Financial Services Group UBS Third Quarter Results 21 13 November 21 Luqman Arnold, President Mark Branson, Head of Group Communications
Caution regarding forward-looking statements This communication contains statements that constitute forward-looking statements, including, without limitation, statements relating to the implementation of strategic initiatives, including the implementation of the new European wealth management strategy, expansion of our corporate finance presence in the US and worldwide, and other statements relating to our future business development and economic performance. While these forward-looking statements represent our judgments and future expectations concerning the development of our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, (1) general market, macro-economic, governmental and regulatory trends, (2) movements in local and international securities markets, currency exchange rates and interest rates, (3) competitive pressures, (4) technological developments, (5) changes in the financial position or credit-worthiness of our customers, obligors and counterparties, (6) legislative developments, (7) the impact of the terrorist attacks on the World Trade Center and other sites in the United States on 11 September 21 and subsequent related developments and (8) other key factors that we have indicated could adversely affect our business and financial performance which are contained in our past and future filings and reports, including those with the SEC. More detailed information out those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including UBS s Annual Report on Form 2-F for the year ended 31 December 2. UBS is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events, or otherwise. Financial Services Group 1
Weakening environment Fee pools USD bn 16 14 12 1 8 6 4 2 1Q 2Q 3Q 4Q 1Q 1 2Q 1 3Q 1 M&A Debt Financing Equity Financing Source: Freeman & Co analysis, Thomson Financial Securities Data 5% 4% 3% 2% 1% % -1% -2% USA Japan Germany Switzerland UK 2 21E 22E Source: UBS Warburg Economic Research GDP growth Individual Investor Optimism 2 18 16 14 12 1 8 6 4 2 1997 1998 1999 2 21 Source: UBS PaineWebber / Gallup Index of Investor Optimism 25% 225% 2% 175% 15% 125% 1% 75% Equity volumes 5% 99 Avg1Q 2Q 3Q 4Q 1Q1 2Q1 SMI DAX-XETRA DJIA NASDAQ FT-SE 1 Source: SWX, Bloomberg & International Federation of Stock Exchanges Financial Services Group 2
Group results Financial Services Group
Profitility (CHFm) 2Q1 3Q.. vs3q vs2q1 Operating income 8,74 9,881 8,545 2% (12%) Operating expenses 1 7,94 7,683 5,716 24% (8%) Net profit pre goodwill 1 1,227 1,726 2,21. (44%) (29%) Net profit - reported 93 1,385 2,75. (56%) (35%) Notes: 1 Excluding the amortization of goodwill and other intangible assets P&L Invested Assets Asset Quality Capital Financial Services Group 4
Net profit (adjusted) CHF m 2,5 2, 1,5 1, 2,364 2,334 2,216 2,27 2,21 2,75 1,9 1,97 1,634 1,579 1,726 1,385 1,251 1,166 93 1,227 5 Avg 1999 1Q 2Q 3Q 4Q 1Q1 2Q1 Net profit after tax Net profit after tax, before goodwill P&L Invested Assets Asset Quality Capital Financial Services Group 5
Performance against targets ROE 1 Basic EPS 2 35% 3% 25% 2% 15% 1% 5% % 99 Avg 3M 6M 9M 12M 3M1 6M1 9M1 Cost / Income 2 Private Client Net New Money 3 8% 2 (CHF) 2.5 2. 1.5 1..5. 99 Avg 1Q 2Q 3Q 4Q 1Q1 2Q1 6% 4% 2% (CHF bn) 15 1 5 % NOTES: 1 Annualized, before goodwill amortization and adjusted for significant financial events 2 Before goodwill amortization and adjusted for significant financial events 3 Private Banking and Private Clients 99 Avg 1Q 2Q 3Q 4Q 1Q1 2Q1 P&L Invested Assets Asset Quality Capital Financial Services Group 6 (5) 99 Avg 1Q 2Q 3Q 4Q 1Q1 2Q1
