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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Jurisdiction of Incorporation or Organization)
Bahnhofstrasse 45
CH-8001 Zurich, Switzerland
and
Aeschenvorstadt 1
CH-4051 Basel, Switzerland
(Address of Principal Executive Offices)
UBS AG
677 Washington Boulevard
Stamford, CT 06901
Telephone: (203) 719-3000
Fax: (203) 719-0680
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Please see page 3.
Please see page 4.
Please see page 4.
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* | As of December 31, 2009, UBS had outstanding mandatory convertible notes (“MCNs”) in the face amount of CHF 13 billion. Upon their conversion on 5 March 2010, these MCNs led to the issuance of 272,651,005 new shares out of conditional capital. |
Yesþ | Noo |
15(d) of the Securities Exchange Act of 1934.
Yeso | Noþ |
Yesþ | Noo |
Yeso | Noþ |
Large accelerated filerþ | Accelerated filero | Non-accelerated filero |
statements included in this filing.
U.S. GAAPo | International Financial Reporting Standards as issued by the International Accounting Standards Boardþ | Othero |
financial statement item the registrant has elected to follow.
Item 17o | Item 18o |
defined in Rule 12b-2 of the Exchange Act)
Yeso | Noþ |
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Name of each exchange on | ||
Title of each class | which registered | |
Ordinary Shares (par value of CHF 0.10 each) | New York Stock Exchange | |
$300,000,000 Floating Rate Noncumulative Trust Preferred Securities | New York Stock Exchange | |
$300,000,000 Floating Rate Noncumulative Company Preferred Securities | New York Stock Exchange* | |
$1,000,000,000 6.243% Noncumulative Trust Preferred Securities | New York Stock Exchange | |
$1,000,000,000 6.243% Noncumulative Company Preferred Securities | New York Stock Exchange* | |
Subordinated Guarantee of UBS AG with respect to each of the Noncumulative Company Preferred Securities above | New York Stock Exchange* | |
$30,000,000 PPNs due April 2010 | NYSE Alternext US | |
$31,000,000 PPNs due May 2010 | NYSE Alternext US | |
$23,000,000 PPNs due June 2010 | NYSE Alternext US | |
$10,000,000 PPNs due July 2010 | NYSE Alternext US | |
$7,750,000 PPNs due August 2010 | NYSE Alternext US | |
$12,660,000 PPNs due September 2010 | NYSE Alternext US | |
$8,000,000 PPNs due November 2010 | NYSE Alternext US | |
$17,842,000 PPNs due October 2011 | NYSE Alternext US | |
$100,000,000 E-TRACS UBS Bloomberg CMCI Food ETN due April 2038 | NYSE Arca | |
$50,000,000 E-TRACS UBS Bloomberg CMCI Agriculture ETN due April 2038 | NYSE Arca | |
$50,000,000 E-TRACS UBS Bloomberg CMCI Energy ETN due April 2038 | NYSE Arca | |
$100,000,000 E-TRACS UBS Bloomberg CMCI Total Return ETN due April 2038 | NYSE Arca | |
$100,000,000 E-TRACS UBS Bloomberg Gold ETN due April 2038 | NYSE Arca | |
$50,000,000 E-TRACS UBS Bloomberg CMCI Industrial Metals due April 2038 | NYSE Arca |
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Name of each exchange on | ||
Title of each class | which registered | |
$50,000,000 E-TRACS UBS Bloomberg CMCI Livestock ETN due April 2038 | NYSE Arca | |
$50,000,000 E-TRACS UBS Bloomberg CMCI Silver ETN due April 2038 | NYSE Arca | |
$50,000,000 E-TRACS UBS Long Platinum ETN due May 2018 | NYSE Arca | |
$50,000,000 E-TRACS UBS Short Platinum ETN due May 2018 | NYSE Arca | |
$100,000,000 E-TRACS UBS S&P 500 Gold Hedged Index ETN due January 2040 | NYSE Arca | |
$100,000,000 E-TRACS Dow Jones-UBS Commodity Index Total Return ETN due October 2039 | NYSE Arca |
* Not for trading, but solely in connection with the registration of the corresponding Trust Preferred Securities. |
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Item 1. | Identity of Directors, Senior Management and Advisors. |
Item 2. | Offer Statistics and Expected Timetable. |
Item 3. | Key Information. |
Item 4. | Information on the Company. |
1-3 | Please seeCorporate informationon page 6 of the Annual Report 2008. |
4-6 | Please seeThe making of UBSon page 20 andKey factors affecting our financial position and results of operations in 2009on pages 31 to 32 of the Strategy, performance and responsibility report. |
7 | None. |
1, 2, 5, 7 | Please refer to the UBS business divisions and Corporate Center report on pages 74 to 76 with respect to Wealth Management & Swiss Bank, pages 80 to 82 with respect to Wealth Management Americas, pages 86 to 90 with respect to Global Asset Management, pages 95 to 97 with respect to the Investment Bank, and pages 103 to 104 with respect to the Corporate Center. For a breakdown of revenues by category of activity and geographic market for each of the last three financial years, please refer to Notes 2a and 2b to the Financial information reportSegment reportingon pages 283 to 286 andSegment reporting by geographic locationon page 287, respectively. |
3 | Please refer toSeasonal characteristicson page 32 of the Strategy, performance and responsibility report. |
4 | Not applicable. |
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6 | None. |
8 | Please seeRegulation and supervisionon pages 210 to 212 of the Corporate governance and compensation report. |
Item 4.A. | Unresolved Staff Comments. |
Item 5. | Operating and Financial Review and Prospects. |
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Item 6. | Directors, Senior Management and Employees. |
1, 2, 3 | Please see pages 191 to 194 and pages 198 to 201 of the Corporate governance and compensation report. |
4 and 5 | None. |
1 | Please see pages 227 to 238 ofCompensation and shareholdingsin the Corporate governance and compensation report and also Note 31 to the Financial StatementsEquity participation and other compensation planson pages 341 to 346 and Note 32 to the Financial StatementsRelated parties on pages 347 to 349 of the Financial information report. |
2 | Please see Note 30 to the Financial StatementsPension and other post-employment benefits planson pages 335 to 340 of the Financial information report. |
1 | Please see pages 191 to 195 and pages 198 to 201 in the Corporate governance and compensation report. |
2 | Please see Clauses on change of control on page 205 of the Corporate governance and compensation report, pages 228 to 230 ofCompensation and shareholdingsin the Corporate governance and compensation report and Note 32 to the Financial StatementsRelated partieson pages 347 to 349 of the Financial Information report. |
3 | Please seeAudit Committeeon page 195 andHuman Resources and Compensation Committeeon page 196 of the Corporate governance and compensation report. |
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Item 7. | Major Shareholders and Related Party Transactions. |
Item 8. | Financial Information. |
Item 9. | The Offer and Listing. |
1, 2, 3, 5, 6, 7 | Not required because this Form 20-F is filed as an annual report. |
4 | Please seeStock exchange priceson page 163 of the Risk and treasury management report. |
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Item 10. | Additional Information. |
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• | amendments to the Articles; | ||
• | elections of directors and statutory auditors; | ||
• | approval of the annual report and the consolidated statements of accounts; | ||
• | approval of the annual financial statements and the resolution on the use of the balance sheet profit (declaration of dividend); | ||
• | decisions to discharge directors and management from liability for matters disclosed to the shareholders’ meeting; and | ||
• | passing resolutions on matters which are by law or by the Articles reserved to the shareholders’ meeting (e.g., the ordering of an independent investigation into the specific matters proposed to the shareholders’ meeting). |
• | change the limits on BoD size in the Articles; | ||
• | remove one fourth or more of the members of the BoD; or | ||
• | delete or modify the above supermajority voting requirements. |
• | a change in our stated purpose in the Articles; | ||
• | the creation of shares with privileged voting rights; | ||
• | a restriction of transferability; | ||
• | an increase in authorized capital; | ||
• | an increase of capital out of equity against contribution in kind, for the purpose of acquisition and granting of special rights; | ||
• | changes to pre-emptive rights; | ||
• | a change of domicile of the corporation; or | ||
• | dissolution of the corporation without liquidation. |
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• | a citizen or resident of the United States, | ||
• | a domestic corporation or other entity taxable as a corporation, | ||
• | an estate, the income of which is subject to U.S. federal income tax without regard to its source, or | ||
• | a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust. |
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Item 11. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 12. | Description of Securities Other than Equity Securities. |
Item 13. | Defaults, Dividend Arrearages and Delinquencies. |
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds. |
Item 15. | Controls and Procedures. |
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Item 15.T. | Controls and Procedures. |
Item 16.A. | Audit Committee Financial Expert. |
Item 16.B. | Code of Ethics. |
Item 16.C. | Principal Accountant Fees and Services. |
Item 16.D. | Exemptions from the Listing Standards for Audit Committee. |
Item 16.E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers. |
Item 16.F. | Change in Registrant’s Certifying Accountant. |
Item 16.G. | Corporate Governance. |
Item 17. | Financial Statements. |
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Item 18. | Financial Statements. |
Item 19. | Exhibits. |
Exhibit | ||
Number | Description | |
1.1. | Articles of Association of UBS AG. | |
1.2. | Organization Regulations of UBS AG. | |
2(b). | Instruments defining the rights of the holders of long-term debt issued by UBS AG and its subsidiaries. | |
We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt. | ||
4.1 | Deferred Prosecution Agreement between the United States of America and UBS AG, dated February 18, 2009. | |
4.2 | Settlement Agreement among the United States of America, the US Internal Revenue Service and UBS AG, dated August 19, 2009, relating to the John Doe summons. (Incorporated by reference to UBS AG’s Report of Foreign Private Issuer on Form 6-K filed November 3, 2009) | |
7. | Statement regarding ratio of earnings to fixed charges. | |
8. | Significant Subsidiaries of UBS AG. | |
Please see Note 34 to the Financial StatementsSignificant subsidiaries and associateson pages 350 to 353 of the Financial information report. | ||
12. | The certifications required by Rule 13(a)-14(a) (17 CFR 240.13a-14(a)). | |
13. | The certifications required by Rule 13(a)-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code (18 U.S.C. 1350). | |
15. | Consent of Ernst & Young Ltd. |
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UBS AG | ||||
/s/ Oswald Grübel | ||||
Name: | Oswald Grübel | |||
Title: | Group Chief Executive Officer | |||
Date: March 15, 2010 | /s/ John Cryan | |||
Name: | John Cryan | |||
Title: | Group Chief Financial Officer | |||
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Exhibit | ||
Number | Description | |
1.1. | Articles of Association of UBS AG.* | |
1.2. | Organization Regulations of UBS AG.* | |
2(b). | Instruments defining the rights of the holders of long-term debt issued by UBS AG and its subsidiaries. | |
We agree to furnish to the SEC upon request, copies of the instruments, including indentures, defining the rights of the holders of our long-term debt and of our subsidiaries’ long-term debt. | ||
4.1 | Deferred Prosecution Agreement between the United States of America and UBS AG, dated February 18, 2009.* | |
4.2 | Settlement Agreement among the United States of America, the US Internal Revenue Service and UBS AG, dated August 19, 2009, relating to the John Doe summons. (Incorporated by reference to UBS AG’s Report of Foreign Private Issuer on Form 6-K filed November 3, 2009) | |
7. | Statement regarding ratio of earnings to fixed charges.* | |
8. | Significant Subsidiaries of UBS AG. | |
Please see Note 34 to the Financial StatementsSignificant subsidiaries and associateson pages 350 to 353 of the Financial information report. | ||
12. | The certifications required by Rule 13(a)-14(a) (17 CFR 240.13a-14(a)).* | |
13. | The certifications required by Rule 13(a)-14(b) (17 CFR 240.13a-14(b)) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code (18 U.S.C. 1350).* | |
15. | Consent of Ernst & Young Ltd.* |
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Kaspar Villiger | Oswald J. Grübel | |
Chairman of the BoD | Group Chief Executive Officer |
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– | UBS’s strategy, performance and responsibility | |
– | the strategy and performance of the business divisions and the Corporate Center | |
– | risk and treasury management | |
– | corporate governance and executive compensation | |
– | financial information, including the financial statements |
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Switchboards | ||||||
For all general queries. | Zurich | +41-44-234 1111 | ||||
London | +44-20-7568 0000 | |||||
New York | +1-212-821 3000 | |||||
Hong Kong | +852-2971 8888 | |||||
Investor Relations | ||||||
UBS’s Investor Relations team supports institutional, professional and retail investors from our offices in Zurich and New York. www.ubs.com/investors | Hotline | +41-44-234 4100 | UBS AG | |||
New York | +1-212-882 5734 | Investor Relations | ||||
Fax (Zurich) | +41-44-234 3415 | P.O. Box | ||||
CH-8098 Zurich, Switzerland | ||||||
sh-investorrelations@ubs.com | ||||||
Media Relations | ||||||
UBS’s Media Relations team supports global media and journalists from offices in Zurich, London, New York and Hong Kong. www.ubs.com/media | Zurich | +41-44-234 8500 | mediarelations@ubs.com | |||
London | +44-20-7567 4714 | ubs-media-relations@ubs.com | ||||
New York | +1-212-882 5857 | mediarelations-ny@ubs.com | ||||
Hong Kong | +852-2971 8200 | sh-mediarelations-ap@ubs.com | ||||
Shareholder Services | ||||||
UBS Shareholder Services, a unit of the Company Secretary, is responsible for the registration of the global registered shares. | Hotline | +41-44-235 6202 | UBS AG | |||
Fax | +41-44-235 3154 | Shareholder Services | ||||
P.O. Box | ||||||
CH-8098 Zurich, Switzerland | ||||||
sh-shareholder-services@ubs.com | ||||||
US Transfer Agent | ||||||
For all global registered share-related queries in the US. www.melloninvestor.com | Calls from the US | +866-541 9689 | BNY Mellon Shareowner Services | |||
Calls outside the US | +1-201-680 6578 | 480 Washington Boulevard | ||||
Fax | +1-201-680 4675 | Jersey City, NJ 07310, USA | ||||
sh-relations@melloninvestor.com | ||||||
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– | UBS is a client-focused financial services firm that offers a strong combination of wealth management, asset management and investment banking services on a global and regional basis. | |
– | We aim to generate sustainable earnings, create value for our shareholders and be economically profitable in every segment, market and business in which we operate. |
UBS key figures | ||||||||||||
As of or for the year ended | ||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Group results | ||||||||||||
Operating income | 22,601 | 796 | 31,721 | |||||||||
Operating expenses | 25,162 | 28,555 | 35,463 | |||||||||
Operating profit before tax (from continuing and discontinued operations) | (2,569 | ) | (27,560 | ) | (3,597 | ) | ||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (21,292 | ) | (5,247 | ) | ||||||
Diluted earnings per share (CHF)1 | (0.75 | ) | (7.63 | ) | (2.41 | ) | ||||||
Key performance indicators, balance sheet and capital management2 | ||||||||||||
Performance | ||||||||||||
Return on equity (RoE) (%) | (7.8 | ) | (58.7 | ) | (10.5 | ) | ||||||
Return on risk-weighted assets, gross (%) | 9.9 | 1.2 | 8.6 | |||||||||
Return on assets, gross (%) | 1.5 | 0.2 | 1.3 | |||||||||
Growth | ||||||||||||
Net profit growth (%)3 | N/A | N/A | N/A | |||||||||
Net new money (CHF billion)4 | (147.3 | ) | (226.0 | ) | 140.6 | |||||||
Efficiency | ||||||||||||
Cost/income ratio (%) | 103.0 | 753.0 | 111.0 | |||||||||
Capital strength | ||||||||||||
BIS tier 1 ratio (%)5 | 15.4 | 11.0 | ||||||||||
FINMA leverage ratio (%)5 | 3.93 | 2.45 | ||||||||||
Balance sheet and capital management | ||||||||||||
Total assets | 1,340,538 | 2,014,815 | 2,274,891 | |||||||||
Equity attributable to UBS shareholders | 41,013 | 32,531 | 36,875 | |||||||||
BIS total ratio (%)5 | 19.8 | 15.0 | ||||||||||
BIS risk-weighted assets5 | 206,525 | 302,273 | ||||||||||
BIS tier 1 capital5 | 31,798 | 33,154 | ||||||||||
Additional information | ||||||||||||
Invested assets (CHF billion) | 2,233 | 2,174 | 3,189 | |||||||||
Personnel (full-time equivalents) | 65,233 | 77,783 | 83,560 | |||||||||
Market capitalization6 | 57,108 | 43,519 | 108,654 | |||||||||
Long-term ratings | ||||||||||||
Fitch, London | A+ | A+ | AA | |||||||||
Moody’s, New York | Aa3 | Aa2 | Aaa | |||||||||
Standard & Poor’s, New York | A+ | A+ | AA | |||||||||
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– | further strengthening our position as a leading client-focused bank for high net worth and ultra high net worth clients around the world; | |
– | continuing to be a leading firm across all client segments in Switzerland; and | |
– | being a top tier bank in growth regions where we choose to operate. |
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Strategy and structure
– | further strengthening our position as a leading bank for high net worth and ultra high net worth clients around the world; | |
– | continuing to be a leading firm across all client segments in Switzerland; and | |
– | being a top tier bank in growth regions where we choose to operate. |
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è | Refer to the “Reporting structure” and “UBS business divisions and Corporate Center” sections of this report for more information on our businesses |
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Strategy and structure
è | Refer to the “UBS business divisions and Corporate Center” section of this report for more information on the business division strategies |
è | Refer to the “Corporate Center” section of this report for more information |
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è | Refer to the “Measurement and analysis of performance” section of this report for more information on key performance indicators | ||
è | Refer to the “Compensation and shareholdings” section of this report for more information on senior management compensation |
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Strategy and structure
è | Refer to the “Corporate governance” section of this report for more information about the BoD |
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Strategy and structure
è | Refer to the “Corporate governance” section of this report for more information about the GEB |
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The making of UBS
è | Refer to www.ubs.com/history for more information |
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Current market climate and industry drivers
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Current market climate and industry drivers
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– | significantly higher regulatory capital requirements | |
– | changes in the capital treatment of certain capital instruments issued by UBS and other banks | |
– | changes in the calculation of risk-weighted assets | |
– | new or significantly enhanced liquidity requirements | |
– | requirements to maintain liquidity and capital in multiple jurisdictions where activities are conducted |
– | limitations on principal trading activities | |
– | taxes and government fees that would effectively limit balance sheet growth | |
– | a variety of measures constraining, taxing or imposing additional requirements relating to compensation | |
– | requirements to adopt structural and other changes designed to make major financial institutions easier to wind down or disassemble | |
– | outright size limitations |
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Risk factors
– | a general reduction in business activity and market volumes would affect fees, commissions and margins from market-making and customer-driven transactions and activities; | |
– | a market downturn is likely to reduce the volume and valuations of assets we manage on behalf of clients, reducing our asset- and performance-based fees; | |
– | reduced market liquidity limits trading and arbitrage opportunities and impedes our ability to manage risks, impacting both trading income and performance-based fees; | |
– | assets we own and account for as investments or trading positions could continue to fall in value; | |
– | impairments and defaults on credit exposures and on trading and investment positions could increase, and losses may be exacerbated by falling collateral values; and | |
– | if individual countries impose restrictions on cross-border payments or other exchange or capital controls, we could suffer losses from enforced default by counterparties, be unable to access our own assets, or be impeded in – or prevented from – managing our risks. |
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– | we do not fully identify the risks in our portfolio, in particular risk concentrations and correlated risks; | |
– | our assessment of the risks identified or our response to negative trends proves to be inadequate or incorrect; | |
– | markets move in ways that are unexpected – in terms of their speed, direction, severity or correlation – and our ability to manage risks in the resultant environment is therefore affected; | |
– | third parties to whom we have credit exposure or whose securities we hold for our own account are severely affected by events not anticipated by our models, and we accordingly suffer defaults and impairments beyond the level implied by our risk assessment; or | |
– | collateral or other security provided by our counterparties proves inadequate to cover their obligations at the time of their default. |
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Risk factors
è | Refer to the “Risk and treasury management” section of this report for more information on our approach to liquidity and funding management |
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è | Refer to “Note 21 Provisions and litigation” in the “Financial information” section of this report for more information on legal proceedings in which UBS is involved |
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Financial performance
As of or for the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||||||||||||||||||||||||||||||
Group results | |||||||||||||||||||||||||||||||||||||||||||||||||
Operating income | 22,601 | 796 | 31,721 | ||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | 25,162 | 28,555 | 35,463 | ||||||||||||||||||||||||||||||||||||||||||||||
Operating profit before tax (from continuing and discontinued operations) | (2,569 | ) | (27,560 | ) | (3,597 | ) | |||||||||||||||||||||||||||||||||||||||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (21,292 | ) | (5,247 | ) | |||||||||||||||||||||||||||||||||||||||||||
Diluted earnings per share (CHF)1 | (0.75 | ) | (7.63 | ) | (2.41 | ) | |||||||||||||||||||||||||||||||||||||||||||
Key performance indicators, balance sheet and capital management2 | |||||||||||||||||||||||||||||||||||||||||||||||||
Performance | |||||||||||||||||||||||||||||||||||||||||||||||||
Return on equity (RoE) (%) | (7.8 | ) | (58.7 | ) | (10.5 | ) | |||||||||||||||||||||||||||||||||||||||||||
Return on risk-weighted assets, gross (%) | 9.9 | 1.2 | 8.6 | ||||||||||||||||||||||||||||||||||||||||||||||
Return on assets, gross (%) | 1.5 | 0.2 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||
Growth | |||||||||||||||||||||||||||||||||||||||||||||||||
Net profit growth (%)3 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Net new money (CHF billion)4 | (147.3 | ) | (226.0 | ) | 140.6 | ||||||||||||||||||||||||||||||||||||||||||||
Efficiency | |||||||||||||||||||||||||||||||||||||||||||||||||
Cost/income ratio (%) | 103.0 | 753.0 | 111.0 | ||||||||||||||||||||||||||||||||||||||||||||||
Capital strength | |||||||||||||||||||||||||||||||||||||||||||||||||
BIS tier 1 ratio (%)5 | 15.4 | 11.0 | |||||||||||||||||||||||||||||||||||||||||||||||
FINMA leverage ratio (%)5 | 3.93 | 2.45 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance sheet and capital management | |||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | 1,340,538 | 2,014,815 | 2,274,891 | ||||||||||||||||||||||||||||||||||||||||||||||
Equity attributable to UBS shareholders | 41,013 | 32,531 | 36,875 | ||||||||||||||||||||||||||||||||||||||||||||||
BIS total ratio (%)5 | 19.8 | 15.0 | |||||||||||||||||||||||||||||||||||||||||||||||
BIS risk-weighted assets5 | 206,525 | 302,273 | |||||||||||||||||||||||||||||||||||||||||||||||
BIS tier 1 capital5 | 31,798 | 33,154 | |||||||||||||||||||||||||||||||||||||||||||||||
Additional information | |||||||||||||||||||||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 2,233 | 2,174 | 3,189 | ||||||||||||||||||||||||||||||||||||||||||||||
Personnel (full-time equivalents) | 65,233 | 77,783 | 83,560 | ||||||||||||||||||||||||||||||||||||||||||||||
Market capitalization6 | 57,108 | 43,519 | 108,654 | ||||||||||||||||||||||||||||||||||||||||||||||
Long-term ratings | |||||||||||||||||||||||||||||||||||||||||||||||||
Fitch, London | A+ | A+ | AA | ||||||||||||||||||||||||||||||||||||||||||||||
Moody’s, New York | Aa3 | Aa2 | Aaa | ||||||||||||||||||||||||||||||||||||||||||||||
Standard & Poor’s, New York | A+ | A+ | AA | ||||||||||||||||||||||||||||||||||||||||||||||
