Slide 1: Third Quarter 2012 Results & Strategy Update
Third Quarter 2012 Results & Strategy Update October 30, 2012
Slide 2: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements This presentation contains statements that constitute “forward-looking statements,” including but not limited to management’s outlook for UBS’s financial performance and statements relating to the anticipated effect of transactions and strate
Slide 3: Agenda
Agenda Topic Speaker Introduction C. Stewart Overview of strategy update announced today S. Ermotti 3Q12 – Key messages S. Ermotti 3Q12 – Results T. Naratil Strategy update S. Ermotti Strategy update – financial implications T. Naratil Q&A S. Ermotti / T. Naratil 2
Slide 4: Key messages
Key messages Our franchise is unrivaled with compelling industry growth prospects; we are prepared for the future and are committed to deliver highly attractive returns We have built the foundation for our long-term success – industry leading capital ratios, strong funding and liquidity, lower costs
Slide 5: 3Q12 results
3Q12 results
Slide 6: 3Q12—Key messages
3Q12—Key messages CHF 1.4 billion adjusted pre-tax profit; net loss attributable to shareholders of CHF 2.2 billion; diluted earnings per share of CHF (0.58) CHF 0.9 billion own credit loss Industry leading capital position: Basel III fully applied CET1 ratio of 9.3% with Basel III RWAs of CHF 301
Slide 7: 3Q12 results
3Q12 results (CHF million) WM WMA IB Global AM R&C CC Group Income 1,789 1,559 2,273 468 946 244 7,280 Credit loss (expense) / recovery 0 2 3 0 (13) (122) (129) Own credit gain / (loss) (863) (863) Total operating income 1,789 1,561 2,277 468 932 (740) 6,287 Personnel expenses 799 1,093 1,251 236 34
Slide 8: 3Q12 goodwill impairment testing results
3Q12 goodwill impairment testing results Goodwill and other asset impairments resulted from analysis of newly approved Investment Bank business plan Pre-impairment Impairment Post impairment CHF million 30.9.12 balance sheet 3Q12 income statement 30.9.12 balance sheet Goodwill 9,119 3,030 6,088 Inta
Slide 9: Basel 2.5—Capital ratios
Basel 2.5—Capital ratios Further increased industry-leading Basel 2.5 tier 1 capital ratio to 20.2% 20.2% 18.7% 19.2% 15.9% Basel 2.5 risk-weighted 18.1% assets decreased CHF 4 ~12.7% 12.6% 13.2% 13.2% 17.2% 16.7% billion to CHF 210 billion 14.1% 11.0% 11.7% 11.7% Basel 2.5 tier 1 capital ~9.1%
Slide 10: Our wealth management businesses are unrivaled
Our wealth management businesses are unrivaled We are well positioned for growth in the most attractive markets Invested assets of CHF 1.6 trillion on 30.9.12 managed by over 11,100 advisors 720 WM Americas 783 816 Wealth Management Adjusted pre-tax profit1 Net new money (combined result) (combined
Slide 11: Wealth Management
Wealth Management Adjusted pre-tax profit up 18%; highest third quarter NNM in 5 years Operating income and pre-tax profit Higher activity levels and increased invested assets led to 3% increase in 1,745 1,734 1,789 operating income 888 Adjusted cost / income ratio at 67%, within target range 60
Slide 12: Wealth Management—Operating income and gross margin
Wealth Management—Operating income and gross margin Gross margin1 stable at 89 bps; modest increase in client activity levels largely offset by an increase in the invested asset base Invested assets (CHF billion) 783 816 783 816 750 772 750 772 720 720 2 2 1,745 1,769 1,734 1,789 97 91 93 1,673 89 8
Slide 13: Wealth Management Americas (USD)
Wealth Management Americas (USD) Our YTD pre-tax profit already represents a record for full year profits Operating income and pre-tax profit Record USD revenues for WMA; increased 3% on stronger transaction- 1,587 1,631 1,552 based revenues; gains on AFS sales stable Adjusted cost / income rati
Slide 14: Investment Bank
Investment Bank Improved revenues and continued disciplined approach to RWA reduction Operating income CHF USD Revenues increased in all business areas 31% 29% Adjusted cost / income ratio fell to 2,277 2,387 92% 2,131 403 383 Basel III RWAs reduced by CHF 8 263 1,853 1,773 1,736 billion to CH
Slide 15: Investment Bank highlights
Investment Bank highlights1 IBD Significant market share improvement in Advisory and Debt Capital Markets 263 403 397 221 206 257 Advisory improved market share and rank; participated in 2 of the top 6 deals 144 222 183 ECM participated in 6 of top 8 ECM deals; 2Q12 included revenue from a numbe
Slide 16: Global Asset Management
Global Asset Management Adjusted pre-tax profit up 17% QoQ as performance fees more than doubled Operating income and pre-tax profit Operating income increased 5% 468 446 – Performance fees more than doubled, driven 399 by A&Q – Net management fees broadly stable (CHF million) 118 124 124 Operat
Slide 17: Retail & Corporate
Retail & Corporate Adjusted pre-tax profit up 4% QoQ with strong NNBV growth Operating income and pre-tax profit Operating income increased mostly on increased trading income 929 927 932 683 – Modest reduction in interest income despite 1 the historically low interest environment 418 399 395 409 4
Slide 18: Corporate Center
Corporate Center CHF 998 million pre-tax loss including own credit losses of CHF 863 million Corporate Center – Core Functions 1,819 Operating income (excl. own credit) Corporate Center – Core Functions: Own credit gains / (losses) CHF 936 million pre-tax loss Pre-tax profit – Own credit losses of
Slide 19: Strong liquidity and stable funding profile
Strong liquidity and stable funding profile UBS’s Basel III Liquidity Coverage Ratio and Net Stable Funding Ratio in excess of 100%1 Liquidity Coverage Ratio (LCR) 25% of our funded balance sheet assets are in the form of available liquidity2 (CHF billion) 30.9.12 Cash outflows under 30-day 282 Fu
Slide 20: Basel III—Risk-weighted assets
Basel III—Risk-weighted assets Continued reduction in the Investment Bank and the Legacy Portfolio (99) • Sales and reduced exposures contributed ~85% of RWA reduction ~400 in the Investment Bank and the Legacy ~380 Portfolio since 30.9.11 ~21 ~20 ~350 ~80 ~62 ~21 ~305 Quarter on quarter changes: ~3
Slide 21: Industry-leading Basel III capital ratios
Industry-leading Basel III capital ratios ~9.3% CET1 ratio on a fully applied basis Basel III Basel III ~ phase-in 2019 rules fully applied +480 bps +440 bps ~1.2% ~0.6% ~13.6% ~0.5% ~13.1% ~11.8% ~10.7% ~1.3% ~10.0% ~0.6% ~9.3% ~0.5% ~8.8% ~7.5% ~6.7% ~6.2% ~6.2% 30.9.11 31.12.11 31.3.12 30.6.12 30
Slide 22: Strategy update
Strategy update
Slide 23: Key messages
Key messages Our franchise is unrivaled with compelling industry growth prospects; we are prepared for the future and are committed to deliver highly attractive returns We have built the foundation for our long-term success – industry leading capital ratios, strong funding and liquidity, lower costs
Slide 24: UBS—The bank of the future
UBS—The bank of the future An unrivaled franchise with compelling growth prospects WM businesses Retail & Corporate Investment Bank Global AM World’s leading HNW and Leading Leading Equities franchise, Well-diversified across UHNW wealth manager; universal bank Top FX house, strong investment capabi
Slide 25: Successful execution of our key strategic priorities over the last 12 months
Successful execution of our key strategic priorities over the last 12 months Basel III RWAs • Focused and disciplined execution of Basel III RWA reduction (CHF billion) Reduce ~400 (25%) ~301 RWAs • 2012 RWA targets achieved ahead of schedule 30.9.11 30.9.12 Basel III CET1 fully applied ratio • Cons
Slide 26: Our journey—The transformation of UBS
Our journey—The transformation of UBS We are taking action from a position of strength… Implement Unlock Accelerate and execute full potential • Transform the Investment Bank • Operational efficiency • Build capital strength • Reduce balance sheet • Profitable growth • Reduce costs • Implement long-
Slide 27: Accelerating the transformation of the Investment Bank
Accelerating the transformation of the Investment Bank Considerations Benefits Capitalizing • Needs of wealth on our • Ability to concentrate management and resources to maintain and core external clients traditional grow core businesses strengths… • Expected returns • Invest in quality content, ind
Slide 28: Investment Bank
Investment Bank Our Investment Bank is a source of competitive advantage for UBS Capitalizing on our traditional strengths Strong advisory Leading Top FX and solutions capabilities Equities franchise and Precious metals house • Global footprint with presence in • Consistently highly ranked in • High
Slide 29: Creating a profitable and competitive Investment Bank
Creating a profitable and competitive Investment Bank Corporate Client Solutions Investor Client Services Advisory and solutions, origination and Distribution, sales and trading Our structuring, IBD, Leveraged Finance, Special businesses Solutions Group Equities, FX, Precious Metals, Flow rates WM a
Slide 30: Businesses and positions to be exited and transferred to Corporate Center
Businesses and positions to be exited and transferred to Corporate Center Our strong capital position allows us to effectively balance speed of execution and exit costs Exiting some businesses that are not expected to deliver adequate risk-adjusted returns given the regulatory and economic outlook
Slide 31: Investing in businesses with more attractive returns
Investing in businesses with more attractive returns Our operational efficiency plans will free up more resources to support growth in areas with the most attractive returns • Total gross cost reductions of • Investments of CHF 1.5 CHF 5.4 billion p.a. by 2015 billion over the next 3 • CHF 3.3 billi
Slide 32: Group targets
Group targets1 Balance sheet Basel III RWAs Basel III CET1 ratio excl. PRVs fully applied fully applied (CHF trillion) (CHF billion) (%) 0.9 ~301 13.0% (0.3) <250 11.5% 0.6 <200 9.3% 30.9.12 31.12.15 30.9.12 31.12.13 31.12.17 30.9.12 2013 2014 Cost / income ratio Return on equity2 (%) (%) 79% >15% 6
Slide 33: Reducing capital needs, while strengthening the business mix
Reducing capital needs, while strengthening the business mix We will improve the quality and consistency of our earnings Attributed equity Expected pre-tax profit contribution1 to business divisions1 ~20% ~35% WM businesses, R&C, Global AM ~65% Investment Bank ~65% ~80% ~35% 3Q12 2013 pro forma2 Adj
Slide 34: We are firmly committed to return capital to shareholders
We are firmly committed to return capital to shareholders Our business mix supports an attractive capital returns program Progressive capital returns as we work towards our capital targets; thereafter attractive capital returns Future dividend policy – illustrative example (% of profits) Baseline
Slide 35: Our vision for the UBS of the future
Our vision for the UBS of the future An unrivaled Leading positions in all business divisions franchise Positioned for Compelling industry growth prospects growth Prepared for the Clear strategy, solid financial foundation, long-term efficiency measures future and track record of execution Targeted
Slide 36: Strategy – Capital and Funding
Strategy – Capital and Funding
Slide 37: Financial strength is the foundation of our success
Financial strength is the foundation of our success Our business model will be less capital intensive in the future Basel III CET 1 ratio targets of 11.5% in 2013 and 13% in 2014 on a fully applied basis Group Basel III RWA target of <CHF 250 billion by 2013, <CHF 225 billion by 2015 and <CHF 20
Slide 38: Basel III—Capital ratios
Basel III—Capital ratios Targeting a 13% fully-applied CET1 ratio in 2014 Basel III Basel III ~ phase-in 2019 rules fully applied ~13.6% ~13.1% 13.0% ~11.8% 11.5% ~10.7% ~10.0% ~9.3% ~8.8% ~7.5% ~6.7% ~6.2% ~6.2% 30.9.11 31.12.11 31.3.12 30.6.12 30.9.12 30.9.11 31.12.11 31.3.12 30.6.12 30.9.12 2013
Slide 39: Our funded balance sheet will be reduced by a further ~30%
Our funded balance sheet1 will be reduced by a further ~30% Funded assets Funding liabilities 30.9.12 30.9.12 CHF 0.9 trillion CHF 0.9 trillion Due to banks Other assets including net Short-term debt issued (~30%) replacement values (~30%) Cash collateral on securities lent and repo agreements Cash,
Slide 40: Leverage ratios
Leverage ratios Our leverage ratios will improve substantially as we reduce our balance sheet Simple leverage ratio1 FINMA leverage ratio2 2.2 FINMA Basel III leverage ratio3 2.1 Funded balance sheet4 6.1% 5.7% 1.8 5.1% 5.7% 5.4% expected direction 4.5% based on our plans 4.4% 1.2 3.4% 3.9% 2.8% 0.9
Slide 41: FINMA Basel III total capital requirements for large Swiss banks
FINMA Basel III total capital requirements for large Swiss banks1 UBS’s total capital requirement will be a function of total exposure, market share in Switzerland and a possible capital rebate Capital UBS target requirements capital structure for large Swiss based on banks our plans A. Total exposu
Slide 42: Basel III—Risk-weighted assets
Basel III—Risk-weighted assets We aim to reduce Group RWAs to below CHF 200 billion by 2017 ~400 ~380 (25%) ~21 ~20 ~350 (50%) ~80 ~21 ~62 ~305 ~301 ~59 ~270 ~53 ~49 <250 ~40 <225 <200 ~85 ~220 ~212 ~55 ~25 ~191 ~170 ~162 ~135 <70 <70 <70 (CHF billion) ~79 ~86 ~79 ~82 ~90 ~95 ~95 ~100 ~105 30.9.11 3
Slide 43: Basel III—Investment Bank & Legacy RWAs
Basel III—Investment Bank & Legacy RWAs Investment Bank and Legacy RWAs to be reduced ~CHF 120 billion by 2017 Basel III RWAs (CHF billion) Legacy Portfolio including businesses and positions to be exited ~49 ~49 Investment Bank Transfer to CC ~90 ~85 ~55 ~162 ~25 <70 <70 <70 <70 Of which ~CHF 15-18
Slide 44: Legacy Portfolio (30.9.12)
Legacy Portfolio (30.9.12) Total Basel III RWAs ~CHF 49 billion Basel III B/S excl. PRVs (CHF billion) RWAs PRVs1 Comments on Basel III RWAs: CDOs 9.2 3.1 2.6 Reduced > 60% YoY Auction rate securities 8.42 8.7 – Reduced > 50% YoY Muni swaps & options 8.1 – 5.4 Including CHF 3.6 billion CVAs3 Monolin
Slide 45: Businesses and positions to be exited (30.9.12)
Businesses and positions to be exited (30.9.12) Total Basel III RWAs ~CHF 90 billion Basel III RWAs Basel III B/S excl. B/S incl. (excluding operational risk) RWAs PRVs PRVs (CHF billion) Cash positions – expected exit schedule ~38 Businesses within Credit ~30 ~20 ~28 (CHF billion) ~20 Businesses wi
Slide 46: UBS’s equity allocation framework
UBS’s equity allocation framework Attributed equity – business divisions Average attributed equity 47.6 Tangible equity 5.3 ~42.5 50% RWAs -> Capitalize with 10% Basel III CET1 ratio 8.4 ~8.5 25% assets -> Capitalize with 3.5% Basel III leverage ratio 25% RBC1 -> Internal measure of economic risk ~1
Slide 47: Implementing long-term efficiency measures and reducing costs
Implementing long-term efficiency measures and reducing costs 4Q12 2013 2014 2015 Initiatives Expected gross savings development IB efficiency Org. effectiveness Hubbing Lean front-back Independent buying entity 2Q11 program 3Q12 program ~CHF 5.4 billion 2Q11 program ~CHF 4.0 billion Cost savings ~C
Slide 48: Business division targets
Business division targets1 Ranges of sustainable performance in our businesses Wealth Wealth Management Retail & Management Americas Corporate NNM growth rate 3-5% NNM growth rate 2-4% NNBV growth2 1-4% Gross margin 95-105 bps Gross margin 75-85 bps Net interest margin 140-180 bps Cost / income rati
Slide 49: UBS—A unique and attractive investment proposition
UBS—A unique and attractive investment proposition Unrivaled franchise Solid financial foundation with clear strategic direction which will be strengthened further and strong track record on execution as UBS accelerates its transformation UBS’s franchise is unrivaled Industry-leading capital rat
Slide 50: Appendix
Appendix
Slide 51: Basel III fully applied CET1 ratio
Basel III fully applied CET1 ratio Fully applied CET1 Basel III ratio increased to ~9.3% = CET1 capital + loss-absorbing capital ratio = CET1 ratio ~10.6% 13% ~9.4% ~8.0% ~1.3% 13.0% ~0.6% 11.5% ~6.7% ~0.5% Target ~6.2% ~8.8% ~9.3% common ~7.5% equity ~6.2% ~6.7% capital ~6.2% ~6.7% ~7.5% ~8.8% ~9.3
Slide 52: Basel III phase-in CET1 ratio
Basel III phase-in CET1 ratio Phase-in CET1 Basel III ratio increased to ~13.6% = CET1 capital + loss-absorbing capital ratio = CET1 ratio ~14.8% ~13.7% ~12.3% ~1.2% ~0.6% ~0.5% ~1.4% ~10.7% ~1.4% ~10.0% ~1.2% ~3.0% ~1.1% ~3.0% Common equity 1 ~1.1% ~3.2% Loss-absorbing capital ~3.0% 2 ~2.8% 1 Goodw
Slide 53: FINMA Basel III leverage ratio
FINMA Basel III leverage ratio UBS’s current FINMA Basel III leverage ratio is above minimum requirements • UBS‘s FINMA Basel III leverage ratio of 3.4% on 30.9.12 Total capital (Phase-in CET1 + loss absorbing capital) CHF 45.3 billion = = 3.4% Total exposure1 CHF 1,335 billion (Total IFRS assets +
Slide 54: Deferred tax assets on net operating losses
Deferred tax assets on net operating losses The potential to recognize additional deferred tax assets remains significant as of 30.9.12 Unrecognized potential DTAs on NOLs1,2 Recognized DTAs on NOLs1 24.6 18.8 (CHF billion) 2.4 3.6 0.8 5.3 1.7 2.6 0.1 US Switzerland UK RoW Total • Unrecognized poten
Slide 55: IFRS equity attributable to UBS shareholders
IFRS equity attributable to UBS shareholders1 1 (2,267) 196 65 348 (2,172) (24) (233) 54,716 (448) CHF 30.6.12 30.9.12 Change Book value per share 14.60 14.00 (4%) 52,449 (CHF million) Tangible book value per share 12.00 12.23 2% 30.6.12 Net profit Foreign Financial Cash flow Treasury Tax Employee s
Slide 56: Basel III—Investment Bank & Legacy RWAs reduction since 30.9.11
Basel III—Investment Bank & Legacy RWAs reduction since 30.9.11 ~85% of RWAs reduction since 30.9.11 through sales and exposure reductions Investment Bank (47) (11) 4 (24) (17) (8) (2) ~220 ~209 ~162 (CHF billion) 30.9.11 Allocation 30.9.11 Market OTC Loans, commitments Other¹ FX and 30.9.12 of adju
Slide 57: Basel III—Common equity tier capital
Basel III—Common equity tier 1 capital Phase-in Basel III CET1 capital – QoQ change 0.9 3.0 (0.6) (2.2) (CHF billion) 40.4 41.5 1 30.6.12 Net profit attributable Own credit Goodwill impairment Other 30.9.12 to shareholders Fully applied Basel III CET1 capital – QoQ change 3.0 0.9 (0.4) (CHF billion)
Slide 58: Wealth Management—3Q12 by business area
Wealth Management—3Q12 by business area1 Net new money growth in all regions; strong contributions from APAC, EM and UHNW Asia Emerging o/w o/w Europe Switzerland Pacific Markets UHNW GFO2 347 352 (CHF billion) Invested 190 146 125 assets CHF 816 billion 41 8% 8% 6% Annualized NNM 3% 1% growth rate3
Slide 59: Wealth Management Americas—Operating income (USD)
Wealth Management Americas—Operating income (USD) YoY +5% QoQ +3% 1,568 1,587 1,631 1,552 1,504 1,506 1,417 1,449 129 136 124 122 1,321 127 119 135 130 144 354 332 352 394 380 391 384 400 321 2 779 788 798 762 841 835 667 710 728 (USD million) 1 169 184 178 197 237 218 218 206 195 3Q10 4Q10 1Q11 2Q1
Slide 60: Wealth Management Americas—Lending balances (USD)
Wealth Management Americas—Lending balances (USD) 1 237 218 218 Net interest income 215 206 (USD million) 197 195 184 178 169 28.0 27.1 25.5 25.7 3.2 24.7 2.8 23.5 2.0 2.3 21.4 1.7 3.7 20.3 1.4 3.8 19.4 1.1 4.3 4.3 3.9 1.0 0.8 3.7 0.9 0.6 3.0 0.9 1.0 0.9 2.7 0.9 2.8 0.8 0.9 0.9 18.5 19.6 20.1 17.5 1
Slide 61: Wealth Management Americas—Financial advisor productivity (USD)
Wealth Management Americas—Financial advisor productivity (USD) Revenue per FA, annualized Invested assets per FA 927 118 902 897 905 115 882 112 113 114 869 835 851 109 108 104 104 780 (USD thousand) (USD million) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Slide 62: Invested assets
Invested assets Wealth Management Wealth Management Americas 8 26 29 5 (0) (7) 783 4% 816 757 3% 783 (CHF billion) (CHF billion) 30.6.12 NNM Market FX / Other 30.9.12 30.6.12 NNM Market FX / Other 30.9.12 Global Asset Management 2 19 (2) 3% (CHF billion) 569 588 30.6.12 NNM Market FX / Other 30.9.12
Slide 63: Investment Bank—IBD revenues
Investment Bank—IBD revenues Significant market share improvement in Advisory and Debt Capital Markets Comparison in USD terms CHF USD 215 372 383 263 397 403 Advisory +36% 12% 11% – Improved rank and market share despite a 605 616 17% decline in global fee pool 503 587 522 557 – Participated in 2
Slide 64: Investment Bank—Equities revenues
Investment Bank—Equities revenues Equities performed well Comparison in USD terms CHF USD Cash (n/m) 217% 201% – Strong performance on improved client 820 trading against a global decline in 783 759 3 turnover (lowest market turnover since 3 2005) 630 286 274 300 Derivatives +80% 251 – Improved
Slide 65: Investment Bank—FICC revenues
Investment Bank—FICC revenues Solid result with improved revenues in Credit and Macro up 9% QoQ Comparison in USD terms CHF USD Macro +2% 1% 0% – Strong revenue growth in FX e-trading on increased customer volumes, more than 1,161 offset by impact of subdued FX markets 1,107 1,164 1,099 1,107 113
Slide 66: 3Q12 operating expenses
3Q12 operating expenses 8,803 Of which CHF 3,045 million impairment of goodwill and intangibles 3,042 Significant non-recurring items 6,110 507 5,516 5,432 5,381 473 5,221 5,457 WMA financial advisor compensation1 387 524 5,616 527 579 478 554 Contractors, other personnel expenses, 717 5,049 5,054 5
Slide 67: Exposure to eurozone countries rated lower than AAA / Aaa
Exposure to eurozone countries rated lower than AAA / Aaa1 Our direct exposures are limited and we continue to manage them carefully 30.9.12 Sovereigns2 Local Banks Other3 Total (CHF million) governments Before Net of Before Net of Before Net of Before Net of Before Net of hedges4 hedges hedges4 hed
Slide 68: Tax expense
Tax expense 3Q12 net tax benefit of CHF 345 million Pre-tax loss (as reported) CHF 2,516 million Net deferred tax benefit with respect to recognition of CHF (355 million) DTAs Other net tax expenses in respect CHF 85 million of 3Q12 taxable profits Tax benefits arising from the release of provisions
Slide 69: Headcount
Headcount QoQ1 225 223 80 896 50 16 (1,041) 63,520 63,745 (FTEs) 30.6.12 30.9.12 Wealth Wealth Investment Global Retail & Corporate Management Management Bank Asset Corporate Center Americas Management YoY1 96 (64) 14 (967) 10 65,921 (1,266) 63,745 (FTEs) 30.9.11 30.9.12 (2,176) 1 3Q12 personnel all