | |||||||||
Net profit | 4,526 | 3,636 | |||||||
Adjustments to reconcile net profit to cash flow from/ (used in) operating activities | |||||||||
Non-cash items included in net profit and other adjustments: | |||||||||
Depreciation of property and equipment | 988 | 1,123 | |||||||
Amortization of goodwill and other intangible assets | 718 | 943 | |||||||
Credit loss expense/(recovery) | 54 | 217 | |||||||
Equity in income of associates | (114 | ) | (27 | ) | |||||
Deferred tax expense/(benefit) | 320 | (637 | ) | ||||||
Net loss/(gain) from investing activities | 41 | 685 | |||||||
Net (increase)/decrease in operating assets: | |||||||||
Net due from/to banks | 32,044 | (15,844 | ) | ||||||
Reverse repurchase agreements and cash collateral on securities borrowed | (61,660 | ) | (52,576 | ) | |||||
Trading portfolio and net replacement values | (32,111 | ) | 36,506 | ||||||
Loans/due to customers | 17,496 | 2,883 | |||||||
Accrued income, prepaid expenses and other assets | (1,427 | ) | 1,171 | ||||||
Net increase/(decrease) in operating liabilities: | |||||||||
Repurchase agreements, cash collateral on securities lent | 37,921 | 20,969 | |||||||
Accrued expenses and other liabilities | 9,976 | (2,238 | ) | ||||||
Income taxes paid | (789 | ) | (773 | ) | |||||
Net cash flow from/(used in) operating activities | 7,983 | (3,962 | ) | ||||||
Cash flow from/(used in) investing activities | |||||||||
Investments in subsidiaries and associates | (83 | ) | (30 | ) | |||||
Disposal of subsidiaries and associates | 726 | 231 | |||||||
Purchase of property and equipment | (778 | ) | (1,336 | ) | |||||
Disposal of property and equipment | 68 | 84 | |||||||
Net (investment in)/divestment of financial investments | 1,453 | 2,290 | |||||||
Net cash flow from/(used in) investing activities | 1,386 | 1,239 | |||||||
Cash flow from/(used in) financing activities | |||||||||
Net money market paper issued/(repaid) | (10,478 | ) | (23,549 | ) | |||||
Net movements in treasury shares and own equity derivative activity | (5,480 | ) | (4,007 | ) | |||||
Capital issuance | 2 | 5 | |||||||
Capital repayment by par value reduction | 0 | (2,509 | ) | ||||||
Dividends paid | (2,298 | ) | 0 | ||||||
Issuance of long-term debt | 19,206 | 11,746 | |||||||
Repayment of long-term debt | (12,342 | ) | (10,450 | ) | |||||
Increase in minority interests | 488 | 185 | |||||||
Dividend payments to/and purchase from minority interests | (231 | ) | (213 | ) | |||||
Net cash flow from/(used in) financing activities | (11,133 | ) | �� | (28,792 | ) | ||||
Effects of exchange rate differences | (169 | ) | (1,539 | ) | |||||
Net increase/(decrease) in cash equivalents | (1,933 | ) | (33,054 | ) | |||||
Cash and cash equivalents, beginning of the period | 82,344 | 116,259 | |||||||
Cash and cash equivalents, end of the period | 80,411 | 83,205 | |||||||
Cash and cash equivalents comprise: | |||||||||
Cash and balances with central banks | 4,790 | 3,204 | |||||||
Money market paper1 | 38,440 | 50,778 | |||||||
Due from banks maturing in less than three months | 37,181 | 29,223 | |||||||
Total | 80,411 | 83,205 | |||||||
50
Notes to the Financial Statements
11 November 2003
Notes to the Financial Statements (unaudited)
Note 1 Basis of Accounting
UBS AG’s (“UBS”) consolidated financial statements (“the Financial Statements”) are prepared in accordance with International Financial Reporting Standards (IFRS) and stated in Swiss francs (CHF). These Financial Statements are presented in accordance with IAS 34 “Interim Financial Statements”. In preparing the interim Financial Statements, the same accounting principles and methods of computation are applied as in the Financial Statements at 31 December 2002 and for the year then ended. These interim Financial Statements should be read in conjunction with the audited Financial Statements included in the UBS Financial Report 2002.
Center. Note 2 to the interim Financial Statements reflects the changed Business Group structure and associated management accounting changes. Comparative prior period amounts have been restated to conform to the current year presentation.