5 Refer to the “Capital management” section of this report. 6 Refer to the “UBS shares in 2009” section of this report.
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– | In 2009, the net loss attributable to UBS shareholders for 2009 was CHF 2.7 billion, a considerable reduction from the CHF 21.3 billion loss recorded in the prior year. This improvement was due to much lower losses on residual risk positions in the Investment Bank and reduced operating expenses for the Group. The result for 2009 included a number of significant items, namely an own credit loss of CHF 2.0 billion which occurred as a result of the markets’ perception of our improved creditworthiness, charges relating to the sale of UBS Pactual of CHF 1.4 billion, restructuring charges of CHF 0.8 billion, and a CHF 0.3 billion gain on the mandatory convertible notes converted in August 2009. Excluding these significant items, the underlying pre-tax result for the year was a profit of CHF 1.4 billion. The Group’s net profit attributable to shareholders for the fourth quarter was CHF 1.2 billion, including a positive contribution from each of our business divisions. | |
– | At the end of 2009 our invested asset base was CHF 2,233 billion, broadly in line with the figure for year-end 2008. However, the Group’s average invested asset base for the year was down significantly, and this was the primary driver of reduced profits in our asset gathering business divisions. Net new money outflows in 2009 were CHF 89.8 billion for Wealth Management & Swiss Bank, compared with CHF 107.1 billion in 2008; CHF 11.6 billion for Wealth Management Americas, compared with CHF 15.9 billion; and CHF 45.8 billion for Global Asset Management, compared with CHF 103.0 billion. | |
– | At year-end 2009, the BIS tier 1 ratio amounted to 15.4% and the total capital ratio to 19.8%, up from 11.0% and 15.0%, respectively, on 31 December 2008. BIS risk-weighted assets declined from CHF 302.3 billion in December 2008 to CHF 206.5 billion in December 2009, while eligible tier 1 capital decreased from CHF 33.2 billion to CHF 31.8 billion over the same period, reflecting the effects of losses incurred during 2009 and further negative impacts on equity, only partially offset by the positive effects from issues of capital instruments. | |
– | Our total assets stood at CHF 1,341 billion on 31 December 2009, down CHF 674 billion (33%) from CHF 2,015 billion on 31 December 2008. This decline was due to significant market driven reductions in replacement values (RVs) on both sides of the balance sheet. |
– | Due to the significant improvement in our credit spreads in 2009 compared with 2008, the Investment Bank incurred an own credit charge to income of CHF 2,023 million compared with a gain of CHF 2,032 million recognized in 2008. | |
– | In 2009, we experienced a net credit loss expense of CHF 1,832 million, of which CHF 1,698 million related to the Investment Bank and CHF 133 million to Wealth Management & Swiss Bank. Impairment charges of the Investment Bank include an impairment of CHF 425 million for reclassified securities. In comparison, we recorded a net credit loss expense of CHF 2,996 million in 2008. |
è | Refer to the “Credit risk” section of this report for more information |
– | We recognized a net income tax benefit of CHF 443 million for 2009, which mainly related to an increase in deferred tax assets for tax losses following updated forecast profit assumptions over the five-year horizon used for recognition purposes. In 2008, the net income tax benefit was CHF 6,837 million, which mainly reflected an increase in deferred tax assets for tax losses. | |
– | On 16 October 2008, we reached an agreement with the Swiss National Bank (SNB) to transfer, in one or more sales, certain illiquid and other positions from our balance sheet to a separate fund entity owned and controlled by the SNB. In December 2008, USD 16.4 billion of positions were transferred to the fund followed by the transfer of the remaining USD 22.2 billion of positions in March and April 2009. The purchase price was determined by the SNB based on valuations made by independent experts and reflected the value of these positions on 30 September 2008. The purchase price for the overall portfolio was, in the aggregate, approximately USD 1 billion lower than the market value we assigned to these positions on 30 September 2008. Of this USD 1 billion, USD 0.7 billion was accounted for in our results for 2008, and the remaining balance was recognized in the income statement in first quarter 2009. The impact of the SNB transaction on the income statement for 2009 was a charge of CHF 115 million, which comprised a CHF 232 million charge due to the price difference recognized in first quarter 2009, and was offset by a net valuation gain of CHF 117 million on our option to acquire the fund’s equity. | |
– | On 18 February 2009, we announced the settlement of the US cross-border case with the US Department of Jus- |
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tice (DOJ) and the US Securities and Exchange Commission (SEC), by entering into a deferred prosecution agreement with the DOJ and a consent order with the SEC. As part of these settlement agreements, we agreed to pay CHF 917 million (USD 780 million). This had no impact on our 2009 results as the cost for the settlement had been fully charged in 2008. Subsequently, on 19 August 2009, we also announced the formal signing of a settlement agreement with the IRS and the DOJ to resolve the “John Doe” summons litigation. The agreement does not call for any payment by us. Moreover, it resolves all issues relating to the alleged breaches of our Qualified Intermediary Agreement with the IRS as set forth in the Notice of Default dated 15 May 2008. |
è | Refer to “Note 21 Provisions and litigation” In the “Financial Information” section of this report for the principal terms of this settlement agreement and the related agreement entered into at the same time by the governments of Switzerland and the US |
– | On 15 April 2009, we announced cost-saving measures to be executed throughout 2009. We consolidated all Group-wide infrastructure and service operations in the Corporate Center and centralized our finance, risk control, and legal and compliance functions. In addition, we reduced the number of employees to 65,233 as of 31 December 2009 from approximately 76,200 as of the end of March 2009. The total restructuring charge incurred in 2009 was CHF 791 million, including CHF 491 million in Personnel expenses, mainly for severance payments, CHF 256 million in General and administrative expenses, primarily for real-estate-related costs, and CHF 45 million of depreciation and impairment losses on property and equipment. | |
– | On 20 April 2009, we announced the agreement to sell our Brazilian financial services business, UBS Pactual, to BTG Investments, LP. The transaction was completed on 18 September 2009. The consideration included a combination of a cash payment and a transfer of liabilities to BTG Investments. The cash consideration amounted to USD 620 million, of which USD 420 million was paid at closing, and USD 200 million plus accrued interest will be paid 12 months after the closing. The liabilities transferred to BTG Investments consisted primarily of the present value of the residual payment obligation of USD 1.6 billion owed to former Pactual partners, which was incurred when we acquired Pactual in 2006 and was due in 2011. In 2009, the overall impact of the transaction on our profit before tax was a net charge of CHF 1,403 million, including a goodwill impairment charge of CHF 1,123 million, a CHF 498 million pre-tax loss on the completion of the sale, and was partly offset by UBS Pactual’s pre-tax operational profits in 2009 of CHF 218 million. In addition, a deferred tax benefit of CHF 243 million was recognized. |
– | On 25 June 2009, we placed 293,258,050 newly issued shares from authorized capital with a small number of large institutional investors at a price of CHF 13.00 per share. After deducting costs associated with the placement, the amount of new equity capital raised was approximately CHF 3.8 billion. | |
– | On 19 August 2009, the Swiss Confederation announced the conversion of its CHF 6 billion mandatory convertible notes (MCNs). Upon conversion on 25 August 2009, we issued 332,225,913 new shares with a nominal value of CHF 0.10 each from existing conditional capital. The liability and the negative replacement value recorded on the balance sheet for the principal amount and the embedded derivative component of the MCNs were reclassified to equity. The conversion of the MCNs resulted in an overall increase in equity of CHF 6,718 million for 2009. Prior to the conversion of the MCNs, the embedded derivative component was re-measured to fair value resulting in a gain of CHF 341 million for 2009. In addition, the Swiss Confederation waived its right to receive future coupon payments on the converted MCNs for a cash amount of approximately CHF 1.8 billion. The impact on our income statement resulting from this waiver was not material, but the payment reduced our BIS tier 1 capital by CHF 1.4 billion. |
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Key performance indicators | Definition | Group | Wealth Management & Swiss Bank | Wealth Management Americas | Global Asset Management | Investment Bank | ||||||
Net profit growth (%) | Change in net profit attributable to UBS shareholders from continuing operations between current and comparison periods/net profit attributable to UBS shareholders from continuing operations of comparison period | X | ||||||||||
Pre-tax profit growth (%) | Change in business division performance before tax between current and comparison periods/business division performance before tax of comparison period | X | X | X | X | |||||||
Cost/income ratio (%) | Operating expenses/operating income before credit loss (expense) or recovery | X | X | X | X | X | ||||||
Return on equity (%) | Net profit attributable to UBS shareholders on a year-to-date basis (annualized as applicable)/average equity attributable to UBS shareholders (year-to-date basis) | X | ||||||||||
Return on attributed equity (%) | Business division performance before tax on a year-to-date basis (annualized as applicable)/average attributed equity (year-to-date basis) | X | ||||||||||
Return on assets, gross (%) | Operating income before credit loss (expense) or recovery on a year-to-date basis (annualized as applicable)/average total assets (year-to-date basis) | X | X | |||||||||
Return on risk-weighted assets, gross (%) | Operating income before credit loss (expense) or recovery on a year-to-date basis (annualized as applicable)/average risk-weighted assets (year-to-date basis) | X | ||||||||||
FINMA leverage ratio (%) | BIS tier 1 capital/average adjusted assets as per definition by FINMA | X | ||||||||||
BIS tier 1 ratio (%) | BIS tier 1 capital/BIS risk-weighted assets | X | ||||||||||
Net new money (CHF billion) | Inflow of invested assets from new and existing clients less outflows from existing clients or due to client defection | X | X | X | X | |||||||
Gross margin on invested assets (bps) | Operating income before credit loss (expense) or recovery (annualized as applicable) /average invested assets | X1 | X | X | ||||||||
Impaired lending portfolio as a % of total lending portfolio, gross | Impaired lending portfolio, gross/total lending portfolio, gross | X2 | ||||||||||
Average management VaR (1-day, 95% confidence, five years of historical data) | Value-at-Risk (VaR) expresses maximum potential loss measured to a 95% confidence level, over a 1-day time horizon and based on five years of historical data | X | ||||||||||
è | Refer to the discussion of “Compensation and shareholdings” in the “Corporate governance and compensation” section of this report for more information |
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– | The measure “client assets” encompasses all client assets managed by or deposited with us, including custody-only assets and assets held for purely transactional purposes. | |
– | The measure “invested assets” is a more restrictive term and includes all client assets managed by or deposited with us for investment purposes. |
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è | Refer to “Note 1 Summary of significant accounting policies” and “Note 2a Segment reporting” in the “Financial information” section of this report for more details on the basis on which the segment information is prepared and reconciled to the amounts presented in our income statement and balance sheet |
è | Refer to “Note 1a33 Segment reporting” in the “Financial information” section of this report for more information on our general principles for allocating shared service and control function costs managed by the Corporate Center | ||
è | Refer to “Note 1b Changes in accounting policies, comparability and other adjustments” in the “Financial information” section of this report for changes to segment disclosures due to a different presentation of ITI and Group offshore cost allocations |
– | “Wealth Management” will encompass the domestic and international wealth management business conducted in Switzerland, and all wealth management businesses of our other booking centers in Asia and Europe. |
– | “Retail & Corporate” will include services provided to Swiss retail private clients, small businesses, as well as corporate and institutional clients. |
– | We will continue to provide Corporate Center income statement data and additional information onwww.ubs.com/ investors. | |
– | Significant items and treasury-related income data will be explained in the “Group results” section in our quarterly reports, which will no longer include a specific “Corporate Center” section. |
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For the year ended | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Continuing operations | |||||||||||||||||||||||||||||||||||||||||||||||||
Interest income | 23,461 | 65,679 | 109,112 | (64 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (17,016 | ) | (59,687 | ) | (103,775 | ) | (71 | ) | |||||||||||||||||||||||||||||||||||||||||
Net interest income | 6,446 | 5,992 | 5,337 | 8 | |||||||||||||||||||||||||||||||||||||||||||||
Credit loss (expense) / recovery | (1,832 | ) | (2,996 | ) | (238 | ) | (39 | ) | |||||||||||||||||||||||||||||||||||||||||
Net interest income after credit loss expense | 4,614 | 2,996 | 5,099 | 54 | |||||||||||||||||||||||||||||||||||||||||||||
Net fee and commission income | 17,712 | 22,929 | 30,634 | (23 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net trading income | (324 | ) | (25,820 | ) | (8,353 | ) | 99 | ||||||||||||||||||||||||||||||||||||||||||
Other income | 599 | 692 | 4,341 | (13 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Total operating income | 22,601 | 796 | 31,721 | ||||||||||||||||||||||||||||||||||||||||||||||
Personnel expenses | 16,543 | 16,262 | 25,515 | 2 | |||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 6,248 | 10,498 | 8,429 | (40 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Depreciation of property and equipment | 1,048 | 1,241 | 1,243 | (16 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Impairment of goodwill | 1,123 | 341 | 0 | 229 | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 200 | 213 | 276 | (6 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 25,162 | 28,555 | 35,463 | (12 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Operating profit from continuing operations before tax | (2,561 | ) | (27,758 | ) | (3,742 | ) | 91 | ||||||||||||||||||||||||||||||||||||||||||
Tax expense | (443 | ) | (6,837 | ) | 1,369 | 94 | |||||||||||||||||||||||||||||||||||||||||||
Net profit from continuing operations | (2,118 | ) | (20,922 | ) | (5,111 | ) | 90 | ||||||||||||||||||||||||||||||||||||||||||
Discontinued operations | |||||||||||||||||||||||||||||||||||||||||||||||||
Profit from discontinued operations before tax | (7 | ) | 198 | 145 | |||||||||||||||||||||||||||||||||||||||||||||
Tax expense | 0 | 1 | (258 | ) | (100 | ) | |||||||||||||||||||||||||||||||||||||||||||
Net profit from discontinued operations | (7 | ) | 198 | 403 | |||||||||||||||||||||||||||||||||||||||||||||
Net profit | (2,125 | ) | (20,724 | ) | (4,708 | ) | 90 | ||||||||||||||||||||||||||||||||||||||||||
Net profit attributable to minority interests | 610 | 568 | 539 | 7 | |||||||||||||||||||||||||||||||||||||||||||||
from continuing operations | 600 | 520 | 539 | 15 | |||||||||||||||||||||||||||||||||||||||||||||
from discontinued operations | 10 | 48 | 0 | (79 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (21,292 | ) | (5,247 | ) | 87 | ||||||||||||||||||||||||||||||||||||||||||
from continuing operations | (2,719 | ) | (21,442 | ) | (5,650 | ) | 87 | ||||||||||||||||||||||||||||||||||||||||||
from discontinued operations | (17 | ) | 150 | 403 | |||||||||||||||||||||||||||||||||||||||||||||
Performance by business division | |||||||||||||||||||||||||||||||||||||||||||||||||
Wealth Management & Swiss Bank | 3,910 | 6,013 | 8,543 | (35 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Wealth Management Americas | 32 | (823 | ) | 621 | |||||||||||||||||||||||||||||||||||||||||||||
Global Asset Management | 438 | 1,333 | 1,454 | (67 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Investment Bank | (6,081 | ) | (34,300 | ) | (16,669 | ) | 82 | ||||||||||||||||||||||||||||||||||||||||||
Corporate Center | (860 | ) | 19 | 2,310 | |||||||||||||||||||||||||||||||||||||||||||||
Operating profit from continuing operations before tax | (2,561 | ) | (27,758 | ) | (3,742 | ) | 91 | ||||||||||||||||||||||||||||||||||||||||||
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Net income from trading businesses, including lending activities of the Investment Bank, was positive CHF 382 million for full-year 2009. This compares with negative CHF 27,203 million in the prior year, with the improvement mainly due to lower losses on residual risk positions in the fixed income, currencies and commodities (FICC) area of the Investment Bank in 2009.
