Ubs Group Ag · SIX:UBSG
Ubs — Q3 2008 Earnings Presentation
40 slides from Ubs's earnings presentation, Nov 4, 2008
Slide 1: Third Quarter 2008 Results
Third Quarter 2008 Results November 4, 2008
Slide 2: Caution regarding forward looking statements
Caution regarding forward looking statements This presentation contains statements that constitute “forward-looking statements”, including but not limited to statements relating to the anticipated effect of transactions described herein, risks arising from the current market crisis and other risks s
Slide 3: Third Quarter 2008 Results
Third Quarter 2008 Results John Cryan, Group Chief Financial Officer 2
Slide 4: CFO priorities
CFO priorities Balance sheet Cost base Risk positions Financial stability Funding Profitability & liquidity Capital 3
Slide 5: Recent developments
Recent developments ♦ Q3 results - Balance sheet reduced further by CHF 83bn (4%) or CHF 217bn excl. PRVs and FX (14%) - Risk positions reduced further by USD 13.4bn, mostly through sales - Group costs reduced to CHF 6bn - NNM disappointing ♦ SNB transaction - Sale of up to USD 60bn of legacy risk p
Slide 6: 3Q08 Group results
3Q08 Group results (CHF m) 3Q07 2Q08 3Q08 Operating income 6,353 4,021 5,556 Personnel expenses 4,884 4,612 3,997 Non-personnel expenses 2,372 3,497 2,039 Operating expenses 7,256 8,110 6,036 Pre-tax profit from continuing operations (903) (4,089) (480) Net profit attributable to UBS shareholders (8
Slide 7: Personnel reduction by division
Personnel reduction by division (FTE) ♦ Reduction plan on track ♦ IB employees Global WM&BB – 17% reduction from the peak already (1,218) – further 2,000 to come as announced (248) – target ~17,000 81,452 (701) (269) (25) (574) (70) ~76,500 79,565 (1,887) Jun 08 WMI&CH WM US BB CH Global AM IB CC Se
Slide 8: Group operating expenses
Group operating expenses (CHF m) (26%) ♦ Personnel expenses: – Lower staff levels – Lower bonus accruals (919) (15%) ♦ Full effect of personnel (341) reductions yet to come 256 (871) 8,110 (198) 7,106 6,036 reversal 3Q08 EOP1 2Q08 impairment 2Q08 underlying personnel ARS Non Personnel Goodwill provi
Slide 9: Invested assets / NNM
Invested assets / NNM Global WM&BB ♦ Group invested assets down 4% (CHF bn) ♦ Disappointing NNM flows and weak (49) 6 markets partially offset by currency (135) 105 ♦ GWM&BB outflows 2.4% of invested 2,006 assets 1,932 (4%) ♦ Global AM outflows 4.5% of invested assets Jun 08 NNM Market Currency Othe
Slide 10: Balance sheet and risk weighted assets
Balance sheet and risk weighted assets Group assets and RWA ♦ Since June 2007: (CHF bn) – Assets excl. PRVs down CHF 774 bn (21%) (35%) 2,542 2,487 – Good underlying progress on RWA 335 416 2,275 2,233 428 2,080 1,997 573 ♦ Changes during 3Q08: 2,207 495 2,071 564 – Assets excl. PRVs and FX down CHF
Slide 11: Funding profile
Funding profile ♦ Well balanced portfolio of liabilities diversified by market, product and currency ♦ Loans to deposits ratio of 67% ♦ 3Q funding profile broadly similar to prior quarter: – 19% of funding on a secured basis – Savings and demand deposits stable at 21% – Long-term debt stable at 18%
