ubs product day – zurich balance sheet, rwa & capital … · balance sheet, rwa & capital...

$: UBS Product Day – Zurich Balance Sheet, RWA & Capital … · Balance Sheet, RWA & Capital Management June 1, 2006 Clive Standish, Chief Financial Officer. 1 Q:\GROUP-COMMS\Investor$
UBS Product Day – ZurichBalance Sheet, RWA & Capital Management

June 1, 2006

Clive Standish, Chief Financial Officer

1

Q:\GROUP-COMMS\Investor Relations\4 Investor Day\Investor Day 2006\Presentations\Final_presos\Product Day\5_Preso_Clive_Standish.ppt

Table of contents

SECTION 1 Key Messages

SECTION 2 Balance Sheet

SECTION 3 Risk-Weighted Assets (RWA)

SECTION 4 Capital Management

2


Key messages

♦ Large but uniquely liquid balance sheet

♦ Rating/funding advantage reflect unique business model/treasury discipline

♦ Soundly capitalized at total capital and especially Tier 1 capital level

♦ Business mix and risk profile drives high and growing RoE

♦ Capital management balances growth dynamics with pay-out capacity

– high RoE provides strong capital generation to satisfy multiple demands

♦ Basel II impact expected to be modest given large credit gains, especially onhighly secured and collateralized portfolios, offsetting new operational riskunderpinning

♦ Modest RWA reflects risk profile and high liquidity

♦ Strong RWA growth mirrors targeted business growth

SECTION 2

Balance Sheet

4


Liquid and illiquid assets as of December 2005 (US GAAP)

0

500

1,000

1,500

2,000U

BS

Cit

igro

up

HSB

C

Ban

k o

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mer

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JPM

org

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USD

bn

Liquid assets

Illiquid assets

Large but uniquely liquid balance sheetBalance sheet size is not a target…

…rather a consequence of profitable business growth

Source: Corporate Reporting

5


LendingCHF 310bn

CollateralTradingCHF 705bn

TradingCHF 654bn

Pos RVsCHF 334bn

Other AssetsCHF 58bn

21878

301392

118496

298 34

12

Asset decomposition

Investment Bank excl CCT CHF 1,279bn

Corporate Center CHF 14bn

Global Asset Management CHF 37bn

IB Cash & Collateral Trading CHF 470bn

Global WM&BB CHF 249bn

Industrial Holdings CHF 11bn

Group assets dominated by the IB (85%)…

B/S by category and Business Group as of December 2005 (CHF bn)

…consistent with high liquidity of balance sheet

6


Flow of funds – disciplined, integrated business model

Cash andCollateralTrading

Group Treasury

Shareholders

Markets

Long-established central treasury model reduces risks…

…nets all flows and delivers substantial funding advantage

Short-term

(IB & GWM&BB)

> 1year(mainly GWM&BB)

Clients / funding

Liquid(mainly IB)

Illiquid

Clients / assets

SECTION 3

Risk-Weighted Assets (RWA)

8


RWA and total assets as of December 2005 (US GAAP)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800B

ank

of

Am

eric

a

Cit

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JPM

org

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HSB

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USD

bn

Risk-weighted assets

Total assets

RWA – peer comparisonModest RWA level…

…reflects risk profile and highly liquid balance sheetSource: Corporate Reporting

9


Risk-weighted assetsNote 28: Capital Adequacy

CHF billion @ 31.12.2005 Exposure

Risk-weighted

assets

Averagerisk-

weightings

Due from Banks and other collateralized lendings 665.9 7.0 1%

Net positions in securities 8.1 6.8 85%

Positive replacement values 87.0 20.5 24%

Net loans and other collateralized lendings 540.1 196.1 36%

Accrued income and prepaid expenses 9.1 4.8 53%

Property and equipment 8.0 8.0 100%

Other assets 13.3 9.1 69%

Total on-balance sheet 1,331.3 252.4 19%

Contingent liabilities 16.6 7.5 45%

Irrevocable commitments 73.2 18.5 25%

Forward and swap contracts 22,365.4 10.7 -

Purchased options 1,629.3 0.3 -

Total off-balance sheet 24,084.5 37.0 -

Market risk positions 21.0

Total risk-weighted assets 310.4

10


RWA decomposition

Lending to customersCHF 196bn

Positive RV CHF 21bn

Other balance sheetassets CHF 36bn

Off balance sheet RWACHF 37bn

Market risk positionsRWA CHF 21bn

Balanced RWA mix between IB and GWM&BB


Investment Bank CHF 128.7bn

Global WM&BB CHF 147.3bn

Global Asset Management CHF 1.6bn

Corporate Center CHF 8.1bn

Industrial Holdings CHF 2.0bn

IB Cash & Collateral Trading CHF 22.6bn

13653

16

13 87 2 2

30 5

17

7

4

5

2

4

11


Decomposition of B/S and RWA by Business Group

4%12%

34%

7%

29%

7%

17%

10%

6%

7%

B/S RWA

Investment Bank(Dec 05)