è | Refer to “Note 27 Fair value of financial instruments” in the “Financial information” section of this report for more information on own credit |
For the year ended | % change from | |||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||||
Net interest income | 6,446 | 5,992 | 5,337 | 8 | ||||||||||||||
Net trading income | (324 | ) | (25,820 | ) | (8,353 | ) | 99 | |||||||||||
Total net interest and trading income | 6,122 | (19,828 | ) | (3,016 | ) | |||||||||||||
Breakdown by businesses | ||||||||||||||||||
Net income from trading businesses1 | 382 | (27,203 | ) | (10,658 | ) | |||||||||||||
Net income from interest margin businesses | 5,053 | 6,160 | 6,230 | (18 | ) | |||||||||||||
Net income from treasury activities and other | 687 | 1,214 | 1,412 | (43 | ) | |||||||||||||
Total net interest and trading income | 6,122 | (19,828 | ) | (3,016 | ) | |||||||||||||
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è | Refer to the “Risk management and control” section of this report for more information on our risk management approach, method of credit risk measurement and the development of credit risk exposures |
– | Underwriting fees increased 22% to CHF 2,386 million, driven by a 40% increase in equity underwriting fees offset by a 3% decrease in debt underwriting fees. | |
– | Mergers and acquisitions and corporate finance fees fell 47% to CHF 881 million due to reduced market activity as deal appetite remained subdued. |
– | Net brokerage fees fell 31% to CHF 4,469 million mainly due to a reduction in equity trading volumes. | |
– | Investment fund fees fell 28% to CHF 4,000 million as a result of lower asset based fees on both own and third/party funds. | |
– | Portfolio management and advisory fees fell 24% to CHF 5,863 million, mainly due to the decreased average asset base, especially in the wealth management businesses. | |
– | Insurance-related and other fees, at CHF 264 million in 2009, decreased by 17% from a year earlier. That was mainly due to lower commission income from insurance products. | |
– | Commission income from other services decreased 13% to CHF 878 million, mainly in the wealth management businesses. | |
– | Other commission expense fell 31% to CHF 1,368 million, mainly due to lower commissions paid to distribution partners. |
For the year ended | % change from | ||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||
Wealth Management & Swiss Bank | (133 | ) | (392 | ) | 30 | (66 | ) | ||||||||||
Wealth Management Americas | 3 | (29 | ) | (2 | ) | ||||||||||||
Investment Bank1 | (1,698 | ) | (2,575 | ) | (266 | ) | (34 | ) | |||||||||
of which: related to reclassified securities | (425 | ) | (125 | ) | 240 | ||||||||||||
Corporate Center | (5 | ) | |||||||||||||||
UBS | (1,832 | ) | (2,996 | ) | (238 | ) | (39 | ) | |||||||||
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For the year ended | % change from | |||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||||
Equity underwriting fees | 1,590 | 1,138 | 2,564 | 40 | ||||||||||||||
Debt underwriting fees | 796 | 818 | 1,178 | (3 | ) | |||||||||||||
Total underwriting fees | 2,386 | 1,957 | 3,742 | 22 | ||||||||||||||
M&A and corporate finance fees | 881 | 1,662 | 2,768 | (47 | ) | |||||||||||||
Brokerage fees1 | 6,217 | 8,209 | 10,211 | (24 | ) | |||||||||||||
Investment fund fees | 4,000 | 5,583 | 7,422 | (28 | ) | |||||||||||||
Portfolio management and advisory fees2 | 5,863 | 7,667 | 9,454 | (24 | ) | |||||||||||||
Insurance-related and other fees | 264 | 317 | 423 | (17 | ) | |||||||||||||
Total securities trading and investment activity fees | 19,611 | 25,394 | 34,020 | (23 | ) | |||||||||||||
Credit-related fees and commissions | 339 | 273 | 279 | 24 | ||||||||||||||
Commission income from other services | 878 | 1,010 | 1,017 | (13 | ) | |||||||||||||
Total fee and commission income | 20,827 | 26,677 | 35,316 | (22 | ) | |||||||||||||
Brokerage fees paid1 | 1,748 | 1,763 | 2,540 | (1 | ) | |||||||||||||
Other | 1,368 | 1,984 | 2,142 | (31 | ) | |||||||||||||
Total fee and commission expense | 3,116 | 3,748 | 4,682 | (17 | ) | |||||||||||||
Net fee and commission income | 17,712 | 22,929 | 30,634 | (23 | ) | |||||||||||||
of which: net brokerage fees | 4,469 | 6,445 | 7,671 | (31 | ) | |||||||||||||
è | Refer to “Note 5 Other income” in the “Financial information” section of this report for more information |
è | Refer to “Note 31 Equity participation and other compensation plans” in the “Financial information” section of this report for more information about deferred compensation related to non-vested awards granted up to and including 31 December 2009 |
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è | Refer to “Note 21 Provisions and litigation” in the “Financial information” section of this report for more information about provisions |
As of | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF billion | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Swiss clients | 337 | 325 | 455 | 4 | |||||||||||||||||||||||||||||||||||||||||||||
International clients | 624 | 631 | 937 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Wealth Management & Swiss Bank | 960 | 955 | 1,392 | 1 | |||||||||||||||||||||||||||||||||||||||||||||
Wealth Management Americas | 690 | 644 | 906 | 7 | |||||||||||||||||||||||||||||||||||||||||||||
Institutional | 346 | 335 | 522 | 3 | |||||||||||||||||||||||||||||||||||||||||||||
Wholesale intermediary | 237 | 240 | 369 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Global Asset Management | 583 | 575 | 891 | 1 | |||||||||||||||||||||||||||||||||||||||||||||
UBS | 2,233 | 2,174 | 3,189 | 3 | |||||||||||||||||||||||||||||||||||||||||||||
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è | Refer to “Note 27 Fair value of financial instruments” in the “Financial Information” section of our 2008 annual report for more information |
è | Refer to the “Risk management and control” section of this report for more information on our risk management approach, method of credit risk measurement and the development of credit risk exposures |
– | Underwriting fees fell 48% to CHF 1,957 million, driven by a 56% decline in equity underwriting fees and a 31% decline in debt underwriting fees. | |
– | Mergers and acquisitions and corporate finance fees fell 40% to CHF 1,662 million, in an environment of reduced market activity and lower mandated deal volumes. | |
– | Net brokerage fees fell 16% to CHF 6,445 million, mainly due to lower client transaction volumes in the wealth management businesses and the Investment Bank’s cash equities and Asian equity derivatives business. | |
– | Investment fund fees fell 25% to CHF 5,583 million due to lower asset-based fees from the asset management and wealth management businesses. |
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– | Portfolio management and advisory fees fell 19% to CHF 7,667 million mainly due to the lower asset base in the wealth management businesses and reduced performance fees in the asset management business. | |
– | Insurance-related and other fees, at CHF 317 million in 2008, decreased by 25% from a year earlier mainly due to lower commission income from life insurance products at Wealth Management Americas. |
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% change from | |||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 20,899 | 32,744 | (36 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Due from banks | 46,574 | 64,451 | (28 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | 63,507 | 122,897 | (48 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Reverse repurchase agreements | 116,689 | 224,648 | (48 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | 188,037 | 271,838 | (31 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets pledged as collateral | 44,221 | 40,216 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||
Positive replacement values | 421,694 | 854,100 | (51 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value | 10,223 | 12,882 | (21 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Loans | 306,828 | 340,308 | (10 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Financial investments available-for-sale | 81,757 | 5,248 | |||||||||||||||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 5,816 | 6,141 | (5 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Investments in associates | 870 | 892 | (2 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | 6,212 | 6,706 | (7 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Goodwill and intangible assets | 11,008 | 12,935 | (15 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Deferred tax assets | 8,868 | 8,880 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 7,336 | 9,931 | (26 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total assets | 1,340,538 | 2,014,815 | (33 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||
Due to banks | 65,166 | 125,628 | (48 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Cash collateral on securities lent | 7,995 | 14,063 | (43 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Repurchase agreements | 64,175 | 102,561 | (37 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Trading portfolio liabilities | 47,469 | 62,431 | (24 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Negative replacement values | 409,943 | 851,864 | (52 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Financial liabilities designated at fair value | 112,653 | 101,546 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||
Due to customers | 410,475 | 465,741 | (12 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Accrued expenses and deferred income | 8,689 | 10,196 | (15 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Debt issued | 131,352 | 197,254 | (33 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 33,986 | 42,998 | (21 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total liabilities | 1,291,905 | 1,974,282 | (35 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
Share capital | 356 | 293 | 22 | ||||||||||||||||||||||||||||||||||||||||||||||
Share premium | 34,786 | 25,250 | 38 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income recognized directly in equity, net of tax | (4,875 | ) | (4,335 | ) | (12 | ) | |||||||||||||||||||||||||||||||||||||||||||
Revaluation reserve from step acquisitions, net of tax | 38 | 38 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||
Retained earnings | 11,751 | 14,487 | (19 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Equity classified as obligation to purchase own shares | (2 | ) | (46 | ) | 96 | ||||||||||||||||||||||||||||||||||||||||||||
Treasury shares | (1,040 | ) | (3,156 | ) | 67 | ||||||||||||||||||||||||||||||||||||||||||||
Equity attributable to UBS shareholders | 41,013 | 32,531 | 26 | ||||||||||||||||||||||||||||||||||||||||||||||
Equity attributable to minority interests | 7,620 | 8,002 | (5 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total equity | 48,633 | 40,533 | 20 | ||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities and equity | 1,340,538 | 2,014,815 | (33 | ) | |||||||||||||||||||||||||||||||||||||||||||||
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è | Refer to “Note 26 Capital increases and mandatory convertible notes” in the “Financial information” section of this report for more information | ||
è | Refer to “Liquidity and funding management” section of this report for more information on long-term debt issuance |
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Financial performance
è | Refer to the “Shares and capital instruments” section of this report for more information |
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On 31 December 2009 and 31 December 2008, we had no significant exposure through liquidity facilities and guarantees to structured investment vehicles, conduits and other types of special purpose entities (SPEs). Losses resulting from such obligations were not significant in 2009 and 2008.
Off-balance sheet arrangements, risks, | Disclosure in the annual report | |
consolidation and fair value measurements | ||
Contractual obligations | Strategy, performance and responsibility, section “Off-balance sheet” | |
Credit guarantees, performance guarantees, undrawn irrevocable credit facilities, and similar instruments | Strategy, performance and responsibility, section “Off-balance sheet” | |
Derivative financial instruments | Financial information, “Note 23 Derivative instruments and hedge accounting” Risk and treasury management, section “Basel II Pillar 3 disclosures” | |
Credit derivatives | Financial information, “Note 23 Derivative instruments and hedge accounting” Risk and treasury management, section “Basel II Pillar 3 disclosures” | |
Leases | Financial information, “Note 25 Operating lease commitments” | |
Non-consolidated securitization vehicles – non-agency transactions | Strategy, performance and responsibility, section “Off-balance sheet” | |
Support to non-consolidated investment funds | Strategy, performance and responsibility, section “Off-balance sheet” | |
Securitizations (banking book only) | Risk and treasury management, section “Basel II Pillar 3 disclosures” | |
Risk concentrations | Risk and treasury management, section “Risk concentrations” | |
Credit risk information | Risk and treasury management, section “Credit risk” | |
Market risk information | Risk and treasury management, section “Market risk” | |
Liquidity risk information | Risk and treasury management, section “Liquidity and funding management” | |
Consolidation | Financial information, “Note 1 Summary of significant accounting policies” | |
Fair value measurements | Financial information, “Note 27 Fair value of financial instruments” |
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è | Refer to “Note 1 Summary of significant accounting policies” in the “Financial information” section of this report for more information about our accounting policies regarding securitization activities |
– | sale of positions to the SNB StabFund owned and controlled by the Swiss National Bank in 2009 and in 2008 (total volume of USD 38.7 billion; 2009: USD 22.2 billion; 2008: USD 16.4 billion); | |
– | sale of a portfolio of US residential mortgage-backed securities for proceeds of USD 15 billion to the RMBS Opportunities Master Fund, LP, an entity managed by BlackRock Financial Management, Inc.; | |
– | substantial downsizing of our residual risk positions within our FICC business in 2009 and 2008, which included a significant reduction of real estate and securitization activities. |
CHF billion | Total SPE assets | Involvements in non-consolidated SPEs held by UBS | |||||||||||||||||||||||||||||||||||||||||||||||
Purchased and | |||||||||||||||||||||||||||||||||||||||||||||||||
retained interests | |||||||||||||||||||||||||||||||||||||||||||||||||
Original | Current | held by UBS2 | Derivatives held by UBS | ||||||||||||||||||||||||||||||||||||||||||||||
principal | principal | Delinquency | |||||||||||||||||||||||||||||||||||||||||||||||
As of 31 December 2009 | outstanding | outstanding | amounts | Carrying value | Fair value | Nominal value | |||||||||||||||||||||||||||||||||||||||||||
Originated by UBS3 | |||||||||||||||||||||||||||||||||||||||||||||||||
CDOs and CLOs | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 6.3 | 4.1 | 0.0 | 0.9 | 0.8 | 2.6 | |||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | 0.0 | 0.0 | 0.0 | 0.0 | (0.6 | ) | 0.7 | ||||||||||||||||||||||||||||||||||||||||||
Other ABS | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
Securitizations | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 5.7 | 2.3 | 0.2 | 0.0 | 0.0 | 3.9 | |||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | 21.3 | 21.1 | 0.9 | 0.0 | 0.0 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||
Other ABS | 1.8 | 0.4 | 0.1 | 0.0 | 0.0 | 3.2 | |||||||||||||||||||||||||||||||||||||||||||
Total | 35.1 | 27.9 | 1.2 | 0.9 | 0.2 | 10.5 | |||||||||||||||||||||||||||||||||||||||||||
Not originated by UBS | |||||||||||||||||||||||||||||||||||||||||||||||||
CDOs and CLOs | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 130.0 | 59.4 | 9.7 | 2.8 | 0.1 | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | 7.6 | 3.3 | 0.0 | 0.7 | 0.2 | 0.9 | |||||||||||||||||||||||||||||||||||||||||||
Other ABS | 78.6 | 38.8 | 0.1 | 3.9 | 0.6 | 2.7 | |||||||||||||||||||||||||||||||||||||||||||
Securitizations | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 872.5 | 338.8 | 69.7 | 1.8 | (1.8 | ) | 7.6 | ||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | 656.9 | 552.6 | 21.7 | 3.8 | 0.0 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||
Other ABS | 692.8 | 521.2 | 19.8 | 3.5 | 0.0 | 0.0 | |||||||||||||||||||||||||||||||||||||||||||
Total | 2,438.4 | 1,514.1 | 121.0 | 16.5 | (0.9 | ) | 11.3 | ||||||||||||||||||||||||||||||||||||||||||
1 Includes all purchased and retained interests and derivatives held by UBS which are considered involvements in non-consolidated securitization vehicles and CDOs. This implies, for example, that UBS would include an insignificant involvement in such a vehicle into the table (under “Involvements in non-consolidated SPEs held by UBS”), whereas the pool assets held by such vehicle would be included under “Total SPE assets”. The size of the pool assets of such vehicle can be very high, but relates to third parties, if UBS’s involvement is insignificant. The “Total SPE assets” include information which UBS could gather after making exhaustive efforts but excludes data which UBS was unable to receive (in sufficient quality), especially for structures originated by third parties. 2 Includes loans and receivables measured at amortized cost in the amount of CHF 0.9 billion originated by UBS and CHF 11.9 billion for structures not originated by UBS and trading assets measured at fair value in the amount of CHF 4.6 billion for structures not originated by UBS. 3 Structures originated by UBS include transactions within the scope of US GAAP, Financial Accounting Standard 140, paragraph 17. |
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è | Refer to the “Risk management and control” section of this report for information on our risk positions as well as the BlackRock transaction |
è | Refer to “Note 1 Summary of significant accounting policies” in the “Financial information” section of this report for further information on consolidation of securitization vehicles and CDO |
vehicles and CDOs
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We are a member of numerous securities and futures exchanges and clearinghouses. In connection with some of those memberships, we may be required to pay a share of the financial obligations of another member who defaults,
31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
Sub- | Sub- | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Gross | participations | Net | Gross | participations | Net | |||||||||||||||||||||||||||||||||||||||||||
Credit guarantees and similar instruments | 11,180 | (222 | ) | 10,958 | 13,124 | (344 | ) | 12,780 | |||||||||||||||||||||||||||||||||||||||||
Performance guarantees and similar instruments | 3,484 | (582 | ) | 2,902 | 3,596 | (446 | ) | 3,150 | |||||||||||||||||||||||||||||||||||||||||
Documentary credits | 2,406 | (288 | ) | 2,117 | 2,979 | (415 | ) | 2,564 | |||||||||||||||||||||||||||||||||||||||||
Total commitments | 17,070 | (1,092 | ) | 15,977 | 19,699 | (1,205 | ) | 18,494 | |||||||||||||||||||||||||||||||||||||||||
Undrawn irrevocable credit facilities | 59,328 | (1,793 | ) | 57,534 | 60,316 | (1,920 | ) | 58,396 | |||||||||||||||||||||||||||||||||||||||||
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Payment due by period | |||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | < 1 year | 1–3 years | 3–5 years | > 5 years | |||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | 42,759 | 46,796 | 31,515 | 71,357 | |||||||||||||||||||||||||||||||||||||||||||||
Capital lease obligations | 57 | 83 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||
Operating leases | 989 | 1,655 | 1,214 | 2,113 | |||||||||||||||||||||||||||||||||||||||||||||
Purchase obligations | 302 | 113 | 39 | 23 | |||||||||||||||||||||||||||||||||||||||||||||
Other liabilities | 538 | 5 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||
Total | 44,645 | 48,652 | 32,768 | 73,493 | |||||||||||||||||||||||||||||||||||||||||||||
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è | Refer to “Note 36 Business combinations” and “Note 38 Reorganizations and disposals” in the “Financial information” section of this report for more information about our investing activities |
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Our employees
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Our employees
As of 31.12.09 | Officers | Non-officers | Total | ||||||||||||||||||||||||||||||||||||||||||||||
Number | % | Number | % | ||||||||||||||||||||||||||||||||||||||||||||||
Male | 31,557 | 72.8 | 10,537 | 43.6 | 42,094 | 62.3 | |||||||||||||||||||||||||||||||||||||||||||
Female | 11,817 | 27.2 | 13,607 | 56.4 | 25,424 | 37.7 | |||||||||||||||||||||||||||||||||||||||||||
Total | 43,374 | 100.0 | 24,144 | 100.0 | 67,518 | 100.0 | |||||||||||||||||||||||||||||||||||||||||||
1 Calculated on the basis that a person (working full-time or part-time) is considered one headcount in this table only. This accounts for our total year-end 2009 employee number of 67,518 in this table. Normally, we express employee numbers in terms of full-time equivalents (FTEs), which is measured as a percentage of the standard hours normally worked by permanent full-time staff. When calculated according to FTEs, the year-end 2009 total is 65,233. |
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è | Refer to the “Compensation and shareholdings” section of this report for more information on compensation and incentives and employee share ownership |
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Our employees
We behave with respect and integrity | We are accurate, realistic and accountable | We always act fairly and abide by the law
We make it easy to do business with UBS | We are concise, precise and to the point | We are reliable and consistent
We will always give our best | We will perform to the highest professional standards | We will lead the market through superior service and execution
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(The Times High Fliers 2007-2009)
(Bloomberg BusinessWeek 2009)
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Corporate responsibility
è | Refer to www.ubs.com/responsibility for more information on the contents of this section |
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è | Refer to www.ubs.com/environment for more information on our environmental and human rights governance |
è | Refer to the discussion on combating financial crime below for more information on our AML activities |
è | Refer to the “Our employees” section of this report for more information on labor standards and diversity programs |
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è | Refer to the “Our employees” section of this report for information on diversity awards |
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% change | |||||||||||||||||||||||||||||||||||||||||||||||||
For the year ended | from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF billion, except where indicated | GRI2 | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||
UBS | 2,233 | 2,174 | 3,189 | 3 | |||||||||||||||||||||||||||||||||||||||||||||
UBS SRI products and mandates | |||||||||||||||||||||||||||||||||||||||||||||||||
positive criteria | FS11 | 2.72 | 2.12 | 5.20 | 28 | ||||||||||||||||||||||||||||||||||||||||||||
exclusion criteria | FS11 | 22.44 | 14.05 | 33.33 | 60 | ||||||||||||||||||||||||||||||||||||||||||||
Third-party | FS11 | 1.69 | 1.85 | 1.08 | (9 | ) | |||||||||||||||||||||||||||||||||||||||||||
Total SRI invested assets | FS11 | 26.85 | 3 | 18.03 | 39.61 | 49 | |||||||||||||||||||||||||||||||||||||||||||
Proportion of total invested assets (%)4 | 1.20% | 0.83% | 1.24% | ||||||||||||||||||||||||||||||||||||||||||||||
1 All figures are based on the level of knowledge as of January 2010. 2 Global Reporting Initiative (see also www.globalreporting.org). FS stands for the performance indicators defined in the GRI Financial Services Sector Supplement. 35.5% of reported assets have newly been included in 2009 due to adjustments in the reporting process and boundaries. 4 Total SRI / UBS’s invested assets. |
