Slide 1: Second quarter 2012 results
Second quarter 2012 results July 31, 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: Laying the foundations for sustainable long term performance
Laying the foundations for sustainable long term performance CHF 1.0 billion pre-tax profit; net profit attributable to shareholders CHF 0.4 billion in a difficult environment Record quarter for Wealth Management Americas; resilient performance in Retail & Corporate 2Q12 highlights CHF 13.2 billion
Slide 4: Industry-leading Basel III capital ratios
Industry-leading Basel III capital ratios We have achieved our CET1 ratio target of 13% on a phase-in basis Basel III Basel III ~ phase-in 2019 rules fully applied Target 1 6.0% loss- absorbing capital ~13.1% ~11.8% ~10.7% ~10.0% Target ~8.8% 13.0% common ~7.5% ~6.2% ~6.7% equity capital 30.9.11 31.
Slide 5: We are actively reducing costs
We are actively reducing costs Adjusted annualized cost reduction of CHF 1.1 billion vs. 1H11 Adjusted operating expenses 1H11 annualized (CHF 1.1 billion) CHF 23.3 billion 1H12 annualized CHF 22.2 billion 6,123 5,521 5,580 5,532 We are on track to achieve our CHF 2.0 billion cost reduction target
Slide 6: 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 CHF 1,540 billion on 30.6.12, up CHF 40 billion QoQ 720 WM Americas 757 783 Wealth Management Adjusted pre-tax profit1 Net new money (combined result) (combined result) 766
Slide 7: Wealth Management—Gross margin
Wealth Management—Gross margin Our primary focus is to deliver the best possible advice to our clients Gross margin / illustrative scenario Client confidence: an improvement in the macro-economic environment will have the biggest impact Normalization of interest Asset allocation: 30.8% of non-ma
Slide 8: Laying the foundations for sustainable long term performance
Laying the foundations for sustainable long term performance CHF 1.0 billion pre-tax profit; net profit attributable to shareholders CHF 0.4 billion in a difficult environment Record quarter for Wealth Management Americas; resilient performance in Retail & Corporate 2Q12 highlights CHF 13.2 billion
Slide 9: Market environment
Market environment1 Equity trading volumes2 Equity market performance 1.1.11 = 100 1.1.11 = 100 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 NYSE SMI FTSE 100 SMI S&P 500 FTSE 100 MSCI World Volatility FX rates YoY:3 QoQ:3 60 1.7 USD / CHF 13% USD / CHF 6% EUR / CHF 2% EUR / CHF
Slide 10: 2Q12 results
2Q12 results (CHF million) WM WMA IB Global AM R&C CC Group Income 1,733 1,498 1,718 446 939 (163) 6,171 Credit loss (expense) / recovery 1 (1) 19 0 (12) (8) (1) Own credit gain / (loss) 239 239 Total operating income 1,734 1,497 1,736 446 927 68 6,408 Personnel expenses 747 1,060 1,093 216 421 65 3
Slide 11: Wealth Management
Wealth Management CHF 9.5 billion net new money; highest second quarter net inflows in 5 years Operating income and pre-tax profit Fragile client confidence and lower 1,867 trading volumes led to a slight decrease 1,769 1,734 in operating income Litigation provisions and technology 803 672 671 c
Slide 12: Wealth Management—Gross margin
Wealth Management—Gross margin1 Gross margin reflects extremely low client activity levels and higher asset base 120 2 98 97 97 92 91 93 89 89 11.0 9.6 • Trading and transaction-based fee margin 13.8 11.8 down 3.4 bps on lower client activity • Recurring fees margin down 1.3 bps: faster 43.0 41.7 gr
Slide 13: Wealth Management—By business area
Wealth Management—By business area1 Continued progress in strategic growth areas Asia Emerging o/w o/w Europe Switzerland Pacific Markets UHNW GFO2 336 336 (CHF billion) Invested 180 139 119 assets 41 CHF 783 billion 18% Annualized NNM 12% 6% 8% 7% growth rate3 4.9% (0%) 90 100 100 72 Gross 53 4 mar
Slide 14: Wealth Management Americas (USD)
Wealth Management Americas (USD) Record pre-tax profit; highest second quarter net new money in 5 years Operating income and pre-tax profit USD revenues increased 1% due to higher managed account fees and higher 1,568 1,587 realized gains on the AFS portfolio 1,506 Cost / income ratio stable at
Slide 15: Wealth Management Americas—Lending balances (USD)
Wealth Management Americas—Lending balances (USD) Prudently managed lending growth adding to net interest income 1 237 Net interest income 218 218 215 206 (USD million) 197 184 178 27.1 169 25.5 25.6 24.7 2.8 23.5 2.0 2.3 1.7 21.4 1.4 3.8 20.3 4.3 3.9 19.4 1.1 3.7 4.3 0.8 0.9 0.6 3.0 0.9 1.0 0.9 2.8
Slide 16: Investment Bank
Investment Bank Successful Basel III RWA reduction despite challenging market conditions Operating income CHF USD Adjusted pre-tax profit (40%) (42%) 793 (CHF million) 383 3,194 (178) 2,983 2Q11 1Q12 2Q12 2,903 436 2,544 396 482 Achieved 2012 Basel III RWA target 410 Basel III RWAs reduced by CH
Slide 17: Investment Bank—IBD revenues
Investment Bank—IBD revenues Resilient equity capital markets revenues Comparison in USD terms CHF USD Equity capital markets (flat) 396 436 – 21% decline in global fee pool 410 372 482 397 – Participated in 3 of the top 5 IPOs (13%) (15%) – Increased revenues from private and structured transacti
Slide 18: Investment Bank—Equities revenues
Investment Bank—Equities revenues Results impacted by Facebook IPO and adverse market conditions Comparison in USD terms CHF USD Prime services (3)% – #1 European Prime Brokerage 2012 (Extel) (75%) (75%) – Solid performance from new and existing clients 1,237 30 1,091 Cash (n/m) 1,054 9 26 992 3
Slide 19: Investment Bank—FICC revenues
Investment Bank—FICC revenues Resilient performance in client facing activities coupled with Basel III RWA reduction; VaR efficiency more than doubled YoY Comparison in USD terms CHF USD Macro (3%) – Solid FX performance: increased algorithmic trading volumes and higher (27%) (29%) market volatili
Slide 20: Global Asset Management
Global Asset Management CHF 1.2 billion net new money excluding money market Operating income and pre-tax profit Stable net management fees and 478 444 446 lower performance fees in challenging market conditions Adjusted operating expenses broadly 156 unchanged (CHF million) 142 118 108 108 106
Slide 21: Retail & Corporate
Retail & Corporate Resilient profitability and strong net new business volumes Operating income and pre-tax profit Adjusted pre-tax profit increased to 974 936 927 CHF 395 million 575 1 Operating income decreased slightly 421 421 399 395 392 – Net interest income up CHF 8 million on (CHF million
Slide 22: Retail & Corporate
Retail & Corporate Strong net new business growth with continued strong deposit inflows Loans and deposits Net interest margin1 136 136 137 136 137 1.83% 135 135 135 1.69% 1.67% 1.61% 1.75% 1.74% 1.75% 123 1.59% 121 617 595 118 592 590 575 567 117 116 117 539 547 112 (CHF million) (CHF billion) 109
Slide 23: UBS's Swiss mortgage portfolio
UBS’s Swiss mortgage portfolio Our Swiss mortgage portfolio is conservatively managed UBS Swiss mortgage portfolio – distribution of loan volume1 Business division Property type Loan to value (LTV) Commercial LTV 4% WM and other 10% ≥ 80% 21% Other 25% residential 65% Owner 79% 96% occupied LTV R&C
Slide 24: UBS's Swiss mortgage portfolio
UBS’s Swiss mortgage portfolio Switzerland’s economy is strong UBS mortgages - actual loss by year of default The Swiss economy is robust with 100 0.10% government, household and business 80 0.08% balance sheets in good shape 60 0.06% – High income levels, high levels of mortgage 40 0.04% affordab
Slide 25: Corporate Center
Corporate Center Pre-tax loss of CHF 138 million; marked reduction in Basel III RWAs Corporate Center – Core Functions pre-tax profit Corporate Center – Core Functions: 1,819 CHF 19 million pre-tax loss – Own credit gains of CHF 239 million (CHF million) (19) – Non-allocated negative operating inc
Slide 26: Basel 2.5—Capital ratios
Basel 2.5—Capital ratios Further increased industry-leading Basel 2.5 tier 1 capital ratio to 19.2% 18.7% 19.2% 15.9% Basel 2.5 risk-weighted ~12.7% 12.6% 13.2% 13.2% 17.2% assets increased CHF 4 16.7% 14.1% billion to CHF 215 billion 11.0% 11.7% 11.7% ~9.1% Basel 2.5 tier 1 capital 39.6 41.2 37
Slide 27: Basel III—2Q12 changes affecting CET1 capital and RWAs
Basel III—2Q12 changes affecting CET1 capital and RWAs Impact on 30.6.12 Impact on 30.6.12 Changes to CET1 capital and RWAs CET1 capital ratio Group RWA targets1 SNB StabFund CET1 capital: option ~ CHF 1.8 billion deduction Phase-in: +~35 bps CHF (20) billion (phase-in + fully applied) Starting 2Q12
Slide 28: Basel III—Risk-weighted assets
Basel III—Risk-weighted assets Continued disciplined execution; now focused on 2013 targets Estimated pro-forma Targets2 ~400 ~380 ~21 ~20 ~350 ~340 Adjusted ~80 ~21 ~325 ~62 ~305 SNB StabFund1 ~20 Adjusted Legacy Portfolio (CC) ~290 ~59 ~45 ~60 ~270 ~270 Adjusted ~53 ~20 Investment Bank ~30 ~20 <24
Slide 29: Basel III capital ratios—Phase-in scenario
Basel III capital ratios—Phase-in scenario Phase-in CET1 Basel III ratio increased to ~13.1% = CET1 capital + loss-absorbing capital ratio Illustrative example1 = CET1 ratio ~19.0% ~17.5% Target ~13.7% 1.8% 2 loss- 6.0% absorbing ~12.3% 1.1% 0.6% capital 13% 0.5% 3.4% ~10.7% 1.4% ~10.0% 1.2% 1.1% 3.
Slide 30: Basel III capital ratios—Fully applied scenario
Basel III capital ratios—Fully applied scenario Fully applied CET1 Basel III ratio increased to ~8.8% Illustrative example1 ~19.0% = CET1 capital + loss-absorbing capital ratio Including = CET1 ratio IAS 19R impact Target 2 6.0% loss- absorbing ~13.1% capital 13% ~9.4% 1.9% ~8.0% 0.6% 0.5% ~6.2% ~6.
Slide 31: Capital strength is the foundation of our success
Capital strength is the foundation of our success Consistent strategy execution; highest capital ratio targets in the industry Demonstrated ability to execute on Our capital, liquidity and funding strategic priorities and unwavering positions are strong and represent a commitment to our capital targ
Slide 32: Appendix
Appendix
Slide 33: Basel III—Assumptions for illustrative example
Basel III—Assumptions for illustrative example1 Basel III CET1 capital1 CHF billion except where noted Refer to slide 1 for details about adjusted numbers, pro-forma Basel III estimates and FX rates in this presentation 1 Deferred tax assets on net operating losses (CHF 5,583 million on 30.6.12) and
Slide 34: Basel III—Common equity tier 1 capital
Basel III—Common equity tier 1 capital DTAs on net operating losses (NOLs) will first be Phase-in Basel III CET1 capital – QoQ change deducted in 2014 (20%) 0.4 0.0 0.3 (0.4) (1.7) (CHF billion) 41.8 40.4 1 31.3.12 Net profit Own credit Change in Deferred Other 30.6.12 attributable to treatment of S
Slide 35: Basel III—2Q12 RWA reduction (Investment Bank + Legacy Portfolio)
Basel III—2Q12 RWA reduction (Investment Bank + Legacy Portfolio) Investment Bank (10) 3 2 (11) (15) 191 180 170 (CHF billion) 31.3.12 Allocation of 31.3.12 OTC derivative Market risk Other 30.6.12 as reported CVA VaR adjusted exposure reduction incl. Facebook IPO incl. FX Legacy Portfolio (17) 11 2
Slide 36: Estimated impact of IAS 19R
Estimated impact of IAS 19R We expect a limited impact on our Basel III CET1 capital Fully applied Basel III CET1 capital IFRS equity estimated impact based on 30.6.12 data estimated impact based on 30.6.12 data (4.1) 0.8 (1.0) (3.5) 1 (1.4) 2 3.8 0.1 54.7 50.6 1 (3.5) (1.4) 2 26.7 25.7 30.6.12 Net
Slide 37: Basel 2.5—Core tier 1 capital and RWAs
Basel 2.5—Core tier 1 capital and RWAs Core tier 1 capital 1.4 0.4 0.0 (0.2) 36.9 (CHF billion) 35.3 1 2 31.3.12 Net profit attributable Own credit Share-related FX and other 30.6.12 to shareholders components Risk-weighted assets 4.9 0.1 1.3 (2.2) (0.5) 211.1 214.7 (CHF billion) 3 3 3 31.3.12 Credi
Slide 38: IFRS equity attributable to UBS shareholders
IFRS equity attributable to UBS shareholders 1 1,490 652 1 66 989 41 (262) (379) (43) 425 54,716 CHF 31.3.12 30.6.12 Change 53,226 Book value per share 14.10 14.60 4% (CHF million) Tangible book value per share 11.62 12.00 3% 31.3.12 Net profit Foreign Financial Cash flow Treasury Tax Employee Divid
Slide 39: Tax expense
Tax expense 2Q12 net tax expense of CHF 253 million Pre-tax profit (as reported) CHF 951 million Deferred tax expenses with respect to the CHF 241 million amortization of previously recognized DTAs Other net tax expenses in respect CHF 113 million of 2Q12 taxable profits Tax benefits arising from th
Slide 40: Net profit attributable to non-controlling interests
Net profit attributable to non-controlling interests CHF 273 million of net profit attributed to non-controlling interests in 2Q12 Hybrid tier 1 instruments outstanding Amount Issue date Interest rate First call date EUR 1,000 million 11.4.08 8.836%1 11.4.13 EUR 1,000 million 15.4.05 4.28%1 15.4.15
Slide 41: Asset funding—30 June 2012
Asset funding—30 June 2012 Assets Liabilities and equity Due to banks 39 Cash, balances with central Money market paper issued 43 banks and due from banks 134 Cash collateral on securities lent Financial investments AFS 60 CHF 105 and repurchase agreements 106 billion collateral Trading portfolio li
Slide 42: Diversified funding with a long-term surplus
Diversified funding with a long-term surplus Assets Liabilities & equity 30.6.12 Equity Continued net new deposit inflows in Other assets1 2Q12 (CHF 12 billion net of FX impact) Other Behavioral maturities liabilities > 1 year2 4 public benchmark bonds issued in 1H12 Cash at CBs Surplus stable f
Slide 43: Our liquidity position is strong
Our liquidity position is strong We continue to have substantial available liquidity 25% of our funded balance sheet assets We continue to be compliant with are in the form of available liquidity1 FINMA’s liquidity requirements Funded balance sheet (30.6.12) UBS was compliant with FINMA’s liquidit
Slide 44: Funding sources by currency—30 June 2012
Funding sources by currency—30 June 2012 Customer deposits represent a significant source of funding in all major currencies 76 20 42% USD1 124 6 13 46 21 22% EUR1 CHF 349 billion CHF 182 billion 10 38 54 60 64 3 39 10 6 20 21% CHF1 14% other1 14 50 CHF 177 billion CHF 118 billion 13 141 23 (CHF bil
Slide 45: Wealth Management—Operating income
Wealth Management—Operating income Invested assets (CHF billion) 787 791 772 783 768 750 748 720 2,178 1,928 1,867 1,759 1,803 1,7451 1,769 1,734 198 2 233 2 1,673 145 154 232 2 209 319 2 186 252 298 259 2 216 2052 150 262 229 912 895 908 892 823 805 818 812 (CHF million) 447 427 457 451 469 487 478
Slide 46: Wealth Management Americas—Operating income (USD)
Wealth Management Americas—Operating income (USD) YoY +5% QoQ +1% 1,568 1,587 1,552 1,504 1,449 1,506 1,417 124 1,321 119 129 135 136 130 127 144 354 332 352 380 391 384 400 321 2 2 779 788 798 762 841 667 710 728 (USD million) 1 1 169 184 178 197 237 218 218 206 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2
Slide 47: Wealth Management Americas—Financial advisor productivity (USD)
Wealth Management Americas—Financial advisor productivity (USD) Revenue per FA, annualized Invested assets per FA 902 897 905 113 115 114 882 869 112 851 109 108 835 104 104 780 (USD thousand) (USD million) 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 46
Slide 48: Invested assets
Invested assets Wealth Management Wealth Management Americas 10 13 4 38 (11) (13) 1% 772 783 728 757 (CHF billion) (CHF billion) 4% 31.3.12 NNM Market FX / Other 30.6.12 31.3.12 NNM Market FX / Other 30.6.12 Global Asset Management 22 (4) (9) (CHF billion) 2% 559 569 31.3.12 NNM Market FX / Other 30
Slide 49: 2Q12 operating expenses
2Q12 operating expenses 6,110 507 5,516 5,432 5,381 473 5,221 5,457 387 5,616 524 527 554 478 Significant non-recurring items 717 5,049 5,054 4,846 4,978 135 604 4,567 643 WMA financial advisor compensation1 623 496 602 131 528 153 160 402 142 241 Contractors, other personnel expenses, 129 281 322 8
Slide 50: Exposure to eurozone countries rated lower than AAA / Aaa
Exposure to eurozone countries rated lower than AAA / Aaa1 Our exposures are limited and we continue to manage them carefully 30.6.12 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 hedges hed
Slide 51: Exposures to student loan auction rate securities & monoline insurers
Exposures to student loan auction rate securities & monoline insurers Student loan auction rate securities (SL ARS) Rated BB- or above Pro-forma Basel III RWAs 20.2 18.1 Rated below BB- (CHF billion) 9.8 (USD billion) 5.7 5.7 5.6 3.0 5.2 4.5 0.4 4Q08 4Q09 4Q10 4Q11 1Q12 2Q12 SL ARS buyback commitmen
Slide 52: Headcount
Headcount QoQ (723) 3 7 (107) (164) (312) (149) 64,243 63,520 (FTEs) 31.3.12 30.6.12 Wealth Wealth Investment Global Retail & Corporate Management Management Bank Asset Corporate Center Americas Management YoY (666) (108) 64 (1,088) (70) 65,707 (318) 63,520 (FTEs) 30.6.11 30.6.12 (2,187) 51