UBS Investor Day 24 Fixed Income, Rates & Currencies Michael Hutchins, Global Head of FIRC
Diversified group of businesses Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate Calgary London Stamford New York Zurich Tokyo Hong Kong Singapore Sydney Principal trading locations 1
Regional revenue Estimated breakdown of the broadly defined Fixed Income market revenues by geography in 23 Europe Americas Asia Pacific Mercer Oliver Wyman 2
Growth & changing mix in the US securities market Outstanding US Debt Securities 2 18 16 Government 2% MBS & ABS 4% Corporate 25% $2.6 trillion US$ trillion 14 12 1 8 6 4 2 Government 41% MBS & ABS 26% Corporate 25% 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 $4.5 trillion $7. trillion $3.6 trillion Note: Government Mortgage & Asset Backed Securities Corporate Agency BMA Excludes Municipals and Money Markets 3
Growth in the US Mortgage market US single family mortgage debt outstanding 8, 7, 6, US$ billion 5, 4, 3, 2, 1, 198 1982 1984 1986 1988 199 1992 1994 1996 1998 2 22 Mortgage Backed Securities Non-securitized Mortgage debt Inside MBS & ABS 4
Growth in the Mortgage Backed Securities market Mortgage Backed Securities issuance 3 Mortgage Backed Securities trading volumes 25 25 2 US$ billion 2 15 1 US$ billion 15 1 5 5 1994 1995 1996 1997 1998 1999 2 21 Monthly average 22 23 1Q4 1994 1995 1996 1997 1998 1999 2 21 Daily average 22 23 1Q4 Note: Inside MBS & ABS, BMA As of January 21, issuance includes private label jumbo and Alt-A and certain mortgage related ABS 5
Growth in the derivatives market Interest rate & cross-currency derivatives 16 Credit default swaps 4, 14 3,5 12 3, US$ trillion 1 8 6 US$ billion 2,5 2, 1,5 4 1, 2 5 1H 2H 1H1 2H1 1H2 2H2 Notional outstanding 1H3 2H3 1H 2H 1H1 2H1 1H2 2H2 1H3 Notional outstanding 2H3 ISDA 6
Growth in the Repo market Repurchase & reverse repurchase agreements US 4, Europe 4, 3,5 3,5 3, 3, US$ billion 2,5 2, 1,5 Euro billion 2,5 2, 1,5 1, 1, 5 5 Note: 1995 1997 1999 21 23 1H1 2H1 1H2 2H2 1H3 2H3 Ave. daily amount outstanding Ave. daily amount outstanding BMA, ISMA Note: As of Dec 31, 23 beginning Jul 31, 21 corporate securities are included in the US data 7
Credit markets Selected US credit spreads 1,6 1,4 1,2 1, 8 6 4 2 1yr AAA, BBB & B corporate spread data from UBS Credit Research. EMBI+ is the JPMorgan emerging markets index. 8 bp Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar- Jun- Sep- Dec- Mar-1 Jun-1 Sep-1 Dec-1 Mar-2 Jun-2 Sep-2 Dec-2 Mar-3 Jun-3 Sep-3 Dec-3 1yr AAA 1yr BBB 1yr B EMBI+
Interest rates markets Selected cash interest rates 8 7 6 5 4 3 2 1 Bloomberg 9 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar- Jun- Sep- Dec- Mar-1 Jun-1 Sep-1 Dec-1 Mar-2 Jun-2 % Sep-2 Dec-2 Mar-3 Jun-3 Sep-3 Dec-3 1yr UST 2yr UST 5yr Swiss 5yr Japan
Mortgage and interest rates derivatives markets Selected spreads 25 2 15 1 5 US$ and Euro Swap spreads from Bloomberg. US$ Mortgage spreads per UBS Mortgage Research. 1 Dec-3 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar- Jun- Sep- Dec- Mar-1 Jun-1 Sep-1 Dec-1 Mar-2 Jun-2 Sep-2 Dec-2 Mar-3 Jun-3 Sep-3 bp 1yr US$ Swap 1yr Euro Swap 3yr US$ Fixed Mortgage
Currency markets Selected currency exchange rates 1.4 1.3 1.2 1.1 1..9.8 Bloomberg 11 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar- Jun- Sep- Dec- Mar-1 Jun-1 Sep-1 Dec-1 Indexed to 1 Jan 1999 Mar-2 Jun-2 Sep-2 Dec-2 Mar-3 Jun-3 Sep-3 Dec-3 Euro/$ JPY/$ CHF/$
FIRC revenue growth 6, 5, 4, US$ m 3, 2, 1, 2 21 22 23 Note: UBS Includes non-core book and excludes credit losses 12
Quarterly FIRC revenue 28% 86% 2,5 2, US$ m 1,5 1, 5 UBS Ave. Ave. 1 Ave. 2 1Q3 2Q3 3Q3 4Q3 1Q4 13
FIRC has become a significant component of. UBS Investment Bank revenue FY 2 FY 21 FY 22 FY 23 1Q 24 27% 45% 52% 54% 53% Note: UBS financial statements. Income defined as operating income before adjusted expected credit loss 14
Distribution of daily FIRC revenue 12 1 Number of days 8 6 4 2 < (15) (15) to < to <15 15 to <3 3 to <45 45 to <6 6+ US$ million revenue "buckets" - Full year 23 UBS-IB Financial Control. The figures exclude adjustments for CDS hedging our credit exposures and other PSR adjustments. 15
Distribution of daily FIRC revenue 25 2 15 1 5 < (15) (15) to < to <15 15 to <3 Number of days 3 to <45 45 to <6 6+ US$ million revenue "buckets" - First quarter 24 UBS-IB Financial Control. The figures exclude adjustments for CDS hedging our credit exposures and other PSR adjustments. 16
Credit risk management within UBS IB 12 CHF billion 1 8 6 4 2 85.8 61. 78.3 52.6 63. 41.6-2 -4-26.2-28.3-23.2 21 22 23 Gross banking products exposure 1 Net banking products exposure 2 Credit hedges & other CRM 3 UBS Notes: 1 Gross exposure excludes money market deposits and cash collateral deposits 2 Bars can not be totalled as net exposure is set to zero in case of over-hedging 3 CRM = Credit Risk Mitigants include cash collateral and unfunded risk participations 17
Diversified group of businesses Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate Calgary London Stamford New York Zurich Tokyo Hong Kong Singapore Sydney Principal trading locations 18
Fixed Income Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate Debt Capital Markets Investment Grade Emerging Markets Global Syndicated Finance Credit Derivatives High Yield Credit Exposure Management Distressed Debt Loan Trading 1 st Financial Institutions Bond house, IFR 23 1 st Global Emerging Markets Bond house, IFR 23 1 st Swiss Franc Bond house, IFR 23 US Fixed Income Sales & 3 rd Trading, Institutional Investor 23 1 st Asian Bond house, IFR 23 1 st Best Support in Secondary Market, Euroweek 24 Note: The above illustrates selected business lines but is not all inclusive 19
Fixed Income Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate FY 23 revenue 1Q 24 revenue Fixed Income 22% Fixed Income 29% UBS 2
Rates Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate Rates Derivatives Residential Mortgages Government Bonds Energy Trading Asset Backed Securities Credit Exposure Management 1 st Overall MBS Trading, Bondweek 23 1 st Euro/US$ Cross-Currency Swaps, Risk 23 In 4 categories for MBS 1 st Research, Institutional Investor 23 1 st European Government Bond strategy, Extel 23 21
Rates Fixed Income, Rates & Currencies Mortgages league table position 1999 23 Rank Fixed Income 1 2 3 4 5 6 7 8 9 1 Rates 1999 2 21 22 23 FX, Cash & Collateral Trading 1Q 24 Mortgages league tables Global MBS Mkt Share 1. UBS 12.9% 2. Lehman Brothers 1.3% 3. Bear Stearns 9.8% All US MBS Principal Finance & Commercial Real Estate Mkt Share 1. UBS 15.8% 2. Lehman Brothers 11.2% 3. Bear Stearns 11.% Global MBS Agency MBS Whole Loans Mkt Share All US MBS Thomson Financial Whole Loans 1. UBS 19.1% 2. Bear Stearns 17.7% 3. Bank of America 12.1% 22
Rates Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate FY 23 revenue 1Q 24 revenue Rates 27% Rates 3% UBS 23
FX, Cash & Collateral Trading Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate Foreign Exchange Money Markets Repo Precious Metals 1 st World s Best FX house, Euromoney 23 1 st FX House of the Year, The Banker 22 & 23 1 st Best Bank Electronic FX, Euromoney.com 23 1 st FX Bank, FX Week 23 1 st FX Derivatives & Repo, Risk 23 1 st Bank for Repo, Institutional Investor 23 Note: The above illustrates selected business lines but is not all inclusive 24
FX, Cash & Collateral Trading Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate FX market share 14% 12% 11.% 11.5% 12.4% UBS Deutsche Bank 1% Citigroup 8% 6% 4% 5.% JP Morgan 2% 3.6% Goldman Sachs % 2 21 22 23 24 Euromoney 25
FX, Cash & Collateral Trading Fixed Income, Rates & Currencies Fixed Income Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate FY 23 revenue 1Q 24 revenue FXCCT 27% FXCCT 23% UBS 26
Principal Finance & Commercial Real Estate Fixed Income Fixed Income, Rates & Currencies Rates FX, Cash & Collateral Trading Principal Finance & Commercial Real Estate FY 23 revenue PF & CRE 24% 1Q 24 revenue PF & CRE 18% UBS 27
Diversification of revenue Fixed Income, Rates & Currencies FY 23 revenue 1Q 24 revenue PF & CRE 24% Fixed Income 22% PF & CRE 18% Fixed Income 29% FXCCT 27% Rates 27% FXCCT 23% Rates 3% UBS 28
29 UBS Investor Day 24 Fixed Income, Rates & Currencies Michael Hutchins, Global Head of FIRC