UBS: (NYSE:UBS)(SWX:UBSN): Fourth quarter 2009 resultsNet profit attributable to UBS shareholders was CHF 1,205 million, with all business divisions reporting a pre-tax profit in fourth quarter 2009Improvement compared with the third quarter due to lower costs, lower own credit charges and a tax creditGreater efficiency and cost controlCost reduction and efficiency programs initiated in early 2009 have led to a sharp reduction in fixed costs to CHF 20.2 billion in 2009, broadly in line with the CHF 20 billion target set for 2010Headcount reduced by 16% to 65,233 during the year, broadly in line with the 2010 target of 65,000Financial strengthYear-end BIS tier 1 capital ratio of 15.4% compared with 11.0% on 31 December 2008; FINMA leverage ratio of 3.9% in fourth quarter 2009 compared with 2.5% in fourth quarter 2008Further reductions in risk exposures and balance sheet: assets1 down 21% year-on-year to CHF 919 billion and total risk-weighted assets down 32% year-on-year to CHF 207 billion on 31 December 2009Net new money and invested assetsNet new money outflows in fourth quarter 2009 were CHF 33.2 billion for Wealth Management & Swiss Bank, CHF 12.0 billion for Wealth Management Americas, and CHF 11.0 billion for Global Asset ManagementInvested assets were CHF 2,233 billion on 31 December 2009, up 3% year-on-year and down 1% compared with the prior quarter-endCEO comment and outlookGroup CEO Grübel says UBS is delivering on its plan for a new UBS, as demonstrated by its return to profitability and strengthened capitalizationAddressing the causes of net new money outflows remains a main priority – management is confident that reputation will be restored with tangible resultsEffects of the progress made in improving efficiency, reducing risk and rebuilding and refocusing businesses are expected to be felt in the coming quarters Commenting on UBS's fourth quarter 2009 results, Group CEO Oswald J. Grübel said: "We entered 2009 at the height of the crisis. By the end of 2009 UBS has returned to profitability, delivering on its priorities. We have taken decisive action to transform UBS, and it is now a focused, efficient and resilient firm. We expect that our return to profitability will increase clients' confidence in UBS and restore our reputation." Fourth quarter 2009 profit of CHF 1,205 million UBS reports a fourth quarter net profit attributable to UBS shareholders of CHF 1,205 million (net loss of CHF 564 million in the third quarter). Wealth Management & Swiss Bank's pre-tax profit was up 40% to CHF 1,109 million from CHF 792 million, mainly due to lower personnel expenses and the effect of other related cost reduction measures. Revenues were broadly flat compared with the third quarter. Wealth Management Americas recorded a 62% increase in pre-tax profit to CHF 178 million from CHF 110 million on slightly higher revenues. This improvement primarily reflects a non-recurring interest income credit, increased fee income and lower personnel expenses. Global Asset Management's pre-tax profit rose to CHF 284 million from CHF 130 million as lower revenues were more than offset by lower personnel expenses. The Investment Bank recorded a pre-tax profit of CHF 297 million compared with a pre-tax loss of CHF 1,370 million. Fourth quarter 2009 saw a broader market slowdown, lower volumes and more limited trading opportunities which affected revenues from the equities and fixed income, currencies and commodities (FICC) areas of the Investment Bank. The investment banking department saw an increase in revenues compared with the prior quarter. An own credit charge of CHF 24 million on financial liabilities designated at fair value was included in the fourth quarter result, compared with a charge of CHF 1,436 million in the third quarter. Credit loss expenses were down to CHF 70 million from CHF 243 million. Operating expenses decreased due to lower accruals for variable compensation. The Corporate Center's pre-tax result from continuing operations was negative CHF 956 million compared with negative CHF 255 million. The fourth quarter result included the reallocation of negative revenues to the Corporate Center from the Investment Bank, due to changes in the calculation of own credit from prior periods. Fourth quarter 2009 results include a CHF 480 million tax credit mainly