Slide 12: Risk positions development during 3Q08
Risk positions development during 3Q08 Net Net P&L Other exposure1 exposure1 3Q08 changes USD billion 30.6.08 30.9.08 US sub-prime 6.7 (0.4) (1.1) 5.2 US Alt-A 6.4 (0.7) (3.4) 2.3 US prime 6.1 (0.9) (2.8) 2.3 Monoline2 4.0 (1.0) 1.3 4.3 US RLN program3 7.8 (0.3) (0.3) 7.2 US CRE / CMBS 8.2 0.0 (1.9)
Slide 13: Risk positions adjusted for SNB transaction
Risk positions adjusted for SNB transaction Pro forma as of 30 Sep 2008 Net exposure Of which Of which 30.9.08 Fund UBS USD billion US sub-prime 5.2 5.9 (0.7) US Alt-A 2.3 2.5 (0.2) US prime 2.3 1.9 0.4 US RLN program 7.2 5.8 1.4 US CRE / CMBS 6.4 6.6 (0.2) Student Loans 8.4 8.4 - Positions affected
Slide 14: SNB transaction - Target Portfolio
SNB transaction - Target Portfolio Total net exposure USD billion Legacy risk positions 31.1 Other assets 17.6 Positions affected by initial transfers into fund 48.7 Assets currently insured by monolines ~3.5 US student loan ARS ~5.0 ~57.2 ♦ USD 31.1bn of risk positions in US real estate (incl. US R
Slide 15: Regulatory capital - Group
Regulatory capital - Group Tier 1 BIS Tier 1 Total Total capital RWA ratio capital ratio CHF billion and % 30.06.2008 37.5 323.2 11.6% 50.7 15.7% IAS 19 restatement 1.6 2.1 1.6 30.06.2008 post-restatement 39.2 325.3 12.0% 52.3 16.1% Net P&L attr. to shareholders 0.3 Net P&L not eligible for capital
Slide 16: Global WM&BB
Global WM&BB Pre-tax profit (CHF m) ♦ Pre-tax profit down 9% on 2Q excl. ARS provision of CHF 919m 2,354 ♦ Revenues down 5% on lower invested 556 1,861 assets and reduced transactional activity 172 598 548 ♦ Costs excl. ARS provision in 2Q, down 3% 1,123 203 on lower staff levels and bonus accruals
Slide 17: WM International & Switzerland
WM International & Switzerland Pre-tax profit (CHF m) ♦ Lower profit on reduced revenues from transactional income and asset-based fees, partly offset by cost-cutting measures 1,626 ♦ Gross margin down 5 bps to 95bps 1,266 – Recurring - down 3 bps to 73 bps as clients 1,110 switch to lower-margin ca
Slide 18: WM US
WM US Pre-tax profit ♦ Pre-tax profit up 14% on 2Q excl. ARS (CHF m) provision or up 9% excl. currency impact ♦ Revenues declined on lower invested assets and reduced transactional activity 172 178 203 ♦ Both personnel and non personnel costs reduced as a result of cost control efforts ♦ Gross margi
Slide 19: Business Banking Switzerland
Business Banking Switzerland Pre-tax profit (CHF m) ♦ Pre-tax profit down 8% on reduced revenues and a slight cost increase ♦ Lower revenues on slightly lower business 598 volumes and margins and reduced client 556 548 activities ♦ NNM outflows of CHF 3.5bn, approx. 2% (8%) of invested assets (1%) 3
Slide 20: Global AM
Global AM Pre-tax profit (CHF m) 415 ♦ CHF 168m gain on sale of a minority stake in Adams Street Partners (ASP) 168 367 ♦ Revenues down on lower performance 415 352 and management fees ♦ Costs reduced 9% reflecting lower bonus 247 accruals, lower severance costs and lower (30%) G&A ♦ NNM disappointi
Slide 21: Investment Bank