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– | adopting in-house energy efficiency measures that reduce energy consumption in buildings we operate; | |
– | increasing the proportion of renewable energy used to avoid emissions at source; and | |
– | offsetting and neutralizing emissions that cannot be reduced by other means. |
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Unit | 2009 | Trend | 2008 | 2007 | |||||||||||||||||||||||||||||||||||||||||||||
Direct and intermediate energy | kWh / FTE | 11,986 | à | 11,792 | 11,942 | ||||||||||||||||||||||||||||||||||||||||||||
Business travel | Pkm / FTE | 7,016 | â | 10,281 | 12,685 | ||||||||||||||||||||||||||||||||||||||||||||
Paper consumption | kg / FTE | 130 | â | 167 | 190 | ||||||||||||||||||||||||||||||||||||||||||||
Waste | kg / FTE | 265 | â | 298 | 299 | ||||||||||||||||||||||||||||||||||||||||||||
Water consumption | m3 / FTE | 31.9 | á | 28.1 | 26.7 | ||||||||||||||||||||||||||||||||||||||||||||
CO2 footprint | t / FTE | 3.12 | à | 3.07 | 3.43 | ||||||||||||||||||||||||||||||||||||||||||||
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20092 | 20082 | 20072 | |||||||||||||||||||||||||||||||||||||||||||||||
Absolute | Absolute | Absolute | |||||||||||||||||||||||||||||||||||||||||||||||
GRI3 | normalized4 | Data quality5 | Trend6 | normalized4 | normalized4 | ||||||||||||||||||||||||||||||||||||||||||||
Total direct and intermediate energy consumption7 | 957 GWh | *** | æ | 1,016 GWh | 981 GWh | ||||||||||||||||||||||||||||||||||||||||||||
Total direct energy consumption8 | EN3 | 132 GWh | ** | à | 127 GWh | 130 GWh | |||||||||||||||||||||||||||||||||||||||||||
natural gas | 84.6% | ** | à | 83.3 | % | 83.3 | % | ||||||||||||||||||||||||||||||||||||||||||
heating oil | 10.9% | *** | â | 12.2 | % | 12.1 | % | ||||||||||||||||||||||||||||||||||||||||||
fuels (petrol, diesel, gas) | 4.5% | *** | à | 4.5 | % | 4.6 | % | ||||||||||||||||||||||||||||||||||||||||||
renewable energy (solar power, etc.) | 0.05% | *** | á | 0.03 | % | 0.03 | % | ||||||||||||||||||||||||||||||||||||||||||
Total intermediate energy purchased9 | EN4 | 825 GWh | *** | æ | 890 GWh | 851 GWh | |||||||||||||||||||||||||||||||||||||||||||
electricity from gas-fired power stations | 10.6% | ** | à | 11.7 | % | 12.3 | % | ||||||||||||||||||||||||||||||||||||||||||
electricity from oil-fired power stations | 2.9% | *** | â | 3.7 | % | 4.2 | % | ||||||||||||||||||||||||||||||||||||||||||
electricity from coal-fired power stations | 17.5% | ** | à | 18.4 | % | 18.6 | % | ||||||||||||||||||||||||||||||||||||||||||
electricity from nuclear power stations | 9.5% | ** | æ | 11.1 | % | 13.6 | % | ||||||||||||||||||||||||||||||||||||||||||
electricity from hydroelectric power stations | 28.0% | *** | ä | 25.8 | % | 25.5 | % | ||||||||||||||||||||||||||||||||||||||||||
electricity from other renewable resources | 23.6% | *** | à | 23.1 | % | 22.0 | % | ||||||||||||||||||||||||||||||||||||||||||
district heating | 7.8% | *** | á | 6.2 | % | 3.8 | % | ||||||||||||||||||||||||||||||||||||||||||
Share of renewable energy and district heating | 51% | *** | ä | 48% | 45 | % | |||||||||||||||||||||||||||||||||||||||||||
Total business travel | EN29 | 560 m Pkm | *** | â | 886 m Pkm | 1,042 m Pkm | |||||||||||||||||||||||||||||||||||||||||||
rail travel10 | 3.7% | ** | à | 3.5 | % | 3.3 | % | ||||||||||||||||||||||||||||||||||||||||||
road travel10 | 1.0% | ** | á | 0.6 | % | 0.5 | % | ||||||||||||||||||||||||||||||||||||||||||
air travel | 95.3% | *** | à | 96.0 | % | 96.2 | % | ||||||||||||||||||||||||||||||||||||||||||
Number of flights (segments) | 258,396 | *** | â | 398,369 | 446,274 | ||||||||||||||||||||||||||||||||||||||||||||
Total paper consumption | EN1 | 10,349 t | *** | â | 14,403 t | 15,593 t | |||||||||||||||||||||||||||||||||||||||||||
post-consumer recycled | EN2 | 16.7% | *** | à | 16.2 | % | 10.5 | % | |||||||||||||||||||||||||||||||||||||||||
new fibers FSC11 | 17.1% | *** | à | 16.6 | % | 10.7 | % | ||||||||||||||||||||||||||||||||||||||||||
new fibers ECF + TCF11 | 65.9% | *** | à | 66.8 | % | 78.6 | % | ||||||||||||||||||||||||||||||||||||||||||
new fibers chlorine bleached | 0.4% | ** | ä | 0.4 | % | 0.2 | % | ||||||||||||||||||||||||||||||||||||||||||
Total waste | EN22 | 21,183 t | *** | â | 25,644 t | 24,589 t | |||||||||||||||||||||||||||||||||||||||||||
valuable materials separated and recycled | 54.4% | *** | à | 54.6 | % | 56.3 | % | ||||||||||||||||||||||||||||||||||||||||||
incinerated | 12.5% | *** | â | 14.3 | % | 15.8 | % | ||||||||||||||||||||||||||||||||||||||||||
landfilled | 33.1% | ** | à | 31.1 | % | 27.9 | % | ||||||||||||||||||||||||||||||||||||||||||
Total water consumption | EN8 | 2.55 m m3 | ** | à | 2.42 m m3 | 2.19 m m3 | |||||||||||||||||||||||||||||||||||||||||||
Greenhouse Gas (GHG) Emissions in CO2e | |||||||||||||||||||||||||||||||||||||||||||||||||
Direct GHG emissions (Scope 1)12 | EN16 | 25,723 t | *** | à | 26,490 t | 26,701 t | |||||||||||||||||||||||||||||||||||||||||||
Gross indirect GHG emissions (Gross Scope 2)12 | EN16 | 298,338 t | ** | à | 313,582 t | 311,808 t | |||||||||||||||||||||||||||||||||||||||||||
Gross other indirect GHG emissions (Gross Scope 3)12 | EN17 | 87,867 t | *** | â | 129,364 t | 149,323 t | |||||||||||||||||||||||||||||||||||||||||||
Total Gross GHG Emissions | 411,928 t | *** | â | 469,436 t | 487,832 t | ||||||||||||||||||||||||||||||||||||||||||||
GHG reductions from renewable energy13 | 99,248 t | *** | æ | 109,238 t | 93,127 t | ||||||||||||||||||||||||||||||||||||||||||||
CO2e offsets (business air travel)14 | 63,579 t | *** | â | 96,000 t | 113,000 | ||||||||||||||||||||||||||||||||||||||||||||
Total Net GHG Emissions (GHG Footprint)15 | 249,101 t | *** | æ | 264,197 t | 281,705 t | ||||||||||||||||||||||||||||||||||||||||||||
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è | Refer towww.ubs.com/communityfor more information on our community investment activities |
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For the year ended | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Wealth Management & Swiss Bank | 3,910 | 6,013 | 8,543 | (35 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Wealth Management Americas | 32 | (823 | ) | 621 | |||||||||||||||||||||||||||||||||||||||||||||
Global Asset Management | 438 | 1,333 | 1,454 | (67 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Investment Bank | (6,081 | ) | (34,300 | ) | (16,669 | ) | 82 | ||||||||||||||||||||||||||||||||||||||||||
Corporate Center | (860 | ) | 19 | 2,310 | |||||||||||||||||||||||||||||||||||||||||||||
UBS | (2,561 | ) | (27,758 | ) | (3,742 | ) | 91 | ||||||||||||||||||||||||||||||||||||||||||
– | Equities | |
– | Fixed income, currencies and commodities (FICC) | |
– | the Investment banking department (IBD) |
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Wealth Management & Swiss Bank
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Wealth Management & Swiss Bank
– | “Wealth Management” encompasses the domestic and international wealth management business conducted out of Switzerland, and all wealth management businesses in our Asian and European booking centers. | |
– | “Retail & Corporate” includes services provided to Swiss retail private clients, small businesses, as well as corporate and institutional clients. |
è | Prior to publication of first quarter 2010 results, UBS will publish restated business division results on www.ubs.com/investors showing quarterly and annual results for 2008 and 2009 under the new reporting structure |
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As of or for the year ended | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Swiss clients income | 6,228 | 7,714 | 8,493 | (19 | ) | ||||||||||||||||||||||||||||||||||||||||||||
International clients income | 5,295 | 7,698 | 9,195 | (31 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Income | 11,523 | 15,413 | 17,689 | (25 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Credit loss (expense) / recovery | (133 | ) | (392 | ) | 30 | (66 | ) | ||||||||||||||||||||||||||||||||||||||||||
Total operating income | 11,390 | 15,021 | 17,718 | (24 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Personnel expenses | 5,197 | 5,430 | 6,356 | (4 | ) | ||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 2,017 | 3,295 | 2,514 | (39 | ) | ||||||||||||||||||||||||||||||||||||||||||||
of which: impact from US cross-border case | 917 | ||||||||||||||||||||||||||||||||||||||||||||||||
Services (to) / from other business divisions | (90 | ) | (73 | ) | (43 | ) | (23 | ) | |||||||||||||||||||||||||||||||||||||||||
Depreciation of property and equipment | 289 | 323 | 334 | (11 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 67 | 33 | 15 | 103 | |||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 7,480 | 9,008 | 9,176 | (17 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Business division performance before tax | 3,910 | 6,013 | 8,543 | (35 | ) | ||||||||||||||||||||||||||||||||||||||||||||
of which: impact from US cross-border case | (917 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
of which: business division performance before tax excluding US cross-border case | 3,910 | 6,930 | 8,543 | (44 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Key performance indicators1 | |||||||||||||||||||||||||||||||||||||||||||||||||
Pre-tax profit growth (%) | (35.0 | ) | (29.6 | ) | 15.7 | ||||||||||||||||||||||||||||||||||||||||||||
Cost / income ratio (%) | 64.9 | 58.4 | 51.9 | ||||||||||||||||||||||||||||||||||||||||||||||
Net new money (CHF billion)2 | (89.8 | ) | (107.1 | ) | 120.4 | ||||||||||||||||||||||||||||||||||||||||||||
Impaired lending portfolio as a % of total lending portfolio, gross (Swiss clients) | 1.0 | 1.0 | 1.0 | ||||||||||||||||||||||||||||||||||||||||||||||
Gross margin on invested assets (bps) (international clients)3 | 86 | 96 | 103 | (10 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Additional information | |||||||||||||||||||||||||||||||||||||||||||||||||
Average attributed equity (CHF billion) | 9.0 | 9.5 | (5 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Return on attributed equity (RoaE) (%) | 43.4 | 63.3 | |||||||||||||||||||||||||||||||||||||||||||||||
BIS risk-weighted assets (CHF billion)4 | 48.6 | 62.3 | (22 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Return on BIS risk-weighted assets, gross (%) | 21.7 | 22.3 | |||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and intangible assets (CHF billion) | 1.6 | 1.7 | 1.8 | (6 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Recurring income | 8,830 | 11,613 | 13,194 | (24 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 960 | 955 | 1,392 | 1 | |||||||||||||||||||||||||||||||||||||||||||||
Client assets (CHF billion) | 1,844 | 1,711 | 2,535 | 8 | |||||||||||||||||||||||||||||||||||||||||||||
Personnel (full-time equivalents) | 27,548 | 31,016 | 32,378 | (11 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Swiss clients | |||||||||||||||||||||||||||||||||||||||||||||||||
Net new money (CHF billion)2 | (20.1 | ) | (41.9 | ) | 15.2 | ||||||||||||||||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 337 | 325 | 455 | 4 | |||||||||||||||||||||||||||||||||||||||||||||
International clients | |||||||||||||||||||||||||||||||||||||||||||||||||
Net new money (CHF billion)2 | (69.7 | ) | (65.2 | ) | 105.2 | ||||||||||||||||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 624 | 631 | 937 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Client advisors (full-time equivalents) | 3,182 | 4,236 | 4,253 | (25 | ) | ||||||||||||||||||||||||||||||||||||||||||||
1 For the definitions of UBS’s key performance indicators, refer to the “Measurement and analysis of performance” section of this report. 2 Excludes interest and dividend income. 3 Excludes valuation adjustments on a property fund (2009: CHF 155 million, 2008: CHF 9 million). 4 BIS risk-weighted assets (RWA) are according to Basel II. |
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Wealth Management & Swiss Bank
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Wealth Management Americas
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– | February 2007, acquisition of McDonald Investments’s private client branch network. | |
– | October 2008, transfer of the Investment Bank’s municipal securities operations serving private clients to the former Wealth Management US business unit (following the decision in June 2008 that the Investment Bank would exit the institutional municipal securities business). | |
– | March 2009, entered into an agreement to sell 56 branches to Stifel, Nicolaus & Company, Incorporated. The sale was completed in four separate closings in the second half of 2009. | |
– | September 2009, completed the sale of UBS’s Brazilian financial services business, UBS Pactual, to BTG investments, LP. |
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Wealth Management Americas
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As of or for the year ended | % change from | ||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||
Income | 5,546 | 6,278 | 7,153 | (12 | ) | ||||||||||||
of which: ARS settlement impact | (172 | ) | |||||||||||||||
Credit loss (expense) /recovery | 3 | (29 | ) | (2 | ) | ||||||||||||
Total operating income | 5,550 | 6,249 | 7,151 | (11 | ) | ||||||||||||
Personnel expenses | 4,231 | 4,271 | 5,060 | (1 | ) | ||||||||||||
General and administrative expenses | 1,017 | 2,558 | 1,209 | (60 | ) | ||||||||||||
of which: ARS settlement impact | 1,464 | ||||||||||||||||
Services (to)/from other business divisions | 4 | 16 | 28 | (75 | ) | ||||||||||||
Depreciation of property and equipment | 170 | 162 | 163 | 5 | |||||||||||||
Impairment of goodwill | 34 | 0 | 0 | ||||||||||||||
Amortization of intangible assets | 62 | 65 | 70 | (5 | ) | ||||||||||||
Total operating expenses | 5,518 | 7,072 | 6,530 | (22 | ) | ||||||||||||
Business division performance before tax | 32 | (823 | ) | 621 | |||||||||||||
of which: ARS settlement impact | (1,636 | ) | |||||||||||||||
of which: business division performance before tax excluding ARS settlement impact | 32 | 813 | 621 | (96 | ) | ||||||||||||
Key performance indicators1 | |||||||||||||||||
Pre-tax profit growth (%)2 | N/A | N/A | 12.1 | ||||||||||||||
Cost /income ratio (%) | 99.5 | 112.6 | 91.3 | ||||||||||||||
Net new money (CHF billion)3 | (11.6 | ) | (15.9 | ) | 35.9 | ||||||||||||
Gross margin on invested assets (bps) | 81 | 82 | 77 | (1 | ) | ||||||||||||
Additional information | |||||||||||||||||
Average attributed equity (CHF billion) | 8.8 | 7.8 | 13 | ||||||||||||||
Return on attributed equity (RoaE) (%) | 0.4 | (10.6 | ) | ||||||||||||||
BIS risk-weighted assets (CHF billion)4 | 22.8 | 26.9 | (15 | ) | |||||||||||||
Return on BIS risk-weighted assets, gross (%) | 23.5 | 28.9 | |||||||||||||||
Goodwill and intangible assets (CHF billion) | 4.2 | 4.5 | 4.8 | (7 | ) | ||||||||||||
Recurring income | 3,256 | 4,076 | 4,455 | (20 | ) | ||||||||||||
Invested assets (CHF billion) | 690 | 644 | 906 | 7 | |||||||||||||
Client assets (CHF billion) | 737 | 682 | 1,018 | 8 | |||||||||||||
Personnel (full-time equivalents) | 16,925 | 20,623 | 21,180 | (18 | ) | ||||||||||||
Financial advisors (full-time equivalents) | 7,084 | 8,607 | 8,693 | (18 | ) | ||||||||||||
Additional information (only Wealth Management US) | |||||||||||||||||
Net new money (CHF billion)3 | (7.6 | ) | (10.6 | ) | 26.6 | ||||||||||||
Net new money including interest and dividend income (CHF billion)5 | 11.5 | 11.7 | 51.5 | ||||||||||||||
Business division reporting excluding PaineWebber acquisition costs6 | |||||||||||||||||
Business division performance before tax | 155 | (689 | ) | 841 | |||||||||||||
Cost/ income ratio (%) | 97.3 | 110.4 | 88.5 | ||||||||||||||
Average attributed equity (CHF billion) | 5.2 | 4.2 | 24 | ||||||||||||||
1 For the definitions of our key performance indicators, refer to the “Measurement and analysis of performance” section of this report. 2 Not meaningful if either the current period or the comparison period is a loss period. 3 Excludes interest and dividend income. 4 BIS risk-weighted assets (RWA) are according to Basel II. 5 For purposes of comparison with US peers. 6 Acquisition costs represent goodwill and intangible assets funding costs and intangible assets amortization costs related to the acquisition of the PaineWebber retail brokerage business in 2000. |
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Wealth Management Americas
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Global Asset Management
Key focus areas
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– | In May 2007, UBS announced the closure of Dillon Read Capital Management (DRCM). The business was formed in June 2005 and officially launched in June 2006. The business had two arms – one managing existing proprietary assets transferred from the Investment Bank, the other managing outside investor assets. As the development of the business did not meet original expectations, it was closed in May 2007. | |
– | In July 2007, UBS purchased a 51% stake in Daehan Investment Trust Management Company Ltd. (DIMCO) from Hana Daetoo Securities (formerly Daehan Investment & Securities Company Ltd.), a wholly-owned subsidiary of Hana Financial Group. DIMCO was renamed UBS Hana Asset Management Company Ltd. internationally, and Hana UBS Asset Management in Korea. | |
– | In February 2008, UBS acquired 100% of the Caisse Centrale de Réescompte (CCR) Group in France from Commerzbank. The asset management business of CCR currently operates as CCR Asset Management. | |
– | In August 2008, UBS sold its 24.9% stake in Adams Street Partners to its remaining shareholders. The transaction closed on 6 August 2008 resulting in a net gain of CHF 168 million. | |
– | In September 2009, UBS completed the sale of its Brazilian financial services business, UBS Pactual, including its asset management business, UBS Pactual Asset Management. Global Asset Management continues to serve Brazil and other Latin American markets through its Americas distribution team. |
– | Equitiesoffers a full spectrum of investment styles with varying risk and return objectives. It has three investment pillars with distinct strategies including core/value (portfolios managed according to a price to intrinsic value philosophy), growth investors (a quality global growth manager) and structured equities (strategies that employ proprietary analytics and quantitative methods). | |
– | Fixed incomeoffers a diverse range of global, regional and local market-based investment strategies that cover a wide range of benchmarks. Its capabilities include “core” government and corporate bond strategies, complemented by extended strategies such as high-yield and emerging market debt. |
Invested assets by region1
Institutional/wholesale intermediary revenues
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Global Asset Management
– | Alternative and quantitative investmentshas two primary business lines – multi-manager (or fund of funds) and single manager. The former constructs portfolios of hedge funds and other alternative investments operated by third-party managers, allowing clients to have diversified exposure to a range of hedge funds, private equity and infrastructure strategies. O’Connor is a key provider of single-manager global hedge funds. | |
– | Global real estateactively manages real estate investments in Asia, Europe and the US and across the major real estate sectors. Its capabilities are focused on core and value-added strategies, but also include other strategies across the risk/return spectrum. These are offered on a global, regional and country basis and through open- and closed-end private funds, customized investment structures, funds of funds, individually managed accounts and publicly traded real estate securities. | |
– | Global investment solutionsoffers asset allocation, currency, manager research and risk management services. It manages a wide array of domestic, regional and global balanced portfolios, currency mandates, structured portfolios, multi-manager and absolute return strategies. Through its strategic investment advisory services, it supports clients in a wide range of investment-related functions including investment policy setting, integrated asset liability solutions, multi-manager approaches and investment outsourcing. | |
– | Infrastructure and private equityis involved in the origination and management of specialist funds that invest in infrastructure and other private assets globally. | |
– | Fund services,the global fund administration business, provides professional services, including legal set-up, reporting and accounting for retail and institutional investment funds, hedge funds and other alternative funds. |
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Alternative and | ||||||||||||
quantitative | Global | Global investment | Infrastructure and | |||||||||
Equities | Fixed income | investments | real estate | solutions | private equity | Fund services | ||||||
Core /value | Global | Single manager | Global | Global | Direct infrastructure | Alternative funds | ||||||
Global | Country and regional | hedge funds | Country and regional | Country and regional | investment | investment funds | ||||||
Country and regional | Sector specific | Multi-manager | Private strategies | Asset allocation | Global and regional | |||||||
Emerging markets | Emerging markets | hedge funds | Real estate securities | Currency management | ||||||||
Specialist | High yield | Quantitative | Agriculture | Return and risk targeted | ||||||||
Long /short | Structured credit | Infrastructure | Structured portfolios | |||||||||
HALO | Liquidity/short duration | fund of funds | Risk management and | |||||||||
Growth investors | indexed | Private equity | advisory services | |||||||||
Global | fund of funds | |||||||||||
Country and regional | Active commodities, | |||||||||||
Structured equities | multi-manager | |||||||||||
Systematic alpha | ||||||||||||
Quantitative equities | ||||||||||||
Index and | ||||||||||||
portfolio construction | ||||||||||||
solutions | ||||||||||||
(including passive) | ||||||||||||
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As of or for the year ended | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Institutional fees | 1,273 | 1,659 | 1 | 2,370 | (23 | ) | |||||||||||||||||||||||||||||||||||||||||||
Wholesale intermediary fees | 863 | 1,246 | 1,724 | (31 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Total operating income | 2,137 | 2,904 | 4,094 | (26 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Personnel expenses | 996 | 946 | 1,883 | 5 | |||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 387 | 462 | 593 | (16 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Services (to) / from other business divisions | (74 | ) | 88 | 73 | |||||||||||||||||||||||||||||||||||||||||||||
Depreciation of property and equipment | 36 | 44 | 72 | (18 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Impairment of goodwill | 340 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 13 | 33 | 19 | (61 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 1,698 | 1,572 | 2,640 | 8 | |||||||||||||||||||||||||||||||||||||||||||||
Business division performance before tax | 438 | 1,333 | 1,454 | (67 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Key performance indicators2 | |||||||||||||||||||||||||||||||||||||||||||||||||
Pre-tax profit growth (%) | (67.1 | ) | (8.3 | ) | 10.2 | ||||||||||||||||||||||||||||||||||||||||||||
Cost/income ratio (%) | 79.5 | 54.1 | 64.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Net new money (CHF billion)3 | (45.8 | ) | (103.0 | ) | (15.7 | ) | |||||||||||||||||||||||||||||||||||||||||||
Gross margin on invested assets (bps) (institutional) | 37 | 38 | 44 | (3 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Gross margin on invested assets (bps) (wholesale intermediary) | 36 | 41 | 47 | (12 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Additional information | |||||||||||||||||||||||||||||||||||||||||||||||||
Average attributed equity (CHF billion) | 2.8 | 3.0 | (7 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Return on attributed equity (RoaE) (%) | 15.9 | 44.4 | |||||||||||||||||||||||||||||||||||||||||||||||