51
Notes to the Financial Statements
11 November 2003
Note 2 Reporting by Business Group
The Business Group results are presented on a management reporting basis. Consequently, internal charges and transfer pricing adjustments are reflected in the performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a Business Group on a reasonable basis. Transactions between Business Groups are conducted at arm’s length.
For the nine months ended 30 September 2003 | ||||||||||||||||||||||||
Wealth | ||||||||||||||||||||||||
Wealth Management & | Global Asset | Investment | Management | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||
Income | 9,016 | 1,286 | 10,497 | 3,907 | 722 | 25,428 | ||||||||||||||||||
Credit loss (expense)/recovery1 | (126 | ) | 0 | (97 | ) | (7 | ) | 176 | (54 | ) | ||||||||||||||
Total operating income | 8,890 | 1,286 | 10,400 | 3,900 | 898 | 25,374 | ||||||||||||||||||
Personnel expenses | 3,466 | 616 | 5,753 | 2,782 | 576 | 13,193 | ||||||||||||||||||
General and administrative expenses | 1,573 | 311 | 1,524 | 738 | 273 | 4,419 | ||||||||||||||||||
Depreciation | 283 | 19 | 238 | 118 | 330 | 988 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 58 | 120 | 209 | 257 | 74 | 718 | ||||||||||||||||||
Total operating expenses | 5,380 | 1,066 | 7,724 | 3,895 | 1,253 | 19,318 | ||||||||||||||||||
Business Group performance before tax | 3,510 | 220 | 2,676 | 5 | (355 | ) | 6,056 | |||||||||||||||||
Tax expense | 1,285 | |||||||||||||||||||||||
Net profit before minority interests | 4,771 | |||||||||||||||||||||||
Minority interests | (245 | ) | ||||||||||||||||||||||
Net profit | 4,526 | |||||||||||||||||||||||
For the nine months ended 30 September 2002 | ||||||||||||||||||||||||
Wealth | ||||||||||||||||||||||||
Wealth Management & | Global Asset | Investment | Management | Corporate | ||||||||||||||||||||
CHF million | Business Banking | Management | Bank | USA | Center | UBS | ||||||||||||||||||
Income | 9,327 | 1,254 | 9,932 | 4,346 | 1,955 | 26,814 | ||||||||||||||||||
Credit loss (expense)/recovery1 | (248 | ) | 0 | (88 | ) | (11 | ) | 130 | (217 | ) | ||||||||||||||
Total operating income | 9,079 | 1,254 | 9,844 | 4,335 | 2,085 | 26,597 | ||||||||||||||||||
Personnel expenses | 3,448 | 583 | 6,357 | 3,318 | 797 | 14,503 | ||||||||||||||||||
General and administrative expenses | 1,704 | 323 | 1,706 | 986 | 513 | 5,232 | ||||||||||||||||||
Depreciation | 330 | 18 | 283 | 113 | 379 | 1,123 | ||||||||||||||||||
Amortization of goodwill and other intangible assets | 71 | 145 | 288 | 350 | 89 | 943 | ||||||||||||||||||
Total operating expenses | 5,553 | 1,069 | 8,634 | 4,767 | 1,778 | 21,801 | ||||||||||||||||||
Business Group performance before tax | 3,526 | 185 | 1,210 | (432 | ) | 307 | 4,796 | |||||||||||||||||
Tax expense | 887 | |||||||||||||||||||||||
Net profit before minority interests | 3,909 | |||||||||||||||||||||||
Minority interests | (273 | ) | ||||||||||||||||||||||
Net profit | 3,636 | |||||||||||||||||||||||
52
Note 3 Net Interest and Trading Income
Accounting standards require separate disclosure of net interest income and net trading income by type of income (see the second and the third tables). This required disclosure, however, does not take into account that net interest and trading income are generated by a range of different business activities. In many cases, a particular business activity can generate both net interest and trading income. Fixed income trading activity, for example, generates both trading profits and coupon income. UBS management therefore analyzes net interest and trading income according to the business activity generating it. The first table below (labeled Net interest and trading income) provides information that corresponds to this management view. For example, net income from trading activities is further broken down into the four sub-components of Equities, Fixed income, Foreign exchange and Other. These activities generate both types of income (interest and trading revenue) and therefore this analysis is not comparable to the breakdown provided in the third table on the next page (Net trading income only).