attributable to the revaluation of deferred tax assets, principally in the US. Business division performance: 4Q09 vs 3Q09   Reporting by business divisionCHF million       Total operating income   Total operating expenses   Performance before tax fromcontinuing operations For the quarter ended       31.12.09   30.9.09   % change   31.12.09   30.9.09   % change   31.12.09   30.9.09   % change Wealth Management & Swiss Bank       2,769   2,814   (2)   1,660   2,023   (18)   1,109   792   40 Wealth Management Americas       1,395   1,378   1   1,217   1,268   (4)   178   110   62 Global Asset Management       537   567   (5)   253   437   (42)   284   130   118 Investment Bank       2,097   1,167   80   1,800   2,537   (29)   297   (1,370)     Corporate Center       (703)   (160)   (339)   253   95   166   (956)   (255)   (275) UBS       6,095   5,766   6   5,183   6,359   (18)   912   (593)                           Full-year 2009 results Net loss attributable to shareholders decreased to CHF 2,736 million for full-year 2009 from CHF 21,292 million in 2008. Adjusted for the items below, the underlying pre-tax profit for 2009 was CHF 1.4 billion. In 2009, the biggest negative accounting impact came from losses on own credit on financial liabilities designated at fair value. These own credit losses were driven by the improved perception of UBS's creditworthiness during 2009, which was a positive development but led to a net charge of CHF 2.0 billion. The other items were a loss in relation to the closing of the UBS Pactual sale (CHF 1.4 billion), restructuring charges (CHF 0.8 billion) and a gain on the mandatory convertible notes formerly held by the Swiss Confederation and converted in August 2009 (CHF 0.3 billion). Net new money and invested assetsWealth Management & Swiss Bank – Outflows of net new money were CHF 33.2 billion in fourth quarter 2009 compared with CHF 16.7 billion in the prior quarter. Invested assets of CHF 22.8 billion were affected by the Italian tax amnesty, of which CHF 14.3 billion were retained within UBS. Total net new money outflows from Swiss clients were CHF 5.9 billion compared with CHF 3.9 billion, with the corporate and institutional clients business recording net new money inflows. Net new money outflows for international clients were CHF 27.3 billion compared with CHF 12.9 billion. The Asia Pacific region showed positive net new money in the fourth quarter. Wealth Management Americas – The fourth quarter saw net new money outflows of CHF 12.0 billion compared with net new money outflows of CHF 9.9 billion in third quarter 2009. These were affected by financial advisor attrition and limited recruitment of experienced financial advisors. Invested assets per financial advisor have increased during the quarter and remain amongst the highest in the industry. Global Asset Management – Net new money outflows were CHF 11.0 billion in the fourth quarter compared with CHF 10.0 billion in the prior quarter. Excluding money market flows, net new money outflows were CHF 5.7 billion compared with CHF 2.3 billion. Institutional net new money outflows were CHF 3.8 billion compared with CHF 1.2 billion. Excluding money market flows, institutional net new money outflows were CHF 3.6 billion, compared with net inflows of CHF 1.4 billion. Outflows of wholesale intermediary net new money slowed to CHF 7.2 billion from CHF 8.8 billion. Excluding money market flows, wholesale intermediary outflows slowed to CHF 2.1 billion from CHF 3.7 billion. Invested assets stood at CHF 2,233 billion on 31 December 2009, compared with CHF 2,258 billion on 30 September 2009. They were impacted by the abovementioned net new money outflows as well as negative currency translation effects, and were partially offset by positive market movements. Of the invested assets, CHF 960 billion were attributable to Wealth Management & Swiss Bank, CHF 690 billion were attributable to Wealth Management Americas and CHF 583 billion were attributable to Global Asset Management. Compared with year-end 2008, UBS’s invested assets increased 3% from CHF 2,174 billion. Capital base and balance sheet On 31 December 2009, UBS's BIS tier 1 ratio stood at 15.4%, up from 15.0% on 30 September 2009. During the fourth quarter, risk-weighted assets (RWA) decreased 2% to CHF 207 billion, and BIS tier 1 capital increased by CHF 0.2 billion to CHF 31.8 billion. UBS reduced its balance sheet by a further CHF 136 billion during the fourth quarter and held total assets of CHF 1,341 billion on 31 December 2009. The size of the balance sheet was reduced by 33% and risk-weighted assets were down 32% compared with 31 December 2008 as exposures to residual risk positions were significantly reduced. Outlook In the coming quarters, UBS expects to see the effects of the progress it has made in improving operating efficiency, reducing risk, and rebuilding and re-focusing its businesses. UBS is confident that the measures it is taking to address the causes of client asset outflows will be effective, but in the immediate future still expects to report outflows, with some pressure on margins. The Investment Bank’s results always depend heavily on market vitality, and client activity levels have been high in January. Although UBS cannot predict how long this attractive trading environment will continue, it expects that the Investment Bank’s performance for 2010 as a whole will improve, in part because its residual risk positions should have a much reduced impact on results. 1 Total assets excluding positive replacement values of CHF 422 billion and CHF 854 billion on 31 December 2009 and 31 December 2008, respectively.   UBS key figures         For the quarter ended   Year ended CHF million, except where indicated       31.12.09   30.9.09   31.12.08   31.12.09   31.12.08   Group results Operating income       6,095   5,766   (4,696)   22,601   796 Operating expenses       5,183   6,359   6,562   25,162   28,555 Operating profit before tax (from continuing and discontinued operations)       888   (593)   (11,239)   (2,569)   (27,560) Net profit attributable to UBS shareholders       1,205   (564)   (9,563)   (2,736)   (21,292) Diluted earnings per share (CHF) 1       0.31   (0.15)   (2.99)   (0.75)   (7.63)   Key performance indicators, balance sheet and capital management 2Performance Return on equity (RoE) (%)                   (7.8)   (58.7) Return on risk-weighted assets, gross (%)                   9.9   1.2 Return on assets, gross (%)                   1.5   0.2 Growth Net profit growth (%) 3       N/A   N/A   N/A   N/A   N/A Net new money (CHF billion) 4       (56.2)   (36.7)   (85.8)   (147.3)   (226.0) Efficiency Cost / income ratio (%)       83.9   106.1   N/A   103.0   753.0           As of         CHF million, except where indicated       31.12.09   30.9.09   31.12.08         Capital strength BIS tier 1 ratio (%) 5       15.4   15.0   11.0         FINMA leverage ratio (%) 5       3.93   3.51   2.45         Balance sheet and capital management Total assets       1,340,538   1,476,053   2,014,815         Equity attributable to UBS shareholders       41,013   39,536   32,531         BIS total ratio (%) 5       19.8   19.4   15.0         BIS risk-weighted assets 5       206,525   210,763   302,273         BIS tier 1 capital 5       31,798   31,583   33,154           Additional information Invested assets (CHF billion)       2,233   2,258   2,174         Personnel (full-time equivalents)       65,233   69,023   77,783         Market capitalization 6       57,108   67,497   43,519         Long-term ratings Fitch, London       A+   A+   A+         Moody’s, New York       Aa3   Aa2   Aa2         Standard & Poor’s, New York       A+   A+   A+         1 Refer to “Note 8 Earnings per share (EPS) and shares outstanding” in the “Financial information” section of the fourth quarter 2009 report. 2 For the definitions of UBS’s key performance indicators refer to the “Key performance indicators” section on page 11 of UBS’s financial report for first quarter 2009. 3 Not meaningful if either the current period or the comparison period is a loss period. 4 Excludes interest and dividend income. 5 Refer to the “Capital management” section of the fourth quarter 2009 report. 6 Refer to the “UBS registered shares” section of the fourth quarter 2009 report.     Income statement         For the quarter ended   % change from   Year ended CHF million, except per share data       31.12.09   30.9.09   31.12.08   3Q09   4Q08   31.12.09   31.12.08   Continuing operations Interest income       4,681   5,100   11,534   (8)   (59)   23,461   65,679 Interest expense       (2,932)   (3,445)   (9,879)   (15)   (70)   (17,016)   (59,687) Net interest income       1,749   1,654   1,655   6   6   6,446   5,992 Credit loss (expense) / recovery       (83)   (226)   (2,310)   (63)   (96)   (1,832)   (2,996) Net interest income after credit loss expense       1,667   1,428   (655)   17       4,614   2,996 Net fee and commission income       4,438   4,530   4,784   (2)   (7)   17,712   22,929 Net trading income       (62)   148   (9,132)       99   (324)   (25,820) Other income       52   (340)   306       (83)   599   692 Total operating income       6,095   5,766   (4,696)   6       22,601   796 Personnel expenses       3,323   4,678   2,378   (29)   40   16,543   16,262 General and administrative expenses       1,547   1,367   3,723   13   (58)   6,248   10,498 Depreciation of property and equipment       280   231   395   21   (29)   1,048   1,241 Impairment of goodwill       0   0   0           1,123   341 Amortization of intangible assets       33   84   66   (61)   (50)   200   213 Total operating expenses       5,183   6,359   6,562   (18)   (21)   25,162   28,555 Operating profit from continuing operations before tax       912   (593)   (11,258)           (2,561)   (27,758) Tax expense       (480)   (49)   (1,798)   (880)   73   (443)   (6,837) Net profit from continuing operations       1,392   (544)   (9,460)           (2,118)   (20,922)   Discontinued operations Profit from discontinued operations before tax       (25)   0   19           (7)   198 Tax expense       0   0   0           0   1 Net profit from discontinued operations       (25)   0   19           (7)   198 Net profit       1,368   (544)   (9,441)           (2,125)   (20,724) Net profit attributable to minority interests       163   21   123   676   33   610   568 from continuing operations       162   21   123   671   32   600   520 from discontinued operations       1   0   0           10   48 Net profit attributable to UBS shareholders       1,205   (564)   (9,563)           (2,736)   (21,292) from continuing operations       1,231   (564)   (9,582)           (2,719)   (21,442) from discontinued operations       (26)   0   19           (17)   150   Earnings per share (CHF) Basic earnings per share       0.32   (0.15)   (2.99)           (0.75)   (7.63) from continuing operations       0.32   (0.15)   (3.00)           (0.74)   (7.68) from discontinued operations       (0.01)   0.00   0.01           0.00   0.05 Diluted earnings per share       0.31   (0.15)   (2.99)           (0.75)   (7.63) from continuing operations       0.32   (0.15)   (3.00)           (0.74)   (7.69) from discontinued operations       (0.01)   0.00   0.01           0.00   0.05                       Media release available at www.ubs.com/media   Further information on UBS's quarterly results is available at www.ubs.com/investors: Fourth quarter 2009 financial report Fourth quarter 2009 results slide presentation Letter to shareholders (English, German, French and Italian)   Webcast: The results presentation, with Oswald Grübel, Group Chief Executive Officer, John Cryan, Group Chief Financial Officer and Caroline Stewart, Global Head of Investor Relations, will be webcast live on www.ubs.com/investors at the following times on 9 February 2010: 0900 CET 0800 GMT 0300 US EST Webcast playback will be available from 1400 CET on 9 February 2010.   Cautionary Statement Regarding Forward-Looking Statements This release 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 strategic initiatives on UBS’s business and future development. While these forward-looking statements represent UBS’s judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS’s expectations. Additional information about those factors is set forth in documents furnished and filings made by UBS with the US Securities and Exchange Commission, including UBS’s financial report for fourth quarter 2009 and UBS’s restated Annual Report on Form 20-F / A for the year ended 31 December 2008. UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Rounding Numbers presented throughout this release may not add up precisely to the totals provided in the tables and text. Percentages and percent changes are calculated based on rounded figures displayed in the tables and text and may not precisely reflect the percentages and percent changes that would be derived based on figures that are not rounded.