BIS risk-weighted assets (CHF billion)4 | 4.1 | 8.5 | (52 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Return on BIS risk-weighted assets, gross (%) | 37.7 | 41.2 | |||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and intangible assets (CHF billion) | 1.7 | 2.2 | 2.3 | (23 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 583 | 575 | 891 | 1 | |||||||||||||||||||||||||||||||||||||||||||||
Personnel (full-time equivalents) | 3,471 | 3,914 | 3,785 | (11 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Institutional | |||||||||||||||||||||||||||||||||||||||||||||||||
Net new money (CHF billion)3 | (12.7 | ) | (55.6 | ) | (16.3 | ) | |||||||||||||||||||||||||||||||||||||||||||
of which: money market funds | 2.1 | 6.0 | 6.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 346 | 335 | 522 | 3 | |||||||||||||||||||||||||||||||||||||||||||||
of which: money market funds | 45 | 42 | 32 | 7 | |||||||||||||||||||||||||||||||||||||||||||||
Wholesale intermediary | |||||||||||||||||||||||||||||||||||||||||||||||||
Net new money (CHF billion)3 | (33.1 | ) | (47.4 | ) | 0.6 | ||||||||||||||||||||||||||||||||||||||||||||
of which: money market funds | (14.3 | ) | 15.2 | 4.8 | |||||||||||||||||||||||||||||||||||||||||||||
Invested assets (CHF billion) | 237 | 240 | 369 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
of which: money market funds | 67 | 80 | 70 | (16 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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Global Asset Management
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Investment Bank
– | Equities | |
– | Fixed income, currencies and commodities (FICC) | |
– | the Investment banking department (IBD) |
– | the April 2007 acquisition of a 20% stake in UBS Securities, China; and | |
– | the September 2009 sale of our Brazilian financial services business, UBS Pactual. |
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Investment Bank
– | Cash equities provides clients with trade execution offerings and related advice, and comprehensive access to corporate management. We provide full-service trade execution for single stock and portfolios, capital commitment, block trading, electronic trading strategies and platforms, and analytics and commission management services. | |
– | Equity research provides in-depth analysis on more than 3,000 companies worldwide, or over 80% of the global markets capitalization. In addition, we have a specialist research offering in economics, macro asset allocation, equity strategy, quantitative analysis, socially responsible investing, commodities, alternative research and valuation and accounting. | |
– | Derivatives provides standardized products and customized solutions to our clients. In addition to products with returns linked to equities or equity indices, we also offer derivative products linked to hedge funds, mutual funds, real estate and commodity indices in a variety of formats such as over-the-counter, securitized, fund-wrapped and exchange-traded. | |
– | Prime brokerage provides integrated global services, including multi-asset class clearing and custody, capital consultancy, securities lending and equity swaps execution. These services are provided through a client-centric service model to hedge funds, banks, asset management and other financial services clients. | |
– | Exchange-traded derivatives provides execution and clearing services with access to approximately 70 global exchanges to hedge funds, banks, asset managers, corporations, commodity trading and wealth management clients as well as to aggregators. |
– | Macro consists of foreign exchange, money market and interest rate sales and trading businesses. We provide a range of foreign exchange, precious metals, treasury, and liquidity management solutions to institutional and private clients via targeted intermediaries. Interest rate activities include standardized rate-driven products and services such as interest rate derivatives trading, underwriting and trading of government and agency securities. | |
– | Credit sales and trading encompasses the origination, underwriting, and distribution of primary cash and synthetic credit transactions. We are also active in corporate lending, secondary trading and market-making in high yield and investment grade bonds, and loans in both cash and derivative products. | |
– | Emerging markets business offers local investors access to international markets, and offers international investors an opportunity to add exposure via our onshore presence in key locations. We also provide liquidity in the local markets across foreign exchange, rates and structured products. We have a local market presence in Central and Eastern Europe and Asia, and access to Latin American markets through our emerging markets hub in Stamford. |
– | Theadvisory groupassists in acquisitions and sale processes, and also advises on strategic reviews and corporate restructuring solutions. | |
– | Global capital markets offers financing and advisory services that cover capital raising including debt and equity capital, and risk management solutions. It comprises the equity capital markets business, whose products include initial public offerings, secondary offerings and equity linked transactions; and the debt capital markets business |
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– | Global leveraged finance provides event-driven (acquisition, leveraged buy-out) loans, bond and mezzanine leveraged finance to corporate customers and financial sponsors. With a presence in all major financial markets, investment banking coverage is based on a comprehensive matrix of country, sector and product banking professionals. |
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Investment Bank
As of or for the year ended | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Investment banking | 2,466 | 2,880 | 6,637 | (14 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Advisory | 858 | 1,609 | 2,696 | (47 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Capital market revenues | 2,514 | 1,844 | 4,262 | 36 | |||||||||||||||||||||||||||||||||||||||||||||
Equities | 1,609 | 977 | 2,784 | 65 | |||||||||||||||||||||||||||||||||||||||||||||
Fixed income, currencies and commodities | 904 | 866 | 1,478 | 4 | |||||||||||||||||||||||||||||||||||||||||||||
Other fee income and risk management | (906 | ) | (573 | ) | (321 | ) | (58 | ) | |||||||||||||||||||||||||||||||||||||||||
Sales and trading | 4,390 | (26,712 | ) | (7,833 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Equities | 4,937 | 5,184 | 9,002 | (5 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Fixed income, currencies and commodities | (547 | ) | (31,895 | ) | (16,835 | ) | 98 | ||||||||||||||||||||||||||||||||||||||||||
Total Investment Bank income | 6,856 | (23,832 | ) | (1,197 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Credit loss (expense)/recovery1 | (1,698 | ) | (2,575 | ) | (266 | ) | (34 | ) | |||||||||||||||||||||||||||||||||||||||||
Total Investment Bank operating income excluding own credit | 5,158 | (26,407 | ) | (1,463 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Own credit2 | (2,023 | ) | 2,032 | 659 | |||||||||||||||||||||||||||||||||||||||||||||
Total Investment Bank operating income as reported | 3,135 | (24,375 | ) | (804 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Personnel expenses | 5,568 | 5,182 | 11,633 | 7 | |||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 2,628 | 3,830 | 3,800 | (31 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Services (to) / from other business divisions | (147 | ) | 41 | (171 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Depreciation of property and equipment | 360 | 447 | 431 | (19 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Impairment of goodwill | 749 | 341 | 0 | 120 | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 59 | 83 | 172 | (29 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses | 9,216 | 9,925 | 15,865 | (7 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Business division performance before tax | (6,081 | ) | (34,300 | ) | (16,669 | ) | 82 | ||||||||||||||||||||||||||||||||||||||||||
Key performance indicators3 | |||||||||||||||||||||||||||||||||||||||||||||||||
Pre-tax profit growth (%)4 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Cost / income ratio (%)5 | 190.7 | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Return on attributed equity (RoaE) (%) | (24.1 | ) | (128.2 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Return on assets, gross (%) | 0.4 | (1.2 | ) | (0.2 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Average VaR (1-day, 95% confidence, 5 years of historical data)6 | 55 | 79 | (30 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Additional information | |||||||||||||||||||||||||||||||||||||||||||||||||
Total assets (CHF billion) | 992.0 | 1,680.3 | 1,922.8 | (41 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Average attributed equity (CHF billion) | 25.3 | 26.8 | (6 | ) | |||||||||||||||||||||||||||||||||||||||||||||
BIS risk-weighted assets, gross (CHF billion)7 | 122.4 | 195.8 | (37 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Return on BIS risk-weighted assets, gross (%) | 3.1 | (10.0 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and intangible assets (CHF billion) | 3.5 | 4.6 | 5.6 | (24 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Compensation ratio (%)5 | 115.2 | N/A | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Impaired lending portfolio as a % of total lending portfolio, gross | 3.8 | 2.6 | 0.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Personnel (full-time equivalents) | 15,666 | 19,132 | 23,739 | (18 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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à | Refer to “Note 27 Fair value of financial instruments” in the “Financial information” section of this report for more information on own credit |
Revenues were negative CHF 547 million in 2009, up from negative CHF 31,895 million a year earlier. The FICC result continued to be affected by losses on residual risk positions
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Revenues were negative CHF 31,895 million, down from negative CHF 16,835 million a year earlier. Consequences of the global financial crisis, including forced liquidations, government bail-outs and consolidation in the banking sector, negatively affected the majority of the FICC businesses. Credit recorded losses in both client and proprietary trading
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Corporate Center
è | Refer to the “UBS reporting structure and accounting changes” section of this report for more information on changes to the quarterly disclosure of the Corporate Center in 2010 |
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Corporate Center
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As of or for the year ended | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Income | 394 | 998 | 3,562 | (61 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Credit loss (expense) / recovery | (5 | ) | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||
Total operating income | 389 | 998 | 3,562 | (61 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Personnel expenses | 551 | 433 | 583 | 27 | |||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 199 | 353 | 312 | (44 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Services (to) / from other business divisions | 306 | (73 | ) | 114 | |||||||||||||||||||||||||||||||||||||||||||||
Depreciation of property and equipment | 193 | 265 | 243 | (27 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||
Total operating expenses1 | 1,250 | 979 | 1,252 | 28 | |||||||||||||||||||||||||||||||||||||||||||||
Performance from continuing operations before tax | (860 | ) | 19 | 2,310 | |||||||||||||||||||||||||||||||||||||||||||||
Performance from discontinued operations before tax | (7 | ) | 198 | 145 | |||||||||||||||||||||||||||||||||||||||||||||
Performance before tax | (867 | ) | 217 | 2,455 | |||||||||||||||||||||||||||||||||||||||||||||
Additional information | |||||||||||||||||||||||||||||||||||||||||||||||||
BIS risk-weighted assets (CHF billion)2 | 8.5 | 8.8 | (3 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Personnel (full-time equivalents)3 | 1,624 | 3,097 | 2,479 | (48 | ) | ||||||||||||||||||||||||||||||||||||||||||||
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Risk management and control
– | A significant reduction in our risk exposures during the year was reflected in our stress loss measures as well as reductions in our average and period-end Value-at-Risk (VaR), a decrease in our credit risk portfolios and lower exposures to residual risk positions. We commuted trades with a notional value of approximately USD 7 billion with several monoline insurers which contributed to a reduction in our net exposures to monoline insurers after credit valuation adjustments to USD 2.3 billion (excluding hedges). Approximately USD 1.6 billion at par of our aggregate exposures to student loan auction rate securities were either redeemed by issuers or sold in the secondary market. Our legacy leveraged finance positions were also reduced through sales and writedowns. | |
– | The decrease in our risk exposures contributed to significant reductions in our balance sheet by 33% to CHF 1,341 billion and our risk-weighted assets by 32% to CHF 206.5 billion at 31 December 2009 compared with the end of the prior year. | |
– | Our credit loss expenses were approximately 40% lower at CHF 1.8 billion for 2009 compared with CHF 3.0 billion for the prior year. | |
– | We significantly enhanced our stress testing framework which comprises portfolio-specific stress tests as well as combined firm-wide stress tests. Our firm-wide stress testing captures all major risks across our business divisions and is one of the most critical inputs for discussions between management, our Board of Directors (BoD) and our regulators on the risk profile of our firm. We carried |
– | We changed the calibration of our management VaR from a 10-day 99% measure to a 1-day 95% measure. We consider that a 1-day 95% VaR reflects the way that trading risks are viewed and managed by the business and can be more directly compared with mark-to-market revenues. | |
– | As a result of management’s investigation into the losses we experienced in 2007 and 2008, we launched a comprehensive remediation program in the Investment Bank. We made further progress in implementing this program and developing sustainable solutions. Our remediation activity has resulted in enhanced risk governance including changes in risk management and control personnel, and we have improved our risk infrastructure and processes and the associated capabilities to capture, represent and monitor risks. We have also changed the firm’s capital optimization model and enhanced our funding and balance sheet management. | |
– | In connection with the settlements relating to the US cross-border matter, we established a governance and control framework designed to ensure that we perform the obligations assumed in those settlements and to manage related matters including the exit from the affected US cross-border business activities. We have also |
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established new standards, controls and training programs for conducting cross-border business globally in compliance with applicable laws and regulations. Additional measures to address operational risks related to that business are being developed and put into effect under our Risk Effectiveness Project, including the communication of clear compliance expectations by senior management and the implementation of new disciplinary processes. | ||||||
– | Our emphasis on risk awareness has been actively strengthened through the greater empowerment of our Control functions by our BoD and Group Chief Executive Officer (CEO). | |||||
– | Our Total Reward Principles, which summarize the compensation structure for our employees, include a focus on sustainable profitability as well as effective risk and capital management. Risk Control is actively involved in our compensation processes which are designed to support appropriate and controlled risk taking by our businesses. | |||||
è | Refer to the “Credit risk”, “Market risk”, “Operational risk”, “Risk concentration” and “Liquidity and funding management” sections of this report for more information | |||||
è | Refer to the “Compensation and shareholdings” section of this report for more information on our compensation practices | |||||
è | Refer to “Note 21 Provisions and litigation” in the “Financial information” section of this report for more information in connection with the US cross-border matter | |||||
Risk management and control principles |
We have five key principles which are intended to support the firm in achieving an appropriate balance between risk and return. These principles are: | ||||||
– | Protection of financial strengthby controlling our overall risk exposures and assessing potential risk concentrations at the position and portfolio levels, and in combination across all risk types and business divisions. | |||||
– | Reputation protectionwhich depends, among other things, on the effective management and control of risks. Our risk culture demands that all employees make the protection of our reputation an overriding concern. | |||||
– | Business management is accountable for all risksand is responsible for the continuous and active management of risk exposure to ensure that risk and return are balanced. | |||||
– | Independent control of riskthrough risk control functions which monitor the effectiveness of business risk management and oversee risk-taking activities. | |||||
– | Disclosure of riskto provide comprehensive, transparent and periodic reporting to senior management, the BoD, shareholders, regulators, rating agencies and other stakeholders. |
Our risk management and control principles are implemented via a risk management and control framework. The framework comprises qualitative elements such as policies and authorities, and quantitative components including risk measurement and limits. |
The framework is dynamic and is adapted as the firm’s businesses and the market environment evolve. It includes clearly defined processes to deal with new business initiatives and complex or unusual transactions. |
The risk assessment and management oversight performed by the BoD considers evolving best practices and is intended to conform to statutory requirements as is the related disclosure in this section. |
Risk management and control responsibilities |
Key roles and responsibilities related to risk management and control are: | ||||||
– | The BoD is responsible for determining the firm’s risk principles, risk appetite and major portfolio limits, including the allocation of certain of these limits to the business divisions. The BoD is supported by a BoD Risk Committee which monitors and oversees the firm’s risk profile and the implementation of the risk framework established by the BoD. The BoD Risk Committee also assesses and approves the firm’s key risk measurement methodologies and control principles. | |||||
– | The Group Executive Board (GEB) is responsible for the implementation of the risk framework, controls the firm’s risk profile and approves major risk policies. | |||||
– | The Group CEO is responsible for the results of the firm, has risk control authority over transactions, positions and exposures, and is also responsible for the allocation of portfolio limits to the business divisions. | |||||
– | The business division CEOs are accountable for the results of their respective business divisions, which includes responsibility for the active and continuous management of risk exposures to ensure that risks and returns are balanced. | |||||
– | The Group Chief Risk Officer (CRO) reports directly to the Group CEO and has functional and management authority over risk control throughout the firm. Risk Control provides independent oversight of risk and is responsible for implementing the risk control processes for credit, country, market, investment and operational risks. This includes establishing methodologies to measure and assess risk, setting risk limits and developing and operating an appropriate risk control infrastructure. The risk control process is supported by a framework of policies and authorities which are delegated to Risk Control Officers corresponding with their experience and scope of responsibilities. |
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Risk and treasury management
Risk management and control
– | The Group Chief Financial Officer (CFO) is responsible for ensuring that disclosure of our financial performance is clear and transparent and meets regulatory requirements and corporate governance standards. The Group CFO is also responsible for implementing the risk management and control frameworks for capital management, liquidity, funding and tax. | |||
– | The Group General Counsel (GC) is responsible for implementing the firm’s risk management and control principles for legal matters and for ensuring compliance with all laws and regulations in each of the jurisdictions in which we operate. |
Risk categories | ||||
The risks faced by our businesses can be broken down into three different categories: primary risks, consequential risks and business risks. | ||||
Primary and consequential risks result from our business activities and are subject to independent risk control. Primary risks consist of credit risk, country risk, market risk (including issuer risk) and investment risk. Consequential risks consist of operational risk, liquidity and funding risks, legal and compliance risks and tax risks. Further details on primary and consequential risks are provided below: |
– | Credit risk– the risk of loss resulting from the failure of a client or counterparty to meet its contractual obligations. | |||
– | Country risk– the risk of loss resulting from country-specific events. It includes transfer risk, whereby a country’s authorities prevent or restrict the payment of an obligation, as well as systemic risk events arising from country-specific political or macroeconomic developments. | |||
– | Market risk and investment risks– the risk of loss resulting from changes in market variables, whether to our trading positions or financial investments. | |||
– | Operational risk– the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external causes, whether deliberate, accidental or natural. This includes risks related to legal and compliance and tax matters. | |||
– | Liquidity and funding risks– the risk that we might be unable to either meet our payment obligations when due or borrow funds in the market at an acceptable price to fund actual or proposed commitments. |
Business risks arise from the commercial and economic risks inherent in our business activities and it is management’s responsibility to manage these risks. | ||||||
è | Refer to the “Credit risk”, “Market risk”, “Operational risk” and “Liquidity and funding management” sections of this report for a description of the control frameworks for these risk categories |
Risk measurement |
A variety of methodologies and measures are applied to quantify the risks of our portfolios and risk concentrations. Risks that are not well reflected by standard measures are subject to additional controls, which may include pre-approval of transactions and specific restrictions. Models to quantify risk are generally developed by dedicated units within the firm-wide and business division-facing control functions. We require that valuation and risk models which could impact the firm’s books and records be independently verified and subjected to ongoing monitoring and control by the Group CRO and Group CFO Organizations. |
Statistical loss and stress loss | ||||||
We assess potential future losses using two complementary types of risk measures: statistical loss and stress loss. | ||||||
Statistical loss | ||||||
Statistical loss measures include VaR, Expected Loss (EL) and Earnings-at-Risk (EaR). VaR estimates the losses which could potentially be realized over a set time period at an established level of confidence. EL is used to measure the average annual costs that are expected to arise from our credit portfolios and from operational risks. EaR comprises a core of statistical measures overlaid with management judgment and measures the potential shortfall in our earnings which could potentially be realized over a set time period at an established level of confidence. | ||||||