Global WM&BB(Dec 05)

11%

44%

B/S RWA

86%

49%

12%

48%

Collateral TradingLendingTraded assets (incl. VaR) Pos replacement valuesTotal other assets Off Balance Sheet

Highly liquid assets translate into low RWA

12


252

11

43

16-2

310

25

200

220

240

260

280

300

320

31.12.03 Loans &collateralized

lending

Irrevocablecommitments

Forward &swap

contracts

VaR Loans &collateralized

lending

Other / FX 31.12.05

CH

F b

n

RWA growth over last 2 yearsMain RWA growth drivers are the targeted GWM&BB…

…and IB strategic initiatives in our core businesses

Investment Bank

GWM&BB

SECTION 4

Capital Management

14


12.9

1.22.4

2.53.8

3.24.8

3.52.8

11.310.6 9.0 8.8 8.7 8.5 8.3

0

2

4

6

8

10

12

14

16

UB

S

Cre

dit

Su

isse

Gro

up

AB

N A

mro

HSB

C

Cit

igro

up

Deu

tsch

eB

ank

JPM

org

anC

has

e

Ban

k o

fA

mer

ica

in %

Tier 1 Ratio Tier 2+3 Ratio

Required Tier 1 minimum Required BIS minimum

11.6 11.3 12.0 11.912.9

3.22.5 1.5 1.9

1.2

0

2

4

6

8

10

12

14

16

2001 2002 2003 2004 2005

in %

Tier 1 Ratio Tier 2+3 Ratio

Core capital strength – peer comparisonSoundly capitalised at total capital and especially Tier 1 level…

as of December 2005

Source: Corporate Reporting…but 2005 level inflated by SBC WM sale proceeds

15


Goodwill represents significant adjustment to eligible tier 1capital …

Eligible capital

Less goodwill *

Tier 1 Capital

Tier 2 Capital

thereof hybrid

(11.2)

39.9

7.2

5.0

thereof Julius Baer (2.2)

thereof Bank of China (0.7)

Total Group Capital 43.9

Tier 1 before goodwill deductions 51.1

Deductions (3.3)

Eligible Capital (CHF bn)as of December 2005

12.9%

14.1%

CapitalRatios

*Cap Ad GAAP

/ RWA

… while financial holdings reduce total capital

16


Decomposition of required capital @ 10% Tier 1 levelHigh IB focus on capital consumption and returns per BU…

Lending to customersCHF 19.6bn

Positive RV CHF 2.1bn

Other balance sheetassets CHF 3.6bn

Off balance sheetRWA CHF 3.7bn

Market risk positionsRWA CHF 2.1bn

Investment Bank CHF 15.1bn

Global WM&BB CHF 14.8bn

Global Asset Management CHF 0.2bn

Corporate Center CHF 0.8bn

Industrial Holdings CHF 0.2bn

1.8

13.66.0

2.0

0.80.7

3.2 0.5

2.1

…with material new business/transaction proposalssubject to reg cap consumption and return analysis

as one decision factor


17


Return on equity (RoE)

1 Net profit attributable to UBS shareholders from continuing operations excluding theamortization of goodwill / average equity attributable to UBS shareholders lessaccrued distributions

0

5

10

15

20

25

30

2001 2002 2003 2004 2005

in %

0% 5% 10% 15% 20% 25% 30%

JPMorganChase

Deutsche Bank

Credit Suisse

Merrill Lynch

Morgan Stanley

Lehman Brothers

Goldman Sachs

Citigroup

UBS

New minimum target

Business mix and risk profile drives high and growing ROE

Source: Corporate Reporting

UBS RoE1 Peer RoE's @ 2005

18


Capital management disciplineHigh RoE supports rapid organic growth and targeted add-onacquisitions…

Issuance (2.8bn)

Trust preferredsecurities (2bn)

Earnings(29.4bn)

Deductions forholdings (2.9bn)

Goodwill (1.6bn)

Dividend & par-valuereduction (9.9bn)

Share buy-back(11.8bn)

RWA growth(5.7bn)

Tier 1capital

Tier 2+3capital

…while simultaneously increasing dividendsand buying back substantial shares

Cumulative flows over last 3 years (2003 – 2005)

19


Uniquely liquid Balance Sheet

0

200

400

600

800

1'000

1'200

1'400

1'600

1'800

2'000

UB

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Liquid assets

Illiquid assets

Modest RWA

0

200

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1,000

1,200

1,400

1,600

1,800

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Risk-weighted assets

Total assets

Executive summary

High and growing RoE

Issuance(2.8bn)

Earnings(29.4bn)

Trust preferredsecurities (2bn)

Deductions forholdings (2.9bn)

Goodwill (1.6bn)

Dividend & par-valuereduction (9.9bn)

Share buy-back(11.8bn)

RWA growth(5.7bn)

Tier 1capital

Tier 2+3capital

Capital Management

0

5

10

15

20

25

30

2001 2002 2003 2004 2005

in %

New minimum target

20


Questions……

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