Investment Bank Pre-tax profit ♦ USD 4.4bn of losses on legacy risk (CHF m) positions (CHF 4.8bn) ♦ Own credit gain of CHF 2.2bn ♦ Revenues in other areas negatively affected by reduced market activity and adverse trading conditions ♦ Costs down on lower bonus accruals and (2,748) lower staff levels
Slide 22: Investment Bank revenues
Investment Bank revenues Investment banking Sales & Trading – Equities Sales & Trading – FICC (CHF m) (CHF m) (CHF m) 1,545 1,542 1,448 1,008 1,136 786 (4,407) (4,720) (4,563) 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 ♦ Declining fee pools and ♦ Lower cash revenues on ♦ CHF 4.8bn of losses on red
Slide 23: Outlook
Outlook ♦ Difficult conditions across markets have Balance sheet continued Cost base Risk positions ♦ This will continue to impact our client's assets and our fee earning businesses Financial stability ♦ Operating expenses will continue to be Funding trimmed Profitability & liquidity ♦ Efficiency an
Slide 24: Q&A
Q&A The times are uncertain. The relationship isn’t. 23
Slide 25: Appendix
Appendix
Slide 26: US sub-prime residential mortgage exposures and P&L
US sub-prime residential mortgage exposures and P&L Net exposures P&L Other net Net exposures USD billion as of 30.6.081 3Q08 changes2 as of 30.9.081,3 Super senior RMBS CDOs 3.7 (0.4) (1.4) 1.9 RMBSs 3.0 0.2 0.1 3.2 Warehouse and retained RMBS CDOs 0.1 (0.2) 0.1 0.1 Total 6.7 (0.4) (1.1) 5.2 1 Net
Slide 27: US sub-prime positions – average marks
US sub-prime positions – average marks Average marks Average marks Net exposures Average marks in %; net exposures in USD billion as of 30.6.081 as of 30.9.081 as of 30.9.082 High grade RMBS CDOs 37 30 0.3 Mezzanine RMBS CDOs - 12% protection 25 19 0.5 Mezzanine RMBS CDOs 26 22 1.2 CDOs squared 8 16
Slide 28: US sub-prime positions - vintages and ratings
US sub-prime positions - vintages and ratings < 2005 2005 2006 2007 Vintages1,2 in % High grade RMBS CDOs 3 33 53 11 Mezzanine RMBS CDOs - 12% protection 5 51 42 2 Mezzanine RMBS CDOs 12 41 40 7 CDOs squared 23 26 43 8 Total super senior RMBS CDOs1 9 42 42 6 Residential mortgage-backed securities (R
Slide 29: US Alt-A residential mortgage exposures, P&L, average marks
US Alt-A residential mortgage exposures, P&L, average marks Net exposures P&L Other net Net exposures USD billion as of 30.6.081 3Q08 changes2 as of 30.9.081,3 AAA rated RMBSs, 1st lien 5.9 (0.8) (3.3) 1.8 Other RMBSs 0.5 0.1 (0.0) 0.5 Total 6.4 (0.7) (3.4) 2.3 Average marks Average marks average ma
Slide 30: US Alt-A positions – vintages and ratings
US Alt-A positions – vintages and ratings < 2005 2005 2006 2007 2008 Vintages1,2 in % AAA rated RMBSs, 1st lien2 47 5 24 23 1 Other RMBSs2 3 - 67 30 - AAA HG Mezz SIG Ratings3 in % Other RMBSs 1 74 (5) 30 Option Hybrid Loan Type in % Fixed rate HELOC ARM & ARM RMBSs 9 6 65 20 1 Vintage information o
Slide 31: US Prime residential mortgage exposures, P&L, average marks
US Prime residential mortgage exposures, P&L, average marks Net exposures P&L Other net Net exposures USD billion as of 30.6.081 3Q08 changes2 as of 30.9.081,3 Super senior RMBS CDOs 0.5 (0.2) (0.0) 0.2 RMBSs 5.6 (0.7) (2.8) 2.1 Total 6.1 (0.9) (2.8) 2.3 Average marks Average marks average marks in
Slide 32: US prime positions - vintages and ratings
US prime positions - vintages and ratings < 2005 2005 2006 2007 Vintages1,2 in % Total super senior RMBS CDOs1 12 24 38 26 Residential mortgage-backed securities (RMBS)2 8 15 17 60 AAA HG Mezz SIG & NR Ratings3 in % Residential mortgage-backed securities (RMBS) 56 4 38 2 1 Vintage information on sup
Slide 33: US commercial real estate exposures and P&L
US commercial real estate exposures and P&L Net exposures P&L Other net Net exposures USD billion as of 30.6.081 3Q08 changes2 as of 30.9.081,3 Super senior CMBS CDOs 0.7 (0.1) (0.0) 0.6 US CMBS/CMBX trading positions 4.6 (0.0) (1.9) 2.7 US commercial real estate loans4 2.9 0.1 0.0 3.1 Total 8.2 0.0
Slide 34: US RLN program exposures and P&L
US RLN program exposures and P&L Net exposures P&L Other net Net exposures USD billion as of 30.6.081,2 3Q08 3 changes 4 as of 30.9.081,2 Sub-prime and Alt-A 2.2 (0.1) (0.1) 1.9 CMBSs 1.7 (0.1) (0.0) 1.6 Other ABSs and corporate debt 3.9 (0.1) (0.2) 3.6 Total 7.8 (0.3) (0.3) 7.2 1 Net exposure repre
Slide 35: US RLN program exposures
US RLN program exposures 30.6.08 30.9.08 Credit Net Gross Net USD billion protection 1 Reference pool notional 13.1 16.9 3.8 13.1 Market value 7.8 8.6 1.4 7.2 Sub-prime and Alt-A 2.2 2.1 0.2 1.9 CMBSs 1.7 2.2 0.6 1.6 Other ABSs and corporate debt 3.9 4.2 0.6 3.6 1 Attribution of credit protection to
Slide 36: US RLN program – ratings and vintages
US RLN program – ratings and vintages1 AAA HG Mezz SIG Ratings2 in % Sub-prime and Alt-A 25 54 8 13 CMBSs 66 22 10 1 Other ABS and corporate debt 17 27 25 31 <2005 2005 2006 2007 Vintages3 in % Sub-prime and Alt-A 38 39 27 (5) 1 Rating and vintage percentage information are based on the gross exposu
Slide 37: Exposure to monoline insurers
Exposure1 to monoline insurers2 Credit Fair value of Fair value of Fair value of Notional valuation underlying CDSs5 prior to CDSs after amount3 adjustment as CDOs4 CVA CVA USD billion of 30.9.08 Credit protection on US RMBS CDOs 9.2 2.9 6.3 3.6 2.6 of which from monolines rated AAA to A 4.8 1.5 3.3
Slide 38: Leveraged finance commitments
Leveraged finance1 commitments Net Net Average Exposure2 Exposure2 mark (%)3 USD billion 30.6.08 30.9.08 Funded 4.1 3.7 Unfunded 2.0 1.0 Total 6.1 4.7 84 1 A leveraged finance deal is defined based on an internal rating which equals to a corporate credit rating of BB- or worse at the point of commit
Slide 39: Auction rate securities exposures and P&L
Auction rate securities exposures and P&L Net exposures P&L Other net Net exposures USD billion as of 30.6.081 3Q08 changes2 as of 30.9.081,3 US student loan auction rate certificates 8.3 (0.3) (0.1) 7.9 US municipal auction rate certificates 0.5 0.0 (0.2) 0.3 US auction preferred securities 0.3 (0.
Slide 40: Client holdings auction rate securities – maximum repurchase
Client holdings auction rate securities – maximum repurchase Par value of Buyback period maximum Institutional required Private Clients clients USD billion purchase as at 30.9.08 31.10.08 to 2.1.09 to 30.6.10 to 4.1.11 4.1.11 2.7.12 US student loan auction rate certificates 12.3 0.5 2.7 9.0 US munic