EPS development 1 2.5 2. (CHF) 1.5 1. 1.3 1.5 1.37.97.5. 99 Avg 1Q 2Q 3Q 4Q 1Q1 2Q1 Notes: 1 Before goodwill amortization and adjusted for significant financial events P&L Invested Assets Asset Quality Capital Financial Services Group 7
Invested assets UBS CH UBS AM UBSW CHF bn PB PCC Inst. Funds PC Capital Total Total opening 718 333 318 348 841 1 2,559 Net New Money 1 6.6 4.6 1.9 1.4 11.4-34.9 Performance & currency (82) (3) (11) (44) (147) - (314) Total closing 643 38 39 314 75 1 2,28 NOTES: 1 Excludes interest & dividend income P&L Invested Assets Asset Quality Capital Financial Services Group 8
Invested assets - currency effect 5 25 (25) PCC PB Inst. MF PC CHF bn (5) (75) (1) (125) (15) Currency movements Market movements Net new money Acquisition P&L Invested Assets Asset Quality Capital Financial Services Group 9
Market movements - 1% 5% % (5%) (1%) (15%) DJIA FT-SE 1 SMI DJ Euro Stoxx MSCI World Bond Index NASDAQ CHF/EUR CHF/USD (2%) (25%) (3%) (35%) (4%) Source: Bloomberg P&L Invested Assets Asset Quality Capital Financial Services Group 1
Net new money Private Banking & Private Clients UBS Asset Management 2 15 1 18 2 1 12 5 CHF bn (5) (1) CHF bn (1) (2) (15) (3) (2) 1Q2Q 3Q4Q 1Q2Q3Q 4Q1Q 2Q3Q 1999 2 21 (4) Avg 99 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2 21 P&L Invested Assets Asset Quality Capital Financial Services Group 11
Revenue trends 12, 1, 8, CHF m 6, 4, 2, 44% 41% 45% 54% 51% 54% 55% (2,) 1Q 2Q 3Q 4Q 1Q1 2Q1 Credit loss Net fee and commission income Net trading income Other income Net interest margin income P&L Invested Assets Asset Quality Capital Financial Services Group 12
Revenues by business area - vs 3Q 9, 8,545 (21) (1,277) 1,589 (186) 8,74 8, 691 (16) (313) 16 7,31 7, CHF m 6, 5, 4, 3Q UBS Switz. CIC EQ CIC FI&FX UBS Cap Credit Losses Other ex-pc PC Funding P&L Invested Assets Asset Quality Capital Financial Services Group 13
Business unit cost trends CHF m 8, 7, 6, 5, 4, 3, 2, 1, 1Q 2Q 3Q 4Q 1Q1 2Q1 Corporate & Institutional Clients Private Banking Private and Corporate Clients UBS Asset Management UBS Capital Private Clients P&L Invested Assets Asset Quality Capital Financial Services Group 14
General and administrative costs 2,5 2, 1,5 CHF mn 1, 5 99 Avg 1Q 2Q 3Q 4Q 1Q1 2Q1 Total excl. Private Clients Private Clients P&L Invested Assets Asset Quality Capital Financial Services Group 15
Asset quality development At period end CHF bn 4 35 3 25 2 15 1 5 6 5 4 3 2 1 % Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 1998 1999 2 21 UBS Switzerland loans (gross) C&IC Private Clients NPL% P&L Invested Assets Asset Quality Capital Financial Services Group 16
Stle credit quality Credit risk exposure by counterparty rating C&IC loan book 31.12.2 31.3.21 3.6.21 3.9.21 PCC (excl. mortgages) 31.12.2 31.3.21 3.6.21 3.9.21 % 25% 5% 75% 1% Investment Grade Non-Investment Grade Impaired / Defaulted P&L Invested Assets Asset Quality Capital Financial Services Group 17
Share buyback and Tier 1 ratio Shares (m) 5 4 3 2 1 14% 12% 1% 8% 6% 4% 2% Tier 1 ratio 1Q 2Q 3Q 4Q 1Q1 2Q1 % Notes: 1 Quarter to 12 November 21 1st trading line Second trading line P&L Second trading line (cancelled) Tier 1 ratio Invested Assets Asset Quality Capital Financial Services Group 18
Business unit results Financial Services Group
Balanced business mix Revenues by operating business area (excl. Corporate Center) 3Q: CHF 8.36bn : CHF 8.98bn 8% 2% 21% 7% 19% 15% 21% 28% 26% 12% 41% Domestic Banking Wealth & Asset Mgt Equities Fixed Income Corporate Finance Other PCC PB AM UBSW Financial Services Group 2
Continued strong profitility CHF mn 6 5 4 3 2 1 Avg 99 1Q 2Q 3Q 4Q 1Q1 2Q1 1,4 1,2 1, 8 6 4 2 CHF mn Net profit before tax Total Operating expenses PCC PB AM UBSW Financial Services Group 21
Cost base development Change in Headcount / Branches 1% 95% 9% 85% 8% 75% 7% 65% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 1999 2 21 Headcount (1Q99=1%) Branches (1Q99=1%) Cost/income ratio (excl. goodwill) 7% 68% 66% 64% 62% 6% 58% 56% Cost / income ratio PCC PB AM UBSW Financial Services Group 22
Continued strong, stle gross margin 12 1 8 bps 6 4 2 64 66 69 65 67 69 69 69 FY99 1Q 2Q 3Q 4Q 1Q1 2Q1 Asset & advisory based Transaction based PCC PB AM UBSW Financial Services Group 23
Hiring of client advisors on track Potential # of client advisors 1'6 1'4 1'2 1' 8 6 4 2 162 25 254 319 348 Dec Mar Jun Sep Oct 21 22 23 24 25 2 21 PCC PB AM UBSW Financial Services Group 24
Net new money 1 CHF bn (1) (2) (3) (4) Avg99 1Q 2Q 3Q 4Q 1Q 2Q 2 21 Institutional Mutual Funds 3Q PCC PB AM UBSW Financial Services Group 25
Investment fund fees 4 3 37 37 34 34 Mitchell Hutchins Transfer 29 33 28 36 32 4 35 3 CHF mn 2 1 217 218 21 198 234 25 2 15 1 bps 5 1Q 2Q 3Q 4Q 1Q1 2Q1 Mutual fund fees Gross margin mutual funds PCC PB AM UBSW Financial Services Group 26
C&IC: profitility & costs 1,6 9% CHF mn 1,2 8 4 8% 7% Avg 99 1Q 2Q 3Q 4Q 1Q1 2Q1 6% Pre-tax profit Cost/income ratio (excl. goodwill) PCC PB AM UBSW Financial Services Group 27
C&IC peer headcount development Last 4 years, 1997 = 1% 2% 15% 1% 5% Headcount 1 : UBSW CIC Merrill Lynch CICG Morgan Stanley Lehman Goldman CSFB 1997 1998 1999 2 Annualised revenues Source: Annual & quarterly reports; not adjusted for acquisitions. MS segment headcount data unavaille - entire firm shown PCC PB AM UBSW Financial Services Group 28
Strong momentum Market share of global IB fee pool 5% International Equity New Issues 1 3.6 3.5 5 7 4.7 % 1999 2 9M21 Source: Freeman & Co. 1 1999 2 9M21 Source: Capital Data Bondware 2 Fee Pool US & European 1 1 4 5 8 9 12 12 1999 2 9M21 Source: Freeman & Co. NYSE Autex & Nasdaq Autex Rankings 1 5 1 9 13 15 16 2 1999 2 9M21 Source: AutEx / BlockDATA PCC PB AM UBSW Financial Services Group 29
UBS Capital - operating profit 12 4 39 114 46 56 CHF m (4) (12) (2) (43) (112) (28) (36) (282) (351) Avg 99 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2 21 PCC PB AM UBSW Financial Services Group 3
UBS PW - resilient recurring fees 12 1 8 bps 6 66 62 54 4 2 3 29 29 1Q1 2Q1 Asset based Transaction based PCC PB AM UBSW Financial Services Group 31
UBS PW - headcount development Financial Advisors Other headcount 12% 1% 98% 96% + 2% 12% - 8% 1% 98% 96% 94% 92% 94% 4Q 1Q1 2Q1 9% 4Q 1Q1 2Q1 PCC PB AM UBSW Financial Services Group 32
Weakening environment? Fee pools USD bn 16 14 12 1 8 6 4 2 1Q 2Q 3Q 4Q 1Q 1 2Q 1 3Q 1 M&A Debt Financing Equity Financing Source: Freeman & Co analysis, Thomson Financial Securities Data 5% 4% 3% 2% 1% % -1% -2% USA Japan Germany Switzerland UK 2 21E 22E Source: UBS Warburg Economic Research GDP growth Individual Investor Optimism 2 18 16 14 12 1 8 6 4 2 1997 1998 1999 2 21 Source: UBS PaineWebber / Gallup Index of Investor Optimism 25% 225% 2% 175% 15% 125% 1% 75% Equity volumes 5% 99 Avg1Q 2Q 3Q 4Q 1Q1 2Q1 SMI DAX-XETRA DJIA NASDAQ FT-SE 1 Source: SWX, Bloomberg & International Federation of Stock Exchanges Financial Services Group 33
Financial Services Group UBS Third Quarter Results 21 13 November 21 Luqman Arnold, President Mark Branson, Head of Group Communications
Appendix: Business unit results Financial Services Group
Group: total operating income (adjusted) (CHFm) 2Q1 3Q vs3q vs2q1 Net interest income 1,73 1,732 1,831 (6%) (%) Credit loss expense (171) (76) 142 125% Net interest income after credit loss expense 1,559 1,656 1,973 (21%) (6%) Net fee and commission income 4,783 5,375 3,865 24% (11%) Net trading income 2,16 2,658 2,368 (9%) (19%) Other income 22 192 339 (4%) 5% Total operating income 8,74 9,881 8,545 2% (12%) Financial Services Group 36
Group: total operating expenses (adjusted) (CHFm) 2Q1 3Q vs3q vs2q1 Personnel 4'852 5,299 3,863 26% (8%) G&A 1,846 1,974 1,53 23% (6%) Depreciation 396 41 35 13% (3%) Goodwill amortization 324 341 126 157% (5%) Total expenses 7,418 8,24 5,842 27% (8%) Financial Services Group 37
Asset quality At period end (CHFm) 3.9.1 3.6.1 % Total loans (gross) 269,239 285,672 (5.7%) Impaired loans 1 15,437 16,644 (7.3%) Non-performing loans 9,88 9,811 (7.4%) Impaired loans in % of gross loans 5.7 5.8 NPL s in % of gross loans 3.4 3.4 Allowances as % of impaired loans 52.7 52.9 Allowances as % of NPL s 62.2 67.1 NOTE: 1 Loans with high probility that they will suffer partial or full loss, includes nonperforming loans Financial Services Group 38
Private & Corporate Clients (CHFm) 2Q1 3Q vs3q vs2q1 Operating income 1,611 1,716 1,69 % (6%) Operating expenses 1,73 1,19 1,145 (6%) (1)% Pre-tax profit 538 526 464 16% 2% Cost / income ratio 1 62% 64% 64% KPI s 2Q1 vs2q1 Invested assets (CHFbn) 38 333 (8%) Net new money 4.6.8 NPL ratio (%) 4.9% 5.1% Headcount 2,646 2,73 % NOTE: 1 Pre-goodwill & credit loss expense Financial Services Group 39
Private Banking (CHFm) 2Q1 3Q vs3q vs2q1 Operating income 1,59 1,66 1,664 (9%) (6%) Operating expenses 96 877 861 5% 3% Pre-tax profit 63 729 83 (25%) (17%) Cost / income ratio 1 59% 54% 51% KPI s 2Q1 vs2q1 Invested assets (CHFbn) 643 718 (1%) Net new money 6.6 8.5 Gross margin (bps) 89 92 (3%) Headcount 9,72 8,865 2% NOTE: 1 Pre-goodwill & credit loss expense Financial Services Group 4
UBS Asset Management (CHFm) 2Q1 3Q vs3q vs2q1 Operating income 521 527 493 6% (1%) Operating expenses 466 47 49 14% (1%) Pre-tax profit 55 57 84 (35%) (4%) Cost / income ratio 1 77% 76% 69% KPI s 2Q1 vs2q1 Institutional assets 39 318 (3%) Net new money 1.9 5.2 Gross margin IF (bps) 28 32 (13%) Mutual fund assets 314 348 (1%) Net new money 1.4.8 Gross margin MF (bps) 36 33 9% Headcount 3,267 3,18 3% Note: 1 Pre-goodwill, credit loss expense Financial Services Group 41
Corporate & Institutional Clients (CHFm) 2Q1 3Q vs3q vs2q1 Operating income 3,664 4,349 4,266 (14%) (16%) Operating expenses 2,786 3,212 3,56 (9%) (13%) Pre-tax profit 878 1,137 1,21 (27%) (23%) Cost / income ratio 1 75% 73% 7% KPI s 2Q1 Compensation ratio 55% 53% NPL ratio (%) 2.1% 2.3% vs2q1 Average VaR (CHFm) 232 29 (2%) Headcount 15,715 15,654 % NOTE: 1 Pre-goodwill & credit loss expense Financial Services Group 42
UBS Capital (CHFm) 2Q1 3Q vs3q vs2q1 Operating income (81) (294) 79 72% Operating expenses 31 57 33 (6%) (46%) Pre-tax profit (112) (351) 46 (68%) KPI s 2Q1 vs2q1 Book value (CHFbn) 4.9 5.3 (8%) Headcount 132 132 (%) KPI s 2Q1 Value Creation (CHFbn) (.3) (.6) Financial Services Group 43
Private Clients 1 (CHFm) 2Q1 3Q 1 vs2q1 Operating income 1,66 1,837 19 (13%) Operating expenses 1,598 1,733 55 (8%) Pre-tax profit 8 14 (36) (92%) Cost / income ratio 2 99% 94% KPI s 2Q1 vs2q1 Invested assets (CHFbn) 75 841 (16%) Net new money 11.4 8.7 Recurring fees (CHFm) 569 583 (2%) Gross margin (bps) 83 91 (8%) Headcount 2,979 21,355 (2%) Financial advisors 9,3 8,962 1% NOTE: 1 3Q UBS Warburg private clients only 2 Pre-goodwill & credit loss expense Financial Services Group 44
Corporate Center (CHFm) 2Q1 3Q. vs3q vs2q1 Income 81 229 414141. 98% (65%) Credit loss (expected actual) (21) 114 374 Operating expenses 351 266 283 24% 32% Pre-tax profit (291) 77 132. KPI s 2Q1 vs2q1 Headcount 1,91 1,57 3% Financial Services Group 45