Net Interest and Trading Income
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||||
Net interest income | 3,357 | 3,026 | 2,726 | 11 | 23 | 9,292 | 7,849 | |||||||||||||||||||||||
Net trading income | 642 | 1,333 | 1,027 | (52 | ) | (37 | ) | 3,236 | 4,906 | |||||||||||||||||||||
Total net interest and trading income | 3,999 | 4,359 | 3,753 | (8 | ) | 7 | 12,528 | 12,755 | ||||||||||||||||||||||
Breakdown by business activity | ||||||||||||||||||||||||||||||
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||||
Net income from interest margin products | 1,267 | 1,292 | 1,238 | (2 | ) | 2 | 3,844 | 3,979 | ||||||||||||||||||||||
Equities | 743 | 700 | 807 | 6 | (8 | ) | 1,758 | 2,272 | ||||||||||||||||||||||
Fixed income | 1,568 | 1,794 | 1,389 | (13 | ) | 13 | 5,362 | 4,991 | ||||||||||||||||||||||
Foreign exchange | 351 | 419 | 287 | (16 | ) | 22 | 1,140 | 1,172 | ||||||||||||||||||||||
Other | 83 | 85 | 59 | (2 | ) | 41 | 244 | 199 | ||||||||||||||||||||||
Net income from trading activities | 2,745 | 2,998 | 2,542 | (8 | ) | 8 | 8,504 | 8,634 | ||||||||||||||||||||||
Net income from treasury activities | 334 | 354 | 328 | (6 | ) | 2 | 1,072 | 1,232 | ||||||||||||||||||||||
Other1 | (347 | ) | (285 | ) | (355 | ) | (22 | ) | 2 | (892 | ) | (1,090 | ) | |||||||||||||||||
Total net interest and trading income | 3,999 | 4,359 | 3,753 | (8 | ) | 7 | 12,528 | 12,755 | ||||||||||||||||||||||
53
Notes to the Financial Statements
11 November 2003
Note 3 Net Interest and Trading Income (continued)
Net interest income1
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Interest income | ||||||||||||||||||||||||||||
Interest earned on loans and advances | 2,794 | 2,822 | 2,808 | (1 | ) | 0 | 8,188 | 8,937 | ||||||||||||||||||||
Interest earned on securities borrowed and reverse repurchase agreements | 2,538 | 2,861 | 3,290 | (11 | ) | (23 | ) | 8,243 | 9,173 | |||||||||||||||||||
Interest and dividend income from financial investments | 13 | 22 | 77 | (41 | ) | (83 | ) | 60 | 139 | |||||||||||||||||||
Interest and dividend income from trading portfolio | 4,799 | 4,939 | 4,234 | (3 | ) | 13 | 13,929 | 13,017 | ||||||||||||||||||||
Total | 10,144 | 10,644 | 10,409 | (5 | ) | (3 | ) | 30,420 | 31,266 | |||||||||||||||||||
Interest expense | ||||||||||||||||||||||||||||
Interest on amounts due to banks and customers | 1,017 | 1,160 | 1,531 | (12 | ) | (34 | ) | 3,369 | 4,955 | |||||||||||||||||||
Interest on securities lent and repurchase agreements | 2,448 | 2,631 | 2,944 | (7 | ) | (17 | ) | 7,561 | 8,396 | |||||||||||||||||||
Interest and dividend expense from trading portfolio | 2,571 | 2,979 | 2,124 | (14 | ) | 21 | 7,795 | 6,396 | ||||||||||||||||||||
Interest on debt issued | 751 | 848 | 1,084 | (11 | ) | (31 | ) | 2,403 | 3,670 | |||||||||||||||||||
Total | 6,787 | 7,618 | 7,683 | (11 | ) | (12 | ) | 21,128 | 23,417 | |||||||||||||||||||
Net interest income | 3,357 | 3,026 | 2,726 | 11 | 23 | 9,292 | 7,849 | |||||||||||||||||||||
Net trading income1 | ||||||||||||||||||||||||||||
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Equities | 331 | 632 | 702 | (48 | ) | (53 | ) | 1,145 | 2,187 | |||||||||||||||||||
Fixed income2 | (54 | ) | 219 | 45 | 784 | 1,274 | ||||||||||||||||||||||
Foreign exchange and other | 365 | 482 | 280 | (24 | ) | 30 | 1,307 | 1,445 | ||||||||||||||||||||
Net trading income | 642 | 1,333 | 1,027 | (52 | ) | (37 | ) | 3,236 | 4,906 | |||||||||||||||||||
54
Note 4 Net Fee and Commission Income
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||
Underwriting fees | 492 | 654 | 528 | (25 | ) | (7 | ) | 1,583 | 1,606 | |||||||||||||||||||
Corporate finance fees | 188 | 153 | 167 | 23 | 13 | 455 | 596 | |||||||||||||||||||||
Brokerage fees | 1,465 | 1,419 | 1,419 | 3 | 3 | 4,113 | 4,644 | |||||||||||||||||||||
Investment fund fees | 1,031 | 931 | 951 | 11 | 8 | 2,844 | 3,135 | |||||||||||||||||||||
Fiduciary fees | 60 | 62 | 71 | (3 | ) | (15 | ) | 185 | 232 | |||||||||||||||||||
Custodian fees | 299 | 305 | 296 | (2 | ) | 1 | 883 | 985 | ||||||||||||||||||||
Portfolio and other management and advisory fees | 1,022 | 911 | 939 | 12 | 9 | 2,834 | 3,130 | |||||||||||||||||||||
Insurance-related and other fees | 94 | 89 | 98 | 6 | (4 | ) | 286 | 336 | ||||||||||||||||||||
Total securities trading and investment activity fees | 4,651 | 4,524 | 4,469 | 3 | 4 | 13,183 | 14,664 | |||||||||||||||||||||
Credit-related fees and commissions | 60 | 53 | 80 | 13 | (25 | ) | 175 | 216 | ||||||||||||||||||||
Commission income from other services | 259 | 275 | 242 | (6 | ) | 7 | 794 | 749 | ||||||||||||||||||||
Total fee and commission income | 4,970 | 4,852 | 4,791 | 2 | 4 | 14,152 | 15,629 | |||||||||||||||||||||
Brokerage fees paid | 390 | 356 | 321 | 10 | 21 | 1,080 | 1,026 | |||||||||||||||||||||
Other | 194 | 183 | 171 | 6 | 13 | 547 | 618 | |||||||||||||||||||||
Total fee and commission expense | 584 | 539 | 492 | 8 | 19 | 1,627 | 1,644 | |||||||||||||||||||||
Net fee and commission income | 4,386 | 4,313 | 4,299 | 2 | 2 | 12,525 | 13,985 | |||||||||||||||||||||
55
Notes to the Financial Statements
11 November 2003
Note 5 Other Income
Quarter ended | % change from | Year to date | |||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Gains/losses from disposal of associates and subsidiaries | |||||||||||||||||||||||||||||
Net gain from disposal of: | |||||||||||||||||||||||||||||
Consolidated subsidiaries | 3 | 164 | 0 | (98 | ) | 167 | 156 | ||||||||||||||||||||||
Investments in associates | 1 | 1 | 0 | 0 | 2 | 0 | |||||||||||||||||||||||
Total | 4 | 165 | 0 | (98 | ) | 169 | 156 | ||||||||||||||||||||||
Financial investments available for sale | |||||||||||||||||||||||||||||
Net gain from disposal of: | |||||||||||||||||||||||||||||
Private equity investments | 27 | 20 | 42 | 35 | (36 | ) | 110 | 157 | |||||||||||||||||||||
Other financial investments | 6 | 81 | 162 | (93 | ) | (96 | ) | 92 | 431 | ||||||||||||||||||||
Impairment charges on private equity investments and other financial investments | (83 | ) | (89 | ) | (444 | ) | 7 | 81 | (412 | ) | (1,487 | ) | |||||||||||||||||
Total | (50 | ) | 12 | (240 | ) | 79 | (210 | ) | (899 | ) | |||||||||||||||||||
Net income from investments in property | 17 | 23 | 18 | (26 | ) | (6 | ) | 56 | 58 | ||||||||||||||||||||
Equity in income of associates | 42 | 62 | 12 | (32 | ) | 250 | 114 | 27 | |||||||||||||||||||||
Other | 66 | 153 | 253 | (57 | ) | (74 | ) | 246 | 732 | ||||||||||||||||||||
Total other income | 79 | 415 | 43 | (81 | ) | 84 | 375 | 74 | |||||||||||||||||||||
56
Note 6 Personnel Expenses
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||||||||||
Salaries and bonuses | 3,385 | 3,606 | 3,360 | (6 | ) | 1 | 10,258 | 11,256 | ||||||||||||||||||||||||||||
Contractors | 137 | 139 | 151 | (1 | ) | (9 | ) | 410 | 429 | |||||||||||||||||||||||||||
Insurance and social contributions | 280 | 224 | 234 | 25 | 20 | 720 | 757 | |||||||||||||||||||||||||||||
Contribution to retirement plans | 172 | 196 | 174 | (12 | ) | (1 | ) | 571 | 516 | |||||||||||||||||||||||||||
Other personnel expenses | 398 | 454 | 492 | (12 | ) | (19 | ) | 1,234 | 1,545 | |||||||||||||||||||||||||||
Total personnel expenses | 4,372 | 4,619 | 4,411 | (5 | ) | (1 | ) | 13,193 | 14,503 | |||||||||||||||||||||||||||
Note 7 General and Administrative Expenses | ||||||||||||||||||||||||||||||||||||
Quarter ended | % change from | Year to date | ||||||||||||||||||||||||||||||||||
CHF million | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | |||||||||||||||||||||||||||||
Occupancy | 299 | 371 | 331 | (19 | ) | (10 | ) | 974 | 1,020 | |||||||||||||||||||||||||||
Rent and maintenance of machines and equipment | 189 | 169 | 187 | 12 | 1 | 532 | 516 | |||||||||||||||||||||||||||||
Telecommunications and postage | 221 | 219 | 247 | 1 | (11 | ) | 659 | 783 | ||||||||||||||||||||||||||||
Administration | 151 | 151 | 173 | 0 | (13 | ) | 445 | 616 | ||||||||||||||||||||||||||||
Marketing and public relations | 83 | 104 | 100 | (20 | ) | (17 | ) | 276 | 335 | |||||||||||||||||||||||||||
Travel and entertainment | 124 | 126 | 133 | (2 | ) | (7 | ) | 368 | 440 | |||||||||||||||||||||||||||
Professional fees | 140 | 147 | 123 | (5 | ) | 14 | 396 | 409 | ||||||||||||||||||||||||||||
IT and other outsourcing | 214 | 198 | 259 | 8 | (17 | ) | 610 | 781 | ||||||||||||||||||||||||||||
Other | 1 | 115 | 167 | (99 | ) | (99 | ) | 159 | 332 | |||||||||||||||||||||||||||
Total general and administrative expenses | 1,422 | 1,600 | 1,720 | (11 | ) | (17 | ) | 4,419 | 5,232 | |||||||||||||||||||||||||||
57
Notes to the Financial Statements
11 November 2003
Note 8 Earnings per Share (EPS) and Shares Outstanding
Quarter ended | % change from | Year to date | |||||||||||||||||||||||||||
Basic earnings (CHF million) | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Net profit | 1,673 | 1,639 | 942 | 2 | 78 | 4,526 | 3,636 | ||||||||||||||||||||||
Quarter ended | % change from | Year to date | |||||||||||||||||||||||||||
Diluted earnings (CHF million) | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Net profit | 1,673 | 1,639 | 942 | 2 | 78 | 4,526 | 3,636 | ||||||||||||||||||||||
Less: Profit on own equity derivative contracts deemed dilutive | (8 | ) | 0 | (21 | ) | 62 | (2 | ) | (130 | ) | |||||||||||||||||||
Net profit for diluted EPS | 1,665 | 1,639 | 921 | 2 | 81 | 4,524 | 3,506 | ||||||||||||||||||||||
Quarter ended | % change from | Year to date | |||||||||||||||||||||||||||
Weighted average shares outstanding | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Weighted average shares outstanding | 1,102,783,381 | 1,136,530,546 | 1,199,528,140 | (3 | ) | (8 | ) | 1,130,413,592 | 1,221,094,518 | ||||||||||||||||||||
Potentially dilutive ordinary shares resulting from options and warrants outstanding | 30,614,016 | 19,428,459 | 11,281,744 | 58 | 171 | 20,617,036 | 14,379,115 | ||||||||||||||||||||||
Weighted average shares outstanding for diluted EPS | 1,133,397,397 | 1,155,959,005 | 1,210,809,884 | (2 | ) | (6 | ) | 1,151,030,628 | 1,235,473,633 | ||||||||||||||||||||
Quarter ended | % change from | Year to date | |||||||||||||||||||||||||||
Earnings per share (CHF) | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||
Basic EPS | 1.52 | 1.44 | 0.79 | 6 | 92 | 4.00 | 2.98 | ||||||||||||||||||||||
Diluted EPS | 1.47 | 1.42 | 0.76 | 4 | 93 | 3.93 | 2.84 | ||||||||||||||||||||||
As at | % change from | ||||||||||||||||||||||||||||
Shares outstanding | 30.9.03 | 30.6.03 | 30.9.02 | 2Q03 | 3Q02 | ||||||||||||||||||||||||
Total ordinary shares issued | 1,182,486,491 | 1,258,031,067 | 1,254,852,158 | (6 | ) | (6 | ) | ||||||||||||||||||||||