è | Refer to the “Credit risk”, “Market risk” and “Operational risk” sections of this report for a description of the firm’s key statistical loss measures | |||||
Stress loss | ||||||
As a complement to our statistical loss measures, we perform stress testing. Stress loss is the loss that could result from extreme events under specified scenarios. We use stress testing to quantify our exposures to extreme and unusual market movements and to enable us to identify, understand and manage our potential vulnerabilities and risk concentrations. During 2009 we significantly enhanced our stress testing framework, which incorporates a comprehensive range of portfolio-specific stress tests as well as combined firm-wide stress tests. | ||||||
Portfolio-specific stress tests are measures that focus on risks of specific portfolios within the business divisions. Our portfolio stress loss measures are characterized by past events but also include forward-looking elements. Our stress scenarios for trading risks were enhanced in 2009 to more accurately capture the liquidity characteristics of different markets and positions. Our stress frameworks include a scenario which re- |
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– | EaR is measured as the potential shortfall in earnings at a 95% confidence level and is evaluated over both 3-month and 1-year periods. | |
– | CaR extends EaR to consider the impact on BIS tier 1 capital of a more severe earnings shortfall and is measured at confidence levels higher than 95%. | |
– | CST was incorporated into the risk appetite framework in 2009 to supplement EaR and CaR. As described under “Stress loss” above, our firm-wide stress tests evaluate the impact across our risk portfolios (and thereby on our earnings and capital) based on specified macro-economic stress scenarios. |
è | Refer to the “Credit risk”, “Market risk” and “Risk concentration” sections of this report for more information on our risk exposures |
è | Refer to the “Basel II Pillar 3” section of this report for further information on the exposures we use in the determination of our required regulatory capital |
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Credit risk
Credit risk is the risk of loss resulting from the failure of a client or counterparty to meet its contractual obligations to UBS. This can be caused by factors directly related to the counterparty, such as business or management problems, or from failures in the settlement process, for example in foreign exchange transactions where we have honored our obligation but the counterparty fails to deliver the counter-value (“settlement risk”). Alternatively, it can be triggered by economic or political difficulties in the country in which a counterparty or issuer of a security is based or where it has substantial assets (“country risk”). |
Sources of credit risk |
Credit risk arises from traditional banking products such as loans, commitments to lend and contingent liabilities (for example, letters of credit) as well as from “traded products”: OTC derivative contracts; exchange-traded derivatives; and securities financing transactions such as repurchase agreements (repos and reverse repos) and securities borrowing and lending transactions. The risk control processes applied to these products are generally the same, although the accounting treatment may vary as products can be carried at amortized cost or fair value depending on the product type and the nature of the exposure. A form of credit risk also arises on securities and other obligations in tradable form, as their fair values are affected by changing expectations regarding the probability of issuers failing to meet these obligations or when actual failures occur. Where these securities and obligations are held in connection with a trading activity, we view the risk as a market risk. | ||||
Many of the business activities of Wealth Management & Swiss Bank and the Investment Bank expose us to credit risk, while credit risk exposures from Wealth Management Americas and Global Asset Management are less material. Wealth Management & Swiss Bank offers private and corporate clients in Switzerland and wealth management clients internationally (except those served by Wealth Management Americas) a variety of credit products. The Investment Bank provides corporate, institutional, intermediary and alternative asset management clients access to a full range of credit and capital markets instruments across many product classes, and engages with other professional counterparties in trading and risk management activities. |
Credit risk control | ||||||
Limits and controls |
Limits are established for individual counterparties and counterparty groups covering banking and traded products, as |
well as settlement amounts. These limits put constraints not only on the current outstanding amount but also on contingent commitments and the potential future exposure of traded products. Credit engagements may not be entered into without the appropriate approvals and adherence to limits. | ||||
In the Investment Bank, a distinction is made between exposures intended to be held to maturity (“take and hold exposures”) and those which are intended to be held for a short term, pending distribution or risk transfer (“temporary exposures”). | ||||
Credit risk concentrations can arise if clients are engaged in similar activities, are located in the same geographical region or have comparable economic characteristics such that their ability to meet contractual obligations would be similarly affected by changes in economic, political or other conditions. To avoid credit risk concentrations, we seek to establish limits and operational controls to constrain risk concentrations at portfolio and sub-portfolio levels, for example with regard to sector exposures, country risk or specific product exposures. | ||||
Risk mitigation | ||||
We actively manage the credit risk in our portfolios by taking collateral against exposures and utilizing credit hedging. In Wealth Management & Swiss Bank, the majority of loans are extended on a secured basis. For real estate financing, a mortgage over the property is taken to secure the claim. Commercial loans may also be secured by mortgages on business premises or other real estate. We apply measures to evaluate collateral and determine maximum loan-to-value ratios including an assessment of income cover. | ||||
“Lombard loans” are made against the pledge of eligible marketable securities or cash. The Investment Bank also takes collateral in the form of marketable securities and cash in its OTC derivatives and securities financing businesses. Discounts (“haircuts”) are generally applied to reflect the quality, liquidity and volatility of the underlying collateral. Exposure and collateral values are continuously monitored and margin calls or close-out procedures are enforced when the market value of collateral falls below a predefined trigger level. Concentrations within individual collateral portfolios and across clients are also monitored where relevant and may affect the haircut applied to a specific collateral pool. | ||||
Our OTC derivatives trading is generally conducted under bilateral International Swaps and Derivatives Association (ISDA) or ISDA-equivalent master trading agreements, which allow for the close-out and netting of all transactions in the event of default. We also have two-way collateral agreements with major market participants under which either party can be required to provide collateral in the form of |
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cash or marketable securities when exposure exceeds a predefined level. Our OTC derivatives activity with lower-rated counterparties is typically conducted under one-way collateral agreements where only the counterparty is required to provide us with collateral. For certain counterparties, like hedge funds, we may also use two-way collateral agreements. We have clearly defined processes for netting and collateral agreements, including the requirement to have a legal opinion regarding the enforceability of contracts in relevant jurisdictions in the case of insolvency. | ||||||
We actively manage the credit risk of our portfolios using credit hedging, primarily in the Investment Bank, with the aim of reducing concentrations to specific counterparties, sectors or portfolios. Hedging measures include single name credit default swaps (CDS), index CDS, credit linked notes and total return swaps. Single name CDS are generally executed under bilateral netting and collateral agreements, with high-grade market counterparties. We observe strict standards for recognizing credit hedges; for example, we do not typically recognize credit risk mitigants such as proxy hedges (credit protection on a correlated but different name) or index CDS for the purposes of monitoring exposures against limits. Buying credit protection creates credit exposure against the hedge provider. We monitor our exposures to credit protection providers and the effectiveness of credit hedges as part of our overall credit exposures to the relevant counterparties. Where there is significant correlation between a counterparty and the hedge provider (so-called “wrong-way risk”), our policy is to discourage such activity, but in any event not to recognize any hedge benefit in credit risk measures. | ||||||
è | Refer to the “Basel II Pillar 3” section of this report for more information on credit derivatives | |||||
Credit risk measurement | ||||||
We have developed tools and models to measure credit risk. Exposures to individual counterparties are measured based on three generally accepted parameters: probability of default, exposure at default and loss given default. These parameters are the basis for the majority of our internal measures of credit risk and are key inputs to the regulatory capital calculation under the Advanced Internal Rating-Based approach of Basel II. We also use models to derive the portfolio credit risk measures of expected loss, statistical loss and stress loss. | ||||||
Probability of default | ||||||
The probability of default (PD) is an estimate of the likelihood of a counterparty defaulting on its contractual obligations. This probability is assessed using rating tools tailored to the various categories of counterparties. These categories are also calibrated to our proprietary credit rating scale (“Masterscale”) designed to ensure a consistent assessment of default probabilities across counterparties. We regularly assess the performance of our rating tools and adjust our |
model parameters as necessary. In addition to using ratings for credit risk measurement, we use them as an important input to determine credit risk approval authorities. | ||||||||
In the Investment Bank, rating tools are applied by broad segments including banks, sovereigns, corporates, funds, hedge funds and commercial real estate. We determine our choice of the relevant assessment criteria (for example, financial ratios and qualitative factors) for the rating tools on the basis of various statistical analyses, externally available information and expert judgment. | ||||||||
Within our retail and corporate banking business in Switzerland, we rate our business and corporate clients in the small-to-medium enterprise segment (SMEs) using statistically developed scorecards. The underlying data used in our scorecards is predominantly based on a combination of financial information relating to clients, qualitative criteria and our credit loss history over several years. In order to rate our large corporate clients domiciled in Switzerland, Wealth Management & Swiss Bank uses templates established for this segment by our Investment Bank. We assess the probability of default from loans secured on owner-occupied or investment properties with a model that takes loan-to-value ratios and debt service capacity of the obligor into account. We rate lombard loan exposures by means of a model simulating potential changes in the value of the collateral and the probability that it may be lower than the loan amount. | ||||||||
Our Masterscale expresses default probabilities that we determine through our various rating tools by means of distinct classes whereby each class incorporates a range of default probabilities. Counterparties migrate between rating classes as our assessment of their probability of default changes. | ||||||||
The ratings of the major credit rating agencies and their equivalent on our Masterscale are shown in the “UBS internal rating scale and mapping of external ratings” table. The mapping is based on the long-term average one-year default | ||||||||
UBS internal rating scale and mapping of external ratings | ||||||||
UBS | Moody’s Investor | Standard & Poor’s | ||||||
Rating | Description | Services equivalent | equivalent | |||||
0 and 1 | Investment grade | Aaa | AAA | |||||
2 | Aa1 to Aa3 | AA+ to AA– | ||||||
3 | A1 to A3 | A+ to A– | ||||||
4 | Baa1 to Baa2 | BBB+ to BBB | ||||||
5 | Baa3 | BBB– | ||||||
6 | Sub-investment grade | Ba1 | BB+ | |||||
7 | Ba2 | BB | ||||||
8 | Ba2 | BB | ||||||
9 | Ba3 | BB– | ||||||
10 | B1 | B+ | ||||||
11 | B2 | B | ||||||
12 | B3 | B– | ||||||
13 | Caa to C | CCC to C | ||||||
14 | Defaulted | D | D | |||||
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è | Refer to the discussion on “Impairment and default – distressed claims” below for more information |
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Composition of credit risk – UBS Group
The exposures detailed in the tables in this section are based on our management view of credit risk.
è | Refer to the “Basel II Pillar 3” section of this report for more information on the credit exposures used in the determination of our required regulatory capital and additional information on credit derivatives | |
è | Refer to “Note 23 Derivative instruments and hedge accounting” and “Note 29c Measurement categories of financial assets and liabilities” in the “Financial information” section of this report for further information on IFRS required disclosures on derivatives and credit risk |
crease of CHF 123 billion since the end of 2008. This decrease reflects the measures we took in 2009 to actively reduce our risk exposures in addition to market movements which drove down the positive replacement values of our derivatives. Our banking product exposures decreased by CHF 40 billion to CHF 355 billion at 31 December 2009 mainly driven by reductions in loans and balances with central banks. Our traded products exposures, which arise largely in our Investment Bank, reduced by CHF 82 billion to CHF 96 billion at 31 December 2009 due to the significant decrease of CHF 68 billion in the replacement values of OTC derivatives. The largest component of our credit exposure before deductions at 31 December 2009 was our lending portfolio (due from banks and loans) at CHF 262 billion or 58% of our total credit exposure. Of this, CHF 200 billion was attributable to Wealth Management & Swiss Bank.
Credit exposure by business division | ||||||||||||||||||||||||||||||||||||||||||
Wealth Management & | Wealth Management | |||||||||||||||||||||||||||||||||||||||||
Swiss Bank | Americas | Investment Bank | Other1 | UBS | ||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||
Balances with central banks | 8,589 | 17,629 | 0 | 0 | 9,525 | 11,528 | 0 | 0 | 18,114 | 29,157 | ||||||||||||||||||||||||||||||||
Due from banks | 2,683 | 5,510 | 1,074 | 1,096 | 13,959 | 12,044 | 282 | 382 | 17,998 | 19,032 | ||||||||||||||||||||||||||||||||
Loans | 197,178 | 206,704 | 21,496 | 19,479 | 25,351 | 43,806 | 101 | 730 | 244,126 | 270,719 | ||||||||||||||||||||||||||||||||
Contingent claims | 11,908 | 14,282 | 385 | 405 | 4,881 | 4,056 | 141 | 149 | 17,315 | 18,892 | ||||||||||||||||||||||||||||||||
Undrawn irrevocable credit facilities | 7,236 | 2,775 | 498 | 13 | 49,356 | 54,201 | 0 | 0 | 57,090 | 56,990 | ||||||||||||||||||||||||||||||||
Banking products | 227,594 | 246,899 | 23,453 | 20,994 | 103,072 | 2 | 125,636 | 2 | 524 | 1,261 | 3 | 354,643 | 394,789 | 3 | ||||||||||||||||||||||||||||
OTC Derivatives | 3,583 | 5,637 | 44 | 63 | 58,121 | 124,393 | 947 | 817 | 62,695 | 130,910 | ||||||||||||||||||||||||||||||||
Exchange traded derivatives | 1,059 | 1,281 | 611 | 948 | 14,933 | 21,560 | 0 | 0 | 16,603 | 23,789 | ||||||||||||||||||||||||||||||||
Securities financing transactions | 0 | 2,942 | 185 | 91 | 16,939 | 20,203 | 0 | 844 | 17,124 | 24,080 | ||||||||||||||||||||||||||||||||
Traded products | 4,642 | 9,860 | 840 | 1,102 | 89,993 | 166,157 | 947 | 1,661 | 96,422 | 178,780 | ||||||||||||||||||||||||||||||||
Total credit exposure | 232,236 | 256,759 | 24,293 | 22,096 | 193,065 | 291,793 | 1,471 | 2,922 | 451,065 | 573,569 | ||||||||||||||||||||||||||||||||
Total credit exposure, net4 | 230,173 | 255,565 | 24,289 | 22,071 | 141,838 | 229,597 | 1,466 | 2,922 | 397,766 | 510,155 | ||||||||||||||||||||||||||||||||
1 Includes Global Asset Management and Corporate Center. 2 IB banking products excluding money market and nostro accounts amount to CHF 82,084 million (31.12.2008: CHF 105,595 million). 3 Does not include financial assets designated at fair value for an amount of CHF 961 million. 4 Net of allowances, provisions, credit valuation adjustments, hedges. |
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distribution of gross banking products exposure across UBS internal rating and loss given default (LGD) buckets
CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Loss given default (LGD) buckets | Weighted | Weighted | |||||||||||||||||||||||||||||||||||||||||||||||
Gross | average | Gross | average LGD | ||||||||||||||||||||||||||||||||||||||||||||||
UBS internal rating | exposure | 0–25% | 26–50% | 51–75% | 76–100% | LGD (%) | exposure | (%) | |||||||||||||||||||||||||||||||||||||||||
0 | 3,713 | 5 | 3,708 | 38 | 13,625 | 39 | |||||||||||||||||||||||||||||||||||||||||||
1 | 6,024 | 28 | 5,987 | 9 | 39 | 5,232 | 39 | ||||||||||||||||||||||||||||||||||||||||||
2 | 29,084 | 25,523 | 3,432 | 129 | 22 | 27,750 | 21 | ||||||||||||||||||||||||||||||||||||||||||
3 | 23,351 | 18,503 | 4,367 | 481 | 22 | 29,938 | 22 | ||||||||||||||||||||||||||||||||||||||||||
4 | 24,978 | 21,502 | 3,261 | 214 | 12 | 24,830 | 14 | ||||||||||||||||||||||||||||||||||||||||||
5 | 48,491 | 43,013 | 5,017 | 460 | 12 | 50,657 | 13 | ||||||||||||||||||||||||||||||||||||||||||
6 | 41,797 | 38,265 | 2,540 | 991 | 1 | 13 | 44,346 | 13 | |||||||||||||||||||||||||||||||||||||||||
7 | 18,160 | 15,577 | 2,348 | 233 | 1 | 15 | 18,735 | 15 | |||||||||||||||||||||||||||||||||||||||||
8 | 15,256 | 12,738 | 2,078 | 439 | 1 | 16 | 14,810 | 17 | |||||||||||||||||||||||||||||||||||||||||
9 | 10,651 | 7,652 | 1,993 | 7 | 999 | 22 | 9,447 | 23 | |||||||||||||||||||||||||||||||||||||||||
10 | 2,092 | 1,478 | 613 | 21 | 1,875 | 20 | |||||||||||||||||||||||||||||||||||||||||||
11 | 1,179 | 897 | 281 | 20 | 1,990 | 19 | |||||||||||||||||||||||||||||||||||||||||||
12 | 224 | 167 | 56 | 1 | 21 | 155 | 19 | ||||||||||||||||||||||||||||||||||||||||||
13 | 76 | 48 | 28 | 21 | 93 | 30 | |||||||||||||||||||||||||||||||||||||||||||
Total non-defaulted | 225,076 | 185,398 | 35,710 | 2,965 | 1,003 | 17 | 243,483 | 18 | |||||||||||||||||||||||||||||||||||||||||
Investment grade | 135,641 | 108,575 | 25,773 | 1,294 | 152,032 | ||||||||||||||||||||||||||||||||||||||||||||
Sub-investment grade | 89,434 | 76,823 | 9,937 | 1,671 | 1,003 | 91,451 | |||||||||||||||||||||||||||||||||||||||||||
Defaulted1 | 2,518 | 3,416 | |||||||||||||||||||||||||||||||||||||||||||||||
Gross banking products exposure | 227,594 | 185,398 | 35,710 | 2,965 | 1,003 | 246,899 | |||||||||||||||||||||||||||||||||||||||||||
Net banking products exposure2 | 225,531 | N/A | N/A | N/A | N/A | 245,705 | |||||||||||||||||||||||||||||||||||||||||||
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CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Secured by residential property | 122,106 | 121,551 | |||||||||||||||||||||||||||||||||||||||||||||||
Secured by commercial/industrial property | 20,378 | 20,181 | |||||||||||||||||||||||||||||||||||||||||||||||
Secured by securities | 39,136 | 46,743 | |||||||||||||||||||||||||||||||||||||||||||||||
Lending to banks | 2,683 | 5,510 | |||||||||||||||||||||||||||||||||||||||||||||||
Unsecured loans | 15,558 | 18,228 | |||||||||||||||||||||||||||||||||||||||||||||||
Total lending portfolio, gross | 199,861 | 212,214 | |||||||||||||||||||||||||||||||||||||||||||||||
Total lending portfolio, net1 | 198,714 | 211,044 | |||||||||||||||||||||||||||||||||||||||||||||||
1 Net of allowances and credit hedges. |
CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Construction | 263 | 302 | |||||||||||||||||||||||||||||||||||||||||||||||
Financial institutions | 895 | 2,045 | |||||||||||||||||||||||||||||||||||||||||||||||
Hotels and restaurants | 74 | 61 | |||||||||||||||||||||||||||||||||||||||||||||||
Manufacturing | 2,599 | 2,700 | |||||||||||||||||||||||||||||||||||||||||||||||
Private households | 1,984 | 2,941 | |||||||||||||||||||||||||||||||||||||||||||||||
Public authorities | 4,176 | 4,533 | |||||||||||||||||||||||||||||||||||||||||||||||
Real estate and rentals | 778 | 878 | |||||||||||||||||||||||||||||||||||||||||||||||
Retail and wholesale | 1,778 | 2,249 | |||||||||||||||||||||||||||||||||||||||||||||||
Services | 2,768 | 2,287 | |||||||||||||||||||||||||||||||||||||||||||||||
Other | 243 | 232 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | 15,558 | 18,228 | |||||||||||||||||||||||||||||||||||||||||||||||
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Banking products | OTC derivatives | |||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | ||||||||||||
Total exposure1 | 82,084 | 105,595 | 58,121 | 124,393 | ||||||||||||
less: allowances / credit valuations adjustment (CVA) | (1,520 | ) | (1,526 | ) | (4,475 | ) | (9,907 | ) | ||||||||
less: credit protection bought (credit default swaps, notional) | (39,314 | ) | (45,106 | ) | (5,741 | ) | (5,506 | ) | ||||||||
Net exposure after allowances and after application of credit hedges | 41,250 | 58,963 | 47,905 | 108,980 | ||||||||||||
of which: banks and regulated financial institutions | 4,283 | 4,447 | 20,373 | 45,131 | ||||||||||||
of which: sovereigns and supranationals | 1,053 | 1,043 | 7,435 | 16,820 | ||||||||||||
of which: corporates | 20,825 | 28,727 | 3,119 | 9,554 | ||||||||||||
of which: monoline insurers | 2,730 | 6,153 | ||||||||||||||
of which: others | 15,088 | 24,746 | 14,248 | 31,322 | ||||||||||||
of which: investment grade | 26,273 | 39,659 | 42,883 | 100,345 | ||||||||||||
of which: sub-investment grade | 14,977 | 19,304 | 5,022 | 8,635 | ||||||||||||
1 Banking products: risk view; OTC derivatives: net replacement value, includes the impact of netting agreements (including cash collateral) in accordance with Swiss Federal Banking law, based on the IFRS scope of consolidation. | ||||||||||||||||
Investment Bank: net banking products exposure to corporates and other non-banks | ||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||||||||||
Loans | 90,700 | 111,798 | ||||||||||||||
Contingent claims and undrawn irrevocable credit facilities | 56,228 | 62,391 | ||||||||||||||
Total (IFRS view) | 146,928 | 174,189 | ||||||||||||||
less: internal risk adjustments margin accounts, cash collateral posted, other1 | (36,455 | ) | (40,129 | ) | ||||||||||||
less: internal risk adjustments reclassified securities2 | (19,255 | ) | (21,840 | ) | ||||||||||||
less: internal risk adjustments acquired auction rate securities | (7,982 | ) | (4,500 | ) | ||||||||||||
less: internal risk adjustments traded loan commitments and funded risk participations | (1,152 | ) | (2,125 | ) | ||||||||||||
Gross banking products exposure3 | 82,084 | 105,595 | ||||||||||||||
less: specific allowances for credit losses and loan loss provisions4 | (1,520 | ) | (1,526 | ) | ||||||||||||
Net banking products exposure | 80,564 | 104,069 | ||||||||||||||
less: credit protection bought (credit default swaps) | (39,314 | ) | (45,106 | ) | ||||||||||||
Net banking products exposure to corporates and other non-banks, after application of credit hedges | 41,250 | 58,963 | ||||||||||||||
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è | Refer to “Note 29b Reclassification of financial assets” in the “Financial information” section of this report for more information on reclassified securities including carrying values of student loan auction rate securities, monoline protected assets and US commercial real estate positions |
CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||||||||||||||||||||||||||||||
Loss given default (LGD) buckets | average | average | |||||||||||||||||||||||||||||||||||||||||||||||
UBS internal rating | Exposure | 0–25% | 26–50% | 51–75% | 76–100% | LGD (%) | Exposure | LGD (%) | |||||||||||||||||||||||||||||||||||||||||
Investment grade | 26,273 | 9,850 | 10,689 | 3,107 | 2,628 | 39 | 39,659 | 36 | |||||||||||||||||||||||||||||||||||||||||
Sub-investment grade | 14,977 | 6,492 | 5,571 | 2,330 | 583 | 34 | 19,304 | 31 | |||||||||||||||||||||||||||||||||||||||||
of which: 6 | 1,407 | 102 | 942 | 302 | 62 | 47 | 2,199 | 32 | |||||||||||||||||||||||||||||||||||||||||
of which: 7 | 2,044 | 1,210 | 339 | �� | 338 | 157 | 33 | 2,307 | 43 | ||||||||||||||||||||||||||||||||||||||||
of which: 8 | 1,293 | 342 | 705 | 228 | 18 | 37 | 1,370 | 45 | |||||||||||||||||||||||||||||||||||||||||
of which: 9 | 2,151 | 896 | 965 | 265 | 26 | 31 | 3,811 | 19 | |||||||||||||||||||||||||||||||||||||||||
of which: 10 | 1,486 | 525 | 720 | 139 | 102 | 32 | 1,674 | 36 | |||||||||||||||||||||||||||||||||||||||||
of which: 11 | 2,168 | 1,104 | 661 | 396 | 7 | 30 | 4,422 | 28 | |||||||||||||||||||||||||||||||||||||||||
of which: 12 | 1,684 | 1,287 | 277 | 65 | 55 | 18 | 687 | 23 | |||||||||||||||||||||||||||||||||||||||||
of which: 13 | 357 | 158 | 133 | 63 | 3 | 31 | 221 | 21 | |||||||||||||||||||||||||||||||||||||||||
of which: defaulted | 2,386 | 870 | 830 | 535 | 151 | 44 | 2,612 | 33 | |||||||||||||||||||||||||||||||||||||||||
Net banking products exposure to corporates and other non-banks, after application of credit hedges | 41,250 | 16,342 | 16,260 | 5,437 | 3,211 | 37 | 58,963 | 35 | |||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Chemicals | 1,347 | 3,072 | |||||||||||||||||||||||||||||||||||||||||||||||
Electricity, gas, water supply | 2,120 | 3,685 | |||||||||||||||||||||||||||||||||||||||||||||||
Financial institutions | 16,316 | 25,716 | |||||||||||||||||||||||||||||||||||||||||||||||
Manufacturing | 6,695 | 7,978 | |||||||||||||||||||||||||||||||||||||||||||||||
Mining | 2,284 | 2,588 | |||||||||||||||||||||||||||||||||||||||||||||||
Public authorities | 2,657 | 3,246 | |||||||||||||||||||||||||||||||||||||||||||||||
Retail and wholesale | 1,530 | 1,855 | |||||||||||||||||||||||||||||||||||||||||||||||
Transport, storage and communication | 4,057 | 5,794 | |||||||||||||||||||||||||||||||||||||||||||||||
Other | 4,243 | 5,030 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | 41,250 | 58,963 | |||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Switzerland | 543 | 1,437 | |||||||||||||||||||||||||||||||||||||||||||||||
Other Europe | 6,759 | 9,354 | |||||||||||||||||||||||||||||||||||||||||||||||
North America | 29,222 | 42,100 | |||||||||||||||||||||||||||||||||||||||||||||||
Latin America | 152 | 1,550 | |||||||||||||||||||||||||||||||||||||||||||||||
Asia/Pacific | 4,014 | 3,833 | |||||||||||||||||||||||||||||||||||||||||||||||
Africa/Middle East | 559 | 689 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | 41,250 | 58,963 | |||||||||||||||||||||||||||||||||||||||||||||||
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Credit loss expenses | ||||||
Under IFRS our credit loss expenses charged to the income statement represent the total credit losses actually experienced in the period from banking products and securities financing transactions. | ||||||
In 2009, we experienced net credit loss expenses of CHF 1,832 million, of which CHF 425 million was due to impairment charges taken on reclassified securities in the Investment Bank. In comparison, we recorded net credit loss expenses of CHF 2,996 million in 2008. | ||||||
The Investment Bank recorded net credit loss expenses of CHF 1,698 million for 2009, compared with net credit loss expenses of CHF 2,575 million in 2008. Excluding the credit loss expenses from reclassified securities of CHF 425 million, the Investment Bank’s net credit loss expenses amounted to CHF 1,273 million in 2009. | ||||||
Wealth Management & Swiss Bank reported net credit loss expenses of CHF 133 million for 2009, compared with CHF 392 million in 2008. Releases of allowances made against lombard loans in 2009 contributed to this positive development. | ||||||
è | Refer to “Note 1 Summary of significant accounting policies” in the “Financial information” section of this report for more information on “incurred loss” concept | |||||
Impairment and default – distressed claims | ||||||
With respect to distressed claims resulting from banking products, we distinguish between loans that are “past due” and “impaired”. We consider a loan to be past due when a contractual payment has been missed. We consider a loan as impaired if it is probable that we will not fully recover all contractual payments due under the loan as a result of the borrower’s inability to meet its obligations after realization of available collateral. Past due but not impaired loans have suffered missed payments but are not considered impaired because we expect to collect all amounts due under the contractual terms of the loans or the equivalent value. | ||||||
We also assess derivative counterparties and claims from securities financing transactions for default and impairment using generally the same principles and processes that we use for banking products. | ||||||
We have processes to ensure that the carrying values of impaired claims are determined in compliance with IFRS requirements. Our credit controls applied to valuation and workout are the same for both amortized cost and fair-valued credit products. We assess each case and our workout strategy and estimation of recoverable amounts are independently approved. | ||||||
We also assess our portfolios of claims carried at amortized cost with similar credit risk characteristics for collective impairment to consider if these portfolios contain impaired obligations where the individual impaired items cannot yet be identified. |
Our portfolios considered impaired on a collective basis are not included in the totals of impaired loans in the tables shown in the discussion of the composition of credit risk for business divisions in the “Credit risk” section of this report. | ||||||
Our assessment of collective impairment differs depending on the nature of the underlying obligations. In our retail and corporate banking business in Switzerland where delayed payments are routinely observed, we typically review individual positions for impairment only after they have been in arrears for a certain time. To cover the time lag between the occurrence of an impairment event and its identification, we establish collective loan loss allowances based on the expected loss for the portfolio over the average period between trigger events and the identification of individual impairment. Collective loan loss allowances of this kind are typically not required for our investment banking businesses because we continuously monitor individual counterparties and exposures to identify impairment events at an early stage. | ||||||
Additionally, for all our portfolios we assess whether there have been any unforeseen developments which might result in impairments that cannot be immediately identified. These events could be stress situations such as a natural disaster or a country crisis, or they could result from structural changes in the legal or regulatory environment. To determine whether an event-driven collective impairment exists, we use a set of global economic drivers to regularly assess the most vulnerable countries and review the impact of any potential impairment event. | ||||||
The recognition of impairment in our financial statements depends on the accounting treatment of the claim. For products carried at amortized cost, impairment is recognized through the creation of an allowance or provision, which is charged to the income statement as credit loss expense. For products recorded at fair value such as derivatives, impairment is recognized through a credit valuation adjustment, which is charged to the income statement through theNet trading incomeline. | ||||||
è | Refer to “Note 27a Valuation principles” in the “Financial information” section of this report for more information on credit valuation adjustments | |||||
Impaired loans, allowances and provisions | ||||||
The credit risk exposures reported in the “Allowances and provisions for credit losses” table represent the IFRS balance sheet view of our gross lending portfolio comprising the balance sheet line itemsDue from banksandLoans.The table also shows the IFRS reported allowances for credit losses and impairments as well as our impaired lending portfolio. | ||||||
The table shows that our allowances and provisions for credit losses decreased by 8.4% to CHF 2,680 million at 31 December 2009 from CHF 2,927 million at the end of 2008. | ||||||
As reported in second quarter 2009, we implemented a threshold for designating a reclassified security as an impaired loan. Under this policy a reclassified security is considered impaired if the carrying value at balance sheet date is |
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Risk management and control |
Allowances and provisions for credit losses | ||||||||||||||||||||||||||||||||
CHF million | Wealth Management & Swiss Bank | Wealth Management Americas | Investment Bank | Others1 | UBS | |||||||||||||||||||||||||||
As of | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | ||||||||||||||||||||||
Due from banks | 2,683 | 5,510 | 1,074 | 1,096 | 42,568 | 57,485 | 282 | 382 | 46,606 | 64,473 | ||||||||||||||||||||||
Loans | 197,178 | 206,704 | 21,496 | 23,981 | 90,700 | 111,798 | 101 | 730 | 309,475 | 343,213 | ||||||||||||||||||||||
of which: related to reclassified securities2 | 19,255 | 21,840 | 19,255 | 21,840 | ||||||||||||||||||||||||||||
Total lending portfolio, gross3 | 199,861 | 212,214 | 22,569 | 25,077 | 133,268 | 169,282 | 383 | 1,113 | 356,081 | 407,685 | ||||||||||||||||||||||
Allowances for credit losses | (1,034) | (1,169 | ) | (4) | (25 | ) | (1,642) | (1,733 | ) | 0 | 0 | (2,680) | (2,927 | ) | ||||||||||||||||||
of which: related to reclassified securities | (162) | (130 | ) | (162) | (130 | ) | ||||||||||||||||||||||||||
Total lending portfolio, net4 | 198,827 | 211,044 | 22,566 | 25,052 | 131,625 | 167,550 | 383 | 1,113 | 353,402 | 404,758 | ||||||||||||||||||||||
Impaired lending portfolio, gross5 | 1,805 | 2,959 | 4 | 39 | 5,056 | 4,436 | 0 | 0 | 6,865 | 7,434 | ||||||||||||||||||||||
of which: related to reclassified securities | 1,090 | 200 | 1,090 | 200 | ||||||||||||||||||||||||||||
Estimated liquidation proceeds of collateral for impaired loans | (530) | (1,576 | ) | 0 | (18 | ) | (1,670) | (945 | ) | 0 | 0 | (2,200) | (2,539 | ) | ||||||||||||||||||
of which: related to reclassified securities | (958) | (94 | ) | (958) | (94 | ) | ||||||||||||||||||||||||||
Impaired lending portfolio, net of collateral | 1,275 | 1,383 | 4 | 21 | 3,386 | 3,491 | 0 | 0 | 4,665 | 4,895 | ||||||||||||||||||||||
Allocated allowances for impaired lending portfolio | 984 | 1,146 | 4 | 25 | 1,642 | 1,733 | 0 | 0 | 2,630 | 2,904 | ||||||||||||||||||||||
Other allowances and provisions | 49 | 24 | 0 | 0 | 0 | 0 | 0 | 0 | 49 | 24 | ||||||||||||||||||||||
Total allowances and provisions for credit losses in lending portfolio | 1,034 | 1,169 | 4 | 25 | 1,642 | 1,733 | 0 | 0 | 2,680 | 2,927 | ||||||||||||||||||||||
Allowances and provisions for credit losses outside of lending portfolio | 19 | 24 | 0 | 0 | 117 | 119 | 5 | 0 | 141 | 143 | ||||||||||||||||||||||
Ratios | ||||||||||||||||||||||||||||||||
Allowances and provisions as a % of total lending portfolio, gross | 0.5 | 0.6 | 0.0 | 0.1 | 1.2 | 1.0 | 0.0 | 0.0 | 0.8 | 0.7 | ||||||||||||||||||||||
Impaired lending portfolio as a % of total lending portfolio, gross | 0.9 | 1.4 | 0.0 | 0.2 | 3.8 | 2.6 | 0.0 | 0.0 | 1.9 | 1.8 | ||||||||||||||||||||||
Impaired lending portfolio excluding reclassified securities as a % of total lending portfolio, gross excluding reclassified securities | 3.5 | 2.9 | 1.7 | 1.9 | ||||||||||||||||||||||||||||
Allocated allowances as a % of impaired lending portfolio, gross | 54.5 | 38.7 | 100.0 | 64.1 | 32.5 | 39.1 | 0.0 | 0.0 | 38.3 | 39.1 | ||||||||||||||||||||||
Allocated allowances as a % of impaired lending portfolio, net of collateral | 77.2 | 82.9 | 100.0 | 119.0 | 48.5 | 49.6 | 0.0 | 0.0 | 56.3 | 59.3 | ||||||||||||||||||||||
1 Includes Global Asset Management and the Corporate Center. 2 This excludes reclassified loan underwriting positions with a value of CHF 1,789 million as of 31.12.09(31.12.08: CHF 3,713 million), which are included in the risk view of loan exposures. 3 Excludes loans designated at fair value, but includes margin accounts for exchange-traded derivatives transactions, cash collateral delivered for OTC derivatives and cash current accounts from prime brokerage (cash leg) of total CHF 70,121 million (of whichDue from banks:CHF 29,770 million, of whichLoans:CHF 40,351 million) (31.12.08: CHF 95,610 million of which due from banks: CHF 46,757 million, of which loans: CHF 48,853 million). 4 Reconciles to the balance sheet carrying values ofDue from banksandLoans,which are reported net of allowances for credit losses. 5 Excludes reclassified securities with adverse cash flow estimate revisions cumulatively below 5% of the carrying value at reclassification date, adjusted for redemptions. 31.12.08 numbers have been adjusted to reflect this change. |
Impaired assets by type of financial instrument | ||||||||||||||||||
CHF million | Impaired exposure | Estimated liquidation proceeds of collateral | Specific allowances, provisions and credit valuation adjustments | Net impaired exposure | ||||||||||||||
Impaired loans | 6,865 | (2,200 | ) | (2,630 | ) | 2,035 | ||||||||||||
Impaired contingent claims | 350 | (90 | ) | 260 | ||||||||||||||
Defaulted derivatives contracts | 4,607 | (3,061 | ) | 1,546 | ||||||||||||||
Defaulted securities financing transactions | 98 | (47 | ) | (51 | ) | 0 | ||||||||||||
Total 31.12.09 | 11,920 | (2,247 | ) | (5,831 | ) | 3,841 | ||||||||||||
Total 31.12.081 | 13,947 | (2,539 | ) | (7,252 | ) | 4,156 | ||||||||||||
1 Impaired exposure was restated from CHF 15,658 million originally reported in our Annual Report for 2008, estimated liquidation proceeds of collateral was restated from CHF 3,930 million. In 2009, we implemented a threshold for designating a reclassified security as an “impaired loan”. Under this policy, a reclassified security is considered impaired if the carrying value at balance sheet date is on a cumulative basis 5% or more below the carrying value at reclassification date adjusted for redemptions. |
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on a cumulative basis 5% or more below the carrying value at reclassification date adjusted for redemptions. In order to ensure year-on-year comparability, we have restated our 31 December 2008 Investment Bank and the Group gross impaired lending portfolio accordingly. | ||
Our gross impaired lending portfolio decreased to CHF 6,865 million on 31 December 2009 from CHF 7,434 million on 31 December 2008. | ||
The ratio of the impaired lending portfolio to the total lending portfolio (both measured gross) was 1.9% on 31 December 2009 compared with 1.8% on 31 December 2008. | ||
We reclassified loans and receivables with a carrying amount of CHF 58 million and CHF 224 million from impaired to performing during 2009 and 2008, respectively. This reclassification occurred because the loans had either been renegotiated and the new terms and conditions met normal market criteria for the quality of the obligor and type of loan, or because the financial position of the obligor improved, enabling it to repay any past due amounts such that we deemed future principal and interest to be fully collectible in accordance with the original contractual terms. | ||
Collateral held against our impaired loans portfolio mainly consisted of real estate and multi-asset-backed securities. It is our policy to dispose of foreclosed real estate as soon as practicable. The carrying amount of foreclosed property recorded in our balance sheet underOther assetsat the end of 2009 and 2008 amounted to CHF 245 million and CHF 280 million, respectively. | ||
We seek to liquidate collateral held in the form of financial assets expeditiously and at prices considered fair. This may require us to purchase assets for our own account, where permitted by law, pending orderly liquidation. | ||
The table “Impaired assets by type of financial instrument” includes impaired loans, impaired off-balance sheet claims and defaulted derivatives and repurchase/reverse |
repo contracts, which are subject to the same workout and recovery processes. Our impaired assets decreased by CHF 2.0 billion to CHF 11.9 billion at 31 December 2009. | ||||||||
After deducting allocated specific allowances, provisions and credit valuation adjustments of CHF 5.8 billion and the estimated liquidation proceeds of collateral of CHF 2.2 billion, net impaired assets amounted to CHF 3.8 billion in 2009. | ||||||||
è | Refer to “Note 9b Due from banks and loans” in the “Financial information” section of this report for more information on the changes in allowances and provisions for credit losses | |||||||
Past due but not impaired loans | ||||||||
The table below shows a breakdown of our total loan balances on loans where payments have been missed but which we do not consider impaired because we expect to collect the amounts due. The loan balances in the table relate to our Wealth Management & Swiss Bank, where delayed payments are routinely observed. The past due but not impaired categorization is not typically applicable to our Investment Bank lending businesses because we continuously monitor individual counterparties and exposures to identify impairment events at an early stage, including missed payments. | ||||||||
Compared with 31 December 2008, our past due but not impaired loan exposures decreased by 47% to CHF 0.9 billion on 31 December 2009. This decrease resulted primarily from recoveries in lombard lending exposures and lower levels of excesses experienced by Wealth Management & Swiss Bank in 2009. Our past due but not impaired loans in the greater-than-90-day category related primarily to mortgage loans. However, our overall past due but not impaired levels on mortgage loans were not significant in the context of the size of the mortgage portfolio. |
Past due but not impaired loans | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
1–10 days | 138 | 522 | ||||||
11–30 days | 62 | 89 | ||||||
31–60 days | 78 | 272 | ||||||
61–90 days | 17 | 331 | ||||||
> 90 days | 635 | 547 | ||||||
of which: past due but not impaired mortgage loans > 90 days | 511 | 425 | ||||||
Total | 930 | 1,761 | ||||||
Past due but not impaired mortgage loans | ||||||||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||||||||
Total mortgage exposure | of which: past due but not impaired > 90 days | Total mortgage exposure | of which: past due but not impaired > 90 days | |||||||||||
Total | 130,348 | 511 | 128,441 | 425 | ||||||||||
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Risk management and control
CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Investment grade | 18,847 | 24,616 | |||||||||||||||||||||||||||||||||||||||||||||||
Sub-investment grade | 3,568 | 8,095 | |||||||||||||||||||||||||||||||||||||||||||||||
Distressed | 3 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||
Total | 22,418 | 32,715 | |||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Total | Banking products | Traded products | Financial investments | Tradable assets | ||||||||||||||||||||||||||||||||||||||||||||
As of | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||
Emerging Europe | 2,117 | 3,706 | 664 | 1,454 | 542 | 1,177 | 136 | 211 | 775 | 864 | |||||||||||||||||||||||||||||||||||||||
Emerging Asia | 13,725 | 16,460 | 4,299 | 3,594 | 4,949 | 7,059 | 652 | 879 | 3,825 | 4,928 | |||||||||||||||||||||||||||||||||||||||
Emerging America | 3,077 | 6,802 | 309 | 1,491 | 485 | 2,157 | 100 | 167 | 2,183 | 2,987 | |||||||||||||||||||||||||||||||||||||||
Middle East/Africa | 3,499 | 5,747 | 1,131 | 1,338 | 1,894 | 3,980 | 23 | 451 | 429 | ||||||||||||||||||||||||||||||||||||||||
Total | 22,418 | 32,715 | 6,403 | 7,877 | 7,870 | 14,373 | 911 | 1,257 | 7,234 | 9,208 | |||||||||||||||||||||||||||||||||||||||
Temporary exposures1 | 340 | 738 | |||||||||||||||||||||||||||||||||||||||||||||||
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Additional information on our exposures to countries that we categorize as emerging markets is provided in the “Emerging markets exposure by UBS internal country rating category” and “Emerging markets exposure by major geographical area and product type” tables. | ||
We use stress testing to assess the potential financial impact of a severe emerging markets crisis. This involves identifying countries that may potentially be subject to a crisis event, determining potential losses and making assumptions about recovery rates depending on the types of transactions involved and their economic importance to the affected countries. | ||
Country risk exposure | ||
Our exposures to emerging market countries amounted to CHF 22.4 billion on 31 December 2009, compared with CHF 32.7 billion on 31 December 2008. The reduction of CHF 10.3 billion in our total emerging markets exposure occurred across all markets. | ||
Based on the main country rating categories, 84% of our emerging market country exposures (excluding those which are temporary exposures) on 31 December 2009 were rated investment grade, compared with 75% on 31 December 2008. The change in our risk profile in these markets was due to the fact that a large proportion of the exposure reduction was related to sub-investment grade countries, in particular Brazil, following the sale of UBS Pactual. The table “Emerging markets exposure by major geographical area and product type” analyzes our emerging market country exposures by major geographical area and product type on 31 December 2009 compared with 31 December 2008. Our |
temporary exposures arising from loan underwriting in these markets are shown separately in the table. | ||||||||
Debt investments | ||||||||
Debt investments classified for IFRS asFinancial investments available-for-salecan be broadly categorized as money market instruments and debt securities which are mainly held for statutory, regulatory or liquidity reasons. Debt investments may also include non-performing loans which were purchased in the secondary market by the Investment Bank. | ||||||||
The risk control framework that we apply to debt instruments classified asFinancial investments available-for-salevaries depending on the nature of the instruments and the purpose for which we hold them. Our exposures may be included in market risk limits or subject to specific monitoring, which may include interest rate sensitivity analysis, and firm-wide earnings-at-risk, capital-at-risk and combined stress test metrics. | ||||||||
Composition of debt investments | ||||||||
Debt financial instruments classified asFinancial investments available-for-saleincreased significantly to CHF 80.4 billion at 31 December 2009 compared with CHF 3.6 billion at 31 December 2008. This increase resulted from the strategic decision to rebalance our liquidity reserve, which led to a shift from repurchase agreements and trading portfolios into debt instruments available-for-sale. These instruments primarily comprised highly liquid short-term securities issued by governments and government-controlled institutions. | ||||||||
è | Refer to “Note 13 Financial investments available-for-sale” in the “Financial information” section of this report for more information |
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Risk and treasury management Risk management and control | ||
Market risk |
Market risk is the risk of loss from changes in market variables. There are two broad categories of market variables: general market risk factors and specific components. General market risk factors include interest rates, equity index levels, exchange rates, commodity prices and general credit spreads. The volatility of these risk factors and the correlations between them are also general market risk factors. Specific components relate to the prices of debt and equity instruments which result from factors and events particular to individual companies or entities. Sources of market risk We take general and specific market risks both in our trading activities and in some non-trading businesses. Trading Most of our market risk arises from our trading activities in the Investment Bank, which include market-making, facilitation of client business and associated position taking in cash and derivative markets for equities, fixed income, interest rates, foreign exchange and commodities. Our trading businesses are subject to multiple market risk limits. Traders are required to manage their risks within these limits, which may involve utilizing hedging and risk mitigation strategies. These strategies can expose the firm to ad- |
ditional risks as the hedge instrument and the position being hedged may not always move in parallel (often referred to as “basis risk”). We also actively manage such basis risks. Management and Risk Control may also give instructions for risk to be reduced, even when limits are not exceeded. The asset management and wealth management businesses carry small trading positions, principally to support client activity. The market risk from these positions is not material to UBS as a whole. Non-trading Market risk exposures – primarily general interest rate and foreign exchange risks – may arise from non-trading activities such as retail banking and lending in our wealth management businesses and retail and corporate banking business in Switzerland, the Investment Bank’s lending businesses and our treasury activities (primarily from funding, balance sheet, liquidity and capital management needs). Equity and certain debt investments can also give rise to specific market risks. In the Investment Bank, non-trading foreign exchange risks are managed under market risk limits and non-trading interest rate risk is either managed under market risk limits or subject to specific monitoring. For example, the market risks associated with the portfolio of assets that were reclassified toLoans and receivablesfromHeld-for-tradingin |
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fourth quarter 2008 and first quarter 2009 are subject to specific monitoring, which includes interest rate and credit spread sensitivity analysis, as well as being reported in firm-wide earnings-at-risk, capital-at-risk and combined stress test metrics. In our other business divisions, exposures to market risks also arise from non-trading activities, the largest being the interest rate risks arising from customer deposits and mortgage business in Wealth Management & Swiss Bank. These market risks are generally transferred to the Investment Bank or Group Treasury, which manage the positions as part of their trading risk portfolios within their allocated market risk limits. Market risks that are retained by our other business divisions are not significant relative to the firm’s overall risk, and exposures are either subject to market risk measures and controls or specific monitoring. In addition to managing market risks transferred from other business divisions, Group Treasury also assumes market risk from its funding, balance sheet, liquidity and capital management responsibilities. The risks resulting from these activities are either covered by market risk limits allocated to Group Treasury or subject to specific monitoring. |
è | Refer to the “Treasury management” section of this report for more information on Group Treasury’s risk management activities |
Market risk limits | ||
We have a limit framework to control our market risks. We have two major portfolio measures of market risk – VaR and stress loss – which are common to all our busi- |
ness divisions and subject to limits that are approved by the BoD. In the Investment Bank, these portfolio measures are complemented by concentration and other supplementary limits on portfolios, asset classes and products, and also cover exposures to general market risk factors and single name risk. Single name risk (or issuer risk) is a measure of our exposure to the tradable instruments (debt, equity and derivatives) of a single issuer (or issuer group) were that issuer subject to a credit event including default. Our concentration and other supplementary limits take a variety of forms including values (market or notional) and risk sensitivities, which are measures of exposure to a given risk factor such as interest rates, credit spreads, equity indices, foreign exchange rates or volatilities. These limits take into account the extent of market liquidity and volatility, available operational capacity, valuation uncertainty, and for our single name exposures the credit quality of issuers. Our exposures from security underwriting commitments are subject to the same measures and controls as secondary market positions. Underwriting commitments are also generally reviewed by our Commitment Committee, which includes representation from both business and control functions. Underwriting commitments are approved under specific delegated risk management and risk control authorities. Market risk limits are set for each of the business divisions and Group Treasury. The limit framework in the Investment Bank is more detailed than in the other business divisions, reflecting the nature and magnitude of the risks it takes. |
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Risk and treasury management Risk management and control | ||
Value-at-risk definition and limitations | ||
VaR is a statistical measure of market risk, representing the market risk losses that potentially could be realized over a set time horizon at an established level of confidence. This assumes no change in our trading positions over the relevant time horizon. We use a single VaR model for both internal management purposes and for determining market risk regulatory capital requirements, although the confidence levels and time horizons differ. | ||
Our VaR model is approved by FINMA and ongoing significant revisions to our VaR methodology and model are also subject to regulatory approval. | ||
The firm’s VaR model makes use of five years of historical data and is calibrated to a 1-day 95% measure for our internal management purposes. However, in accordance with Basel II and FINMA requirements, we use a 1-day 99% VaR for backtesting and a 10-day 99% VaR for determining market risk regulatory capital. We calculate VaR on a daily basis on our end-of-day positions. Our VaR calculation is based on the application of historical changes in market risk factors |
directly to our current positions – a method known as historical simulation. Actual realized losses may differ from those implied by our VaR. All VaR measures are subject to limitations and must be interpreted accordingly. The limitations of VaR include the following: | ||||
– | The five-year historical period used in creating our VaR measure will include fluctuations in market rates and prices that differ from those observed in future periods. In particular, the use of a five-year window means that sudden increases in market volatility will not tend to increase VaR as quickly as the use of shorter historical observation periods, but the impact of the increase will impact our VaR for a longer period of time. | |||
– | The VaR measure is calibrated to a specified level of confidence and may not indicate potential losses beyond this confidence level. | |||
– | The 1-day time horizon in the VaR measure (or 10-day in the case of regulatory VaR) may not fully capture the market risk of positions that cannot be closed out or hedged within the specified period. |
UBS: Value-at-Risk (1-day, 95% confidence, 5 years of historical data) | |||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 31.12.09 | Year ended 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.09 | Min. | Max. | Average | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||
Business divisions | |||||||||||||||||||||||||||||||||||||||||||||||||
Investment Bank | 43 | 75 | 55 | 54 | 57 | 105 | 79 | 74 | |||||||||||||||||||||||||||||||||||||||||
Wealth Management & Swiss Bank1 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||
Wealth Management Americas1 | 2 | 3 | 3 | 3 | 0 | 3 | 1 | 3 | |||||||||||||||||||||||||||||||||||||||||
Global Asset Management | 0 | 1 | 0 | 0 | 0 | 2 | 1 | 1 | |||||||||||||||||||||||||||||||||||||||||
Corporate Center | 2 | 16 | 5 | 4 | 3 | 25 | 9 | 6 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect | 2 | 2 | (8 | ) | (7 | ) | 2 | 2 | (11 | ) | (6 | ) | |||||||||||||||||||||||||||||||||||||
Total management VaR3 | 44 | 78 | 55 | 54 | 59 | 106 | 79 | 78 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect (%) | (13 | ) | (11 | ) | (12 | ) | (7 | ) | |||||||||||||||||||||||||||||||||||||||||
1 Split of former Global Wealth Management & Business Banking into Wealth Management & Swiss Bank and WM Americas not available for 2008, therefore all 2008 Global Wealth Management & Business Banking figures are shown under WM Americas. 2 As the minimum and maximum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification effect. 3 Includes all positions subject to internal management VaR limits. |
Investment Bank: Value-at-Risk (1-day, 95% confidence, 5 years of historical data) | Year ended 31.12.09 | Year ended 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.09 | Min. | Max. | Average | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||
Risk type | |||||||||||||||||||||||||||||||||||||||||||||||||
Equities | 13 | 36 | 22 | 21 | 18 | 63 | 38 | 19 | |||||||||||||||||||||||||||||||||||||||||
Interest rates | 16 | 38 | 24 | 23 | 27 | 85 | 46 | 31 | |||||||||||||||||||||||||||||||||||||||||
Credit spreads | 33 | 65 | 46 | 50 | 35 | 88 | 56 | 61 | |||||||||||||||||||||||||||||||||||||||||
Foreign exchange | 2 | 12 | 6 | 4 | 5 | 15 | 8 | 9 | |||||||||||||||||||||||||||||||||||||||||
Energy, metals & commodities | 2 | 5 | 4 | 3 | 3 | 13 | 6 | 5 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect | 1 | 1 | (47 | ) | (47 | ) | 1 | 1 | (75 | ) | (51 | ) | |||||||||||||||||||||||||||||||||||||
Total management VaR2 | 43 | 75 | 55 | 54 | 57 | 105 | 79 | 74 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect (%) | (46 | ) | (47 | ) | (49 | ) | (41 | ) | |||||||||||||||||||||||||||||||||||||||||
1 As the minimum and maximum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification effect. 2 Includes all positions subject to internal management VaR limits. |
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– | In certain cases, VaR calculations approximate the impact of changes in risk factors on the values of positions and portfolios. This may happen because the number of risk factors included in the VaR model is necessarily limited – for example, yield curve risk factors do not exist for all future dates. | |||
– | The effect of extreme market moves is subject to estimation errors which may result from non-linear interaction effects and the potential for actual volatility and correlation levels to differ from assumptions implicit in the VaR calculations. | |||
We continue to review the performance of our VaR implementation which includes a review of risks not included in VaR. We will continue to enhance our VaR model in order to more accurately capture the relationships between the market risks associated with our risk positions, as well as the revenue impact of large market movements for particular trading positions. Value at risk developments in 2009 We made a number of changes to our VaR model and methodology in 2009, while also changing the scope of the regu- |
latory and internal management VaR to better reflect our underlying risks. |
– | In third quarter 2009, we changed the calibration of our management VaR from a 10-day 99% measure to a 1-day 95% measure. We consider that a 1-day 95% measure reflects the way that trading risks are viewed and managed by the business and can be more directly compared with daily mark-to-market revenues. We continue to use a 10-day 99% VaR to determine regulatory capital and a 1-day 99% measure to backtest our VaR model in accordance with Basel II and FINMA requirements. | |||
– | We increased the scope of regulatory VaR in third quarter 2009 to incorporate a significant proportion of our market risk exposures to credit valuation adjustments (CVA). CVA is the mark-to-market cost of protection required to hedge credit risk from counterparties in our over-the-counter derivatives portfolio. This change more accurately represents the underlying risk exposures alongside their related hedges in our regulatory VaR. The same enhance- |
Year ended 31.12.09 | Year ended 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.09 | Min. | Max. | Average | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||
Business divisions | |||||||||||||||||||||||||||||||||||||||||||||||||
Investment Bank | 179 | 541 | 315 | 286 | 240 | 601 | 374 | 485 | |||||||||||||||||||||||||||||||||||||||||
Wealth Management & Swiss Bank1 | 0 | 1 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||
Wealth Management Americas1 | 15 | 32 | 21 | 30 | 1 | 17 | 4 | 16 | |||||||||||||||||||||||||||||||||||||||||
Global Asset Management | 0 | 7 | 2 | 1 | 1 | 7 | 2 | 6 | |||||||||||||||||||||||||||||||||||||||||
Corporate Center | 2 | 67 | 14 | 7 | 3 | 93 | 26 | 10 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect | 2 | 2 | (37 | ) | (23 | ) | 2 | 2 | (34 | ) | (25 | ) | |||||||||||||||||||||||||||||||||||||
Total regulatory VaR | 187 | 545 | 315 | 301 | 246 | 609 | 373 | 492 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect (%) | (11 | ) | (7 | ) | (8 | ) | (5 | ) | |||||||||||||||||||||||||||||||||||||||||
Year ended 31.12.09 | Year ended 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.09 | Min. | Max. | Average | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||
Risk type | |||||||||||||||||||||||||||||||||||||||||||||||||
Equities | 55 | 115 | 71 | 57 | 82 | 185 | 131 | 117 | |||||||||||||||||||||||||||||||||||||||||
Interest rates | 64 | 149 | 98 | 116 | 112 | 364 | 198 | 131 | |||||||||||||||||||||||||||||||||||||||||
Credit spreads | 216 | 489 | 332 | 322 | 151 | 613 | 322 | 412 | |||||||||||||||||||||||||||||||||||||||||
Foreign exchange | 4 | 55 | 27 | 27 | 12 | 58 | 28 | 30 | |||||||||||||||||||||||||||||||||||||||||
Energy, metals & commodities | 9 | 25 | 16 | 12 | 14 | 60 | 30 | 22 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect | 1 | 1 | (229 | ) | (248 | ) | 1 | 1 | (335 | ) | (226 | ) | |||||||||||||||||||||||||||||||||||||
Total regulatory VaR | 179 | 541 | 315 | 286 | 240 | 601 | 374 | 485 | |||||||||||||||||||||||||||||||||||||||||
Diversification effect (%) | (42 | ) | (46 | ) | (47 | ) | (32 | ) | |||||||||||||||||||||||||||||||||||||||||
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Year ended 31.12.09 | Year ended 31.12.08 | ||||||||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.09 | Min. | Max. | Average | 31.12.08 | |||||||||||||||||||||||||||||
Investment Bank | Regulatory VaR2 | 63 | 167 | 103 | 78 | 96 | 210 | 132 | 162 | ||||||||||||||||||||||||||||
UBS | Regulatory VaR2 | 64 | 170 | 104 | 79 | 97 | 207 | 133 | 163 | ||||||||||||||||||||||||||||
ment was implemented for our management VaR during third quarter 2008. Monoline CVA and related exposures were not included as part of this implementation and also remain outside the scope of management VaR. | ||||||
– | Concurrently with the abovementioned changes, we changed our VaR methodology to an equivalent expected tail loss (ETL) measure. The ETL measure considers the overall distribution of losses in the VaR tail to determine the VaR loss at any given confidence level. We therefore consider the ETL measure to be more stable and to better identify losses around the VaR tail than a pure quantile measure based on a single observation in the VaR distribution. | |||||
The tables in this section show our 1-day 95% management VaR, 10-day 99% management VaR and 1-day 99% backtesting VaR for the Group and the Investment Bank. We have provided additional granularity in the tables related to the Investment Bank by splitting out VaR for interest rate risk and credit spread risk. As at 31 December 2008 we disclosed an aggregate VaR for our interest rate and credit spread risk. | ||||||
The Investment Bank’s average management VaR (1-day 95%) decreased to CHF 55 million in 2009 compared with CHF 79 million in 2008. Period-end VaR was also lower at CHF 54 million at 31 December 2009 compared with CHF 74 million at 31 December 2008. |
This decrease was driven by our active risk reduction across all risk types in 2009. Credit spread VaR remained the dominant component of the Investment Bank’s VaR. | ||||||
VaR for the Group as a whole followed a similar pattern to Investment Bank VaR. | ||||||
è | Refer to “Note 27c Fair value of financial instruments” in the “Financial information” section of this report for valuation sensitivities on certain portfolios and positions | |||||
Backtesting | ||||||
Backtesting compares 1-day 99% regulatory VaR calculated for positions at the close of each business day with the revenues which actually arise on those positions on the following business day. Our backtesting revenues exclude non-trading revenues, such as fees and commissions, and estimated revenues from intraday trading. A backtesting exception occurs when backtesting revenues are negative and the absolute value of those revenues is greater than the previous day’s VaR. | ||||||
We experienced four backtesting exceptions in 2009 compared with 50 backtesting exceptions in 2008. This significant reduction resulted among other reasons from improvements made in the granularity of risk representation in our VaR model (particularly related to credit spread risk) and more frequent update of VaR parameters as well as lower market volatility experienced in 2009. |
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The first histogram above shows daily backtesting revenues in the Investment Bank for the whole of 2009. In the second histogram, the daily backtesting revenues are compared with the corresponding VaR over the same 12-month period for days when backtesting revenues were negative. A positive result in this histogram represents a loss less than VaR while a negative result represents a loss greater than VaR and therefore a backtesting exception. | ||
We investigate all backtesting exceptions and any exceptional revenues on the profit side of the VaR distribution. In addition, we report all backtesting results to senior business management, the Group CRO and business division CROs. | ||
Backtesting exceptions are also reported to internal and external auditors and relevant regulators. |
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Risk and treasury management
Risk management and control
Stress loss | ||||
As a complement to VaR, we run macro stress scenarios combining various market moves to reflect the most common types of potential stress events, and more targeted stress tests for our concentrated exposures and vulnerable portfolios. We enhanced our market risk stress framework in 2009 to increase the scope and granularity of our analysis. This included updating stress scenarios to more accurately capture the liquidity characteristics of different markets, asset classes and positions, and implementing a stress scenario to reflect the extreme market conditions that were experienced at the height of the financial crisis in fourth quarter 2008. | ||||
Our market risk stress testing framework attempts to provide a control framework that is forward-looking and responsive to changing market conditions. Our stress scenarios are therefore reviewed regularly in the context of the macro-economic and geopolitical environment by a committee comprised of representatives from the business divisions, Risk Control and Economic Research. | ||||
è | Refer to the discussion on stress loss in the “Risk management and control” section of this report | |||
Equity investments | ||||
We make investments for a variety of purposes, including revenue generation or as part of strategic initiatives. Other investments, such as exchange and clearing house memberships, are held in support of our business activities. We may also make investments in funds that we manage to fund or “seed” them at inception or to demonstrate alignment of our interests with those of investors. We have also bought and may be required to buy securities and units from funds that we have sold to clients. These include purchases of illiquid assets such as interests in hedge funds. | ||||
We may make direct investments in a variety of entities or buy equity holdings in both listed and unlisted companies, where such investments tend to be illiquid. The fair value of equity investments tends to be dominated by factors specific |
to the individual stocks, and our equity investments are generally intended to be held for the medium- or long-term and may be subject to lock-up agreements. For these reasons, we do not generally control these exposures using the market risk measures applied to trading activities. Such equity investments are, however, subject to controls, including pre-approval of new investments by business management and risk control, and regular monitoring and reporting. They are also included in our firm-wide earnings-at-risk and capital-at-risk, and combined stress test metrics. | ||||
Investments made as part of an ongoing business are also subject to our standard controls, including portfolio and concentration limits. Seed money and co-investments in UBS-managed funds made by Global Asset Management are, for example, subject to a portfolio limit. All investments must be approved according to delegated authorities, and are monitored and reported to senior management. | ||||
Under IFRS, equity investments may be classified asFinancial investments available-for-sale, Financial assets designated at fair value through profit or lossorInvestments in associates. | ||||
Composition of equity investments | ||||
At 31 December 2009, we held equity investments totaling CHF 3.1 billion, of which CHF 1.4 billion were classified asFinancial investments available-for-sale,CHF 0.8 billion asFinancial assets designated at fair valueand CHF 0.9 billion asInvestments in associates. | ||||
As of 31 December 2008, we held equity investments totaling CHF 3.7 billion, of which CHF 1.7 billion were classified asFinancial investments available-for-sale,CHF 1.1 billion asFinancial assets designated at fair valueand CHF 0.9 billion asInvestments in associates. | ||||
The vast majority of the CHF 0.8 billion ofFinancial assets designated at fair value represented the assets of trust entities associated with employee compensation schemes. They are broadly offset by liabilities to plan participants included inOther liabilities.The equivalent positions at 31 December 2008 amounted to CHF 1.1 billion. | ||||
è | Refer to “Note 12 Financial assets designated at fair value” in the “Financial information” section of this report for further information | |||
è | Refer to “Note 13 Financial investments available-for-sale” in the “Financial information” section of this report for further information | |||
è | Refer to “Note 14 Investment in associates” in the “Financial information” section of this report for further information |
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– | The expected loss component is a statistical measure based on our own historical loss experiences (which have been collected since 2002) and is used primarily to determine the expected loss portion of our capital requirement. | |
– | The unexpected loss component is based on a set of generic scenarios that represent categories of operational risks that are relevant to our firm. The scenarios used are based on analysis of internal and external event information, the prevailing business environment and our own internal control environment. This component is used to determine the unexpected loss portion of our capital requirement. |
è | Refer to “Capital management” section of this report for more information on the development of RWA for operational risk |
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Risk concentrations | ||||
A risk concