Ubs Group Ag · SIX:UBSG
Ubs — Q2 2008 Earnings Presentation
38 slides from Ubs's earnings presentation, Aug 12, 2008
Slide 1: Second Quarter 2008 Results
Second Quarter 2008 Results August 12, 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 risks arising from the current market crisis and other risks specific to UBS's business, strategic initiatives, fut
Slide 3: Overview
Overview ♦ Results ♦ Achievements ♦ Management and governance changes ♦ Our expectations 2
Slide 4: Achievements
Achievements ♦ Reduced risk positions substantially ♦ Strengthened capital base to very strong pre-crisis level ♦ Auction Rate Securities (ARS) settlement for all clients ♦ Staff and cost reductions well on track ♦ Continued balance sheet reduction 3
Slide 5: 2Q08 Group results
2Q08 Group results (CHF m) 2Q07 1Q08 2Q08 Operating income 16,014 (3,952)1 4,021 Personnel expenses 7,253 5,274 4,612 Non-personnel expenses 2,656 2,573 3,498 Operating expenses 9,909 7,847 8,110 Pre-tax profit from continuing operations 6,105 (11,799) (4,089) Net profit attributable to UBS sharehol
Slide 6: Personnel reduction by Business Group
Personnel reduction by Business Group (FTE) ♦ Personnel reduction plan on track ♦ WM reductions via natural attrition Global WM&BB and delivering front / back office (750) efficiency 83,839 (301) (286) (163) (40) (1,695) 98 81,452 (2,387) Mar 08 WMI&CH WM US BB CH Global AM IB CC Jun 08 5
Slide 7: Group operating expenses
Group operating expenses (CHF m) ♦ Headline expenses up 3%, 3% but core expenses down 8% 341 ♦ Personnel expenses: (662) 541 – Lower headcount levels 43 – Lower bonus accruals 8,110 – Reversal of 1Q EOP 7,847 accruals (8%) 7,228 ♦ Full effect of personnel reductions yet to come excl. provisions1 and
Slide 8: Net new money
Net new money (CHF bn) ♦ Global WM&BB outflows mainly concentrated in April 0.8 ♦ WM US outflows partly due to seasonal tax effects 35.2 5.6 ♦ Global AM outflows from reputational (2.0) issues and fund performance (16.5) (17.3) (1.9) ♦ Cautious NNM outlook (24.5) (2.0) 2Q07 1Q08 2Q08 WM businesses B
Slide 9: Invested assets
Invested assets Global WM&BB (CHF bn) ♦ Global WM&BB invested assets up 1%, but average asset base down 7% on prior quarter (19) 44 2,298 (13) ♦ NNM outflows less than 1% of 1,994 2,006 invested assets Dec 07 Mar 08 NNM Market Currency Jun 08 Global AM ♦ Global AM invested assets marginally (CHF bn)
Slide 10: Gross margins in Wealth Management
Gross margins in Wealth Management WMI&CH WM US (bps) (bps) 83 103 101 100 77 79 27 25 24 31 30 30 76 76 76 47 49 52 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08 Recurring Non-recurring Recurring Non-recurring 9
Slide 11: Balance sheet and risk weighted assets reduction
Balance sheet and risk weighted assets reduction Group assets and RWA ♦ Reduction since June 2007: (CHF bn) – Total assets down CHF 462 bn (18%) 2,540 – Total assets excl. PRVs down CHF 2,485 622 bn 335 416 2,273 2,231 2,078 – RWA down CHF 55 bn 428 573 2,205 495 2,069 1,845 ♦ Reduction since March
Slide 12: Global WM&BB
Global WM&BB Pre-tax profit (CHF m) ♦ Resilient revenue performance given headwinds from lower average invested asset base 2,245 2,152 1,123 577 540 139 183 598 ♦ ARS provision of USD 900m in WM US 1,529 1,429 1,266 ♦ Excluding ARS provision, expenses down 5% on prior quarter (741) 2Q07 1Q08 2Q08 WM
Slide 13: WM International & Switzerland
WM International & Switzerland Pre-tax profit (CHF m) ♦ WM Switzerland particularly affected by reputational issues 1,529 1,429 ♦ Gross margin stable at 100 bps, with 1,266 recurring income stable at 76 bps (11%) (17%) 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08 vs 1Q08 vs 2Q07 Operating income (CHF m) 3,202 3,05
Slide 14: WM US
WM US Pre-tax profit ♦ Pre-tax loss on ARS provision of USD 900m (CHF m) ♦ Excluding ARS provision, pre-tax profit broadly unchanged 139 183 178 ♦ Gross margin up 4 bps to 83 bps (741) 2Q07 1Q08 2Q08 Excl. impact from ARS provision of CHF 919m 2Q07 1Q08 2Q08 vs 1Q08 vs 2Q07 Operating income (CHF m)
Slide 15: Business Banking Switzerland
Business Banking Switzerland Pre-tax profit (CHF m) ♦ Solid performance on lower operating expenses 598 577 ♦ C / I ratio all–time low at 51.1% 540 11% 4% 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08 vs 1Q08 vs 2Q07 Operating income (CHF m) 1,362 1,268 1,229 (3%) (10%) Operating expenses (CHF m) 785 728 631 (13%)
Slide 16: Global AM
Global AM Pre-tax profit (CHF m) ♦ Pre-tax profit up 7% from 1Q08 on increased performance fees and lower 419 personnel expenses 352 330 ♦ Cost / income improved further (16%) 207 7% 2Q07 1Q08 2Q08 Excl. impact of DRCM closure costs of CHF 212m 2Q07 1Q08 2Q08 vs 1Q08 vs 2Q07 Operating income (CHF m)
Slide 17: Investment Bank
Investment Bank Pre-tax profit ♦ USD 5.1 bn of losses on legacy risk (CHF m) positions 1,659 ♦ Goodwill impairment charge of CHF 341m ♦ Markets remained challenging, but core client franchise continued to perform (5,233) ♦ Efficiency a key priority ♦ Exited institutional municipal business (18,228)
Slide 18: Investment Bank revenues
Investment Bank revenues Investment banking Sales & Trading – Equities Sales & Trading – FICC (CHF m) (CHF m) (CHF m) 2,673 2,079 1,948 1,542 1,469 1,008 557 (19,113) (4,720) 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08 2Q07 1Q08 2Q08 ♦ Declining fee pools and ♦ Down YoY and QoQ due to ♦ 2Q losses on legacy risk r
Slide 19: Key development in credit markets
Key development in credit markets ABX 07-01 AAA to BBB (price in%) 105 ♦ Further deterioration in most of the 95 85 ABX indices 75 65 ♦ Widening credit spreads in the 55 45 student loan paper market 35 25 15 ♦ Sharp increase in credit spreads of 5 monolines Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ma
Slide 20: US residential mortgage related positions
US residential mortgage related positions Net exposures1 ♦ All net exposures significantly (USD bn) reduced 27.6 26.6 ♦ 2Q P&L impact of USD 4.8 bn: US Sub-prime (0.8) US Alt-A (0.6) US prime (0.0) 17.1 15.6 15.3 US RLN2 (0.5) 11.2 Monolines3 (2.9) 9.4 8.9 7.8 6.7 6.4 6.1 6.3 3.6 4.0 US sub-prime US
Slide 21: Other risk positions
Other risk positions Net exposures1 (USD bn) ♦ 2Q P&L impact of USD 0.4 bn: US CRE / CMBS2 0.3 Leveraged finance3 (0.2) US student loans (0.5) 11.4 10.4 9.0 7.8 8.2 8.0 7.7 6.3 6.1 US CRE / CMBS2 Lev. finance3 US student loans Dec 2007 Mar 2008 Jun 2008 1 Net exposure represents market value of gros
Slide 22: Capital management
Capital management 11.6% ♦ Very strong Tier 1 and total capital Tier 1 ratio ratios at 11.6% and 15.7% 470 bps 37.5 6.9% 7.6 ♦ Tier 1 capital increased on rights and hybrid issuance and RWA 22.9 reduction 5.8 Eligible 29.9 ♦ RWA reduction mostly in capital Investment Bank (CHF bn) 17.1 1Q08 2Q08 Cor
Slide 23: Total equity development
Total equity development Total equity (CHF bn) ♦ Rights issue added CHF 15.6 bn to equity 1.7 ♦ MCN reclassified from liability to (0.1) 12.4 equity instruments and added CHF 12.4 bn to equity 15.6 ♦ Minority interests increased by CHF 52.3 1.7 bn on hybrid issuance 22.7 29.6 Mar 08 Rights MCN Other
Slide 24: Appendix
Appendix
Slide 25: 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 31.03.081,2 2Q083 changes4 as of 30.06.081,5 Super senior RMBS CDOs 6.6 (0.8) (2.2) 3.7 RMBSs 8.9 (0.0) (5.9) 3.0 Warehouse and retained RMBS CDOs 0.1 (0.1) 0.0 0.1 Total 15.6 (0.8) (8.1)
Slide 26: 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 31.03.081 as of 30.06.081 as of 30.06.082 High grade RMBS CDOs 34 37 0.3 Mezzanine RMBS CDOs - 12% protection 40 25 0.7 Mezzanine RMBS CDOs 33 26 2.6 CDOs squared 1
Slide 27: 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 1 20 77 2 Mezzanine RMBS CDOs - 12% protection 5 57 37 1 Mezzanine RMBS CDOs 5 37 50 8 CDOs squared 15 14 51 20 Total super senior RMBS CDOs1 5 37 50 8 Residential mortgage-backed securities (RM
Slide 28: US Alt-A residential mortgage exposures and P&L
US Alt-A residential mortgage exposures and P&L Net exposures P&L Other net Net exposures USD billion as of 31.03.081 2Q08 changes2 as of 30.06.081,3 Super senior RMBS CDOs 0.3 (0.0) (0.3) 0.0 AAA rated RMBSs, 1st lien 14.5 (0.5) (8.2) 5.9 Other RMBSs 2.3 (0.1) (1.6) 0.5 Total 17.1 (0.6) (10.1) 6.4
Slide 29: US Alt-A positions – average marks
US Alt-A positions – average marks Average marks Average marks Net exposures Net exposures in USD billion; average marks in % as of 31.03.081 as of 30.06.081 as of 30.06.082 Super senior RMBS CDOs 30 - - AAA rated RMBSs, 1st lien 77 73 5.9 Other RMBSs 44 30 0.5 1 Average marks represent the ratio of
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 15 5 46 30 3 Other RMBSs2 - (3) 82 21 - AAA HG Mezz SIG Ratings3 in % Other RMBSs - 57 10 34 Option Hybrid Loan Type in % Fixed rate HELOC ARM & ARM RMBSs 37 15 40 7 1 Vintage information
Slide 31: 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 31.03.081 2Q08 changes2 as of 30.06.081,3 Super senior CMBS CDOs 0.8 0.0 (0.1) 0.7 US CMBS/CMBX trading positions4 2.4 0.2 2.0 4.6 US commercial real estate loans5 3.1 0.1 (0.3) 2.9 Total 6.3 0.3
Slide 32: 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 31.03.081,2 2Q08 3 changes 4 as of 30.06.081,2 Sub-prime and Alt-A 2.9 (0.5) (0.2) 2.2 CMBSs 1.9 (0.0) (0.1) 1.7 Other ABSs and corporate debt 4.2 0.0 (0.4) 3.9 Total 8.9 (0.5) (0.7) 7.8 1 Net exposure repre
Slide 33: US RLN program exposures
US RLN program exposures 31.03.08 30.06.08 Credit Net Gross Net USD billion protection 1 Reference pool notional 13.1 16.9 3.8 13.1 Market value 8.9 9.4 1.6 7.8 Sub-prime and Alt-A 2.9 2.4 0.3 2.2 CMBSs 1.9 2.4 0.6 1.7 Other ABSs and corporate debt 4.2 4.6 0.7 3.9 1 Attribution of credit protection
Slide 34: US RLN program – ratings and vintages
US RLN program – ratings and vintages1 AAA HG Mezz SIG Ratings2 in % Sub-prime and Alt-A 25 56 8 11 CMBSs 65 22 11 1 Other ABS and corporate debt 17 27 25 31 <2005 2005 2006 2007 Vintages3 in % Sub-prime and Alt-A 38 36 29 (3) 1 Rating and vintage percentage information are based on the gross exposu
Slide 35: 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 30.06.08 Credit protection on US RMBS CDOs 11.5 3.9 7.6 4.6 3.0 of which from monolines rated AAA to A on US sub
Slide 36: Leveraged finance commitments
Leveraged finance1 commitments Net Net Average Exposure2,3 Exposure2,3 mark (%)4 USD billion 31.03.08 30.06.08 Old deals 3.2 2.1 87 Funded 2.9 2.0 Unfunded 0.3 0.1 New deals 4.8 4.0 91 Funded 3.8 2.1 Unfunded 1.0 1.9 Total 8.0 6.1 90 1 A leveraged finance deal is defined based on an internal rating
Slide 37: Student loan exposures and P&L
Student loan exposures and P&L Net exposures P&L Other net Net exposures USD billion as of 31.03.081 2Q08 changes2 as of 30.06.081,3 US student loan auction rate certificates4 8.7 (0.3) (0.1) 8.3 US student loan variable rate demand obligations 0.1 0.0 (0.1) 0.0 Other US student loan ABSs 1.6 (0.2)
Slide 38: Auction rate securities (client holdings)
Auction rate securities (client holdings) Max. required purchase Repurchase window Announced on 8 Aug 2008 (USDbn) Private clients and charities 8.3 31 Oct 2008 to 1 Jan 20111 Student Loan ARCs ~ 2.8 Muni ARCs ~ 2.7 Auction Preferred Securities ~ 2.8 1 Jan 2009 to 1 Jan 2011 Institutional clients (W