Second trading line treasury shares | |||||||||||||||||||||||||||||
2002 first program | 67,700,000 | 62,811,279 | |||||||||||||||||||||||||||
2002 second program | 8,270,080 | ||||||||||||||||||||||||||||
2003 program | 42,940,000 | 11,270,000 | |||||||||||||||||||||||||||
Other treasury shares | 55,128,507 | 52,538,668 | 5,941,400 | 5 | 828 | ||||||||||||||||||||||||
Total treasury shares | 98,068,507 | 139,778,748 | 68,752,679 | (30 | ) | 43 | |||||||||||||||||||||||
Shares outstanding | 1,084,417,984 | 1,118,252,319 | 1,186,099,479 | (3 | ) | (9 | ) | ||||||||||||||||||||||
58
Note 9 Currency Translation Rates
The following table shows the principal rates used to translate the financial statements of foreign entities into Swiss francs:
Spot rate | Average rate | Average rate | ||||||||||||||||||||||||||||||||||
As at | Quarter ended | Year to date | ||||||||||||||||||||||||||||||||||
30.9.03 | 30.6.03 | 31.12.02 | 30.9.02 | 30.9.03 | 30.6.03 | 30.9.02 | 30.9.03 | 30.9.02 | ||||||||||||||||||||||||||||
1 USD | 1.32 | 1.35 | 1.38 | 1.48 | 1.36 | 1.34 | 1.49 | 1.35 | 1.58 | |||||||||||||||||||||||||||
1 EUR | 1.54 | 1.56 | 1.45 | 1.46 | 1.54 | 1.54 | 1.46 | 1.52 | 1.47 | |||||||||||||||||||||||||||
1 GBP | 2.19 | 2.24 | 2.23 | 2.31 | 2.20 | 2.18 | 2.32 | 2.19 | 2.34 | |||||||||||||||||||||||||||
100 JPY | 1.18 | 1.13 | 1.17 | 1.21 | 1.17 | 1.12 | 1.24 | 1.15 | 1.26 | |||||||||||||||||||||||||||
59
UBS Registered Shares
11 November 2003
UBS Registered Shares
UBS ordinary shares are registered shares with a par value of CHF 0.80 per share. They are issued in the form of Global Registered Shares (GRS). A Global Registered Share is a security that provides direct and equal ownership for all shareholders. It can be traded and transferred across applicable borders without the need for conversion, with identical shares traded on different stock exchanges in different currencies. The share is listed on the Swiss (traded on virt-x), New York and Tokyo stock exchanges.
Ticker symbols
Trading exchange | Bloomberg | Reuters | Telekurs | |||
virt-x | UBSN VX | UBSN.VX | UBSN, 380 | |||
New York Stock Exchange | UBS US | UBS.N | UBS, 65 | |||
Tokyo Stock Exchange | 8657 JP | UBS.T | N16631, 106 | |||
Security identification codes
ISIN | CH0012032030 | |
Valoren | 1203203 | |
Cusip | CINS H8920M855 | |
UBS share price
60
Cautionary statement regarding
forward-looking statements
Imprint
Language: English.
SAP-No. 80834E-0304
UBS AG P.O. Box, CH-8098 Zurich P.O. Box, CH-4002 Basel |
www.ubs.com |
INCORPORATION BY REFERENCE
This Form 6-K is hereby incorporated by reference into each prospectus currently outstanding under the registration statements of UBS AG on Form F-1 (Registration Numbers 333-52832; 333-52832-01 to –03; 333-46216; 333-46216-01 and –02; and 333-46930), Form F-3 (Registration Numbers 333-64844; 333-62448; 333-62448-01 to –04) and Form S-8 (Registration Numbers 333-57878; 333-50320; 333-49216; 333-49214; 333-49212; 333-49210; and 333-103956), and the registration statement of Corporate Asset Backed Corporation on Form S-3 (Registration Number 333-61522), and into any outstanding offering circular that incorporates by reference any Form 6-K’s of UBS AG that are incorporated into its registration statements filed with the SEC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
UBS AG | ||||
By: | /s/ Robert Dinerstein | |||
Name: | Robert Dinerstein | |||
Title | Managing Director | |||
By: | /s/ Robert Mills | |||
Name: | Robert Mills | |||
Title: | Managing Director | |||
Date: November 11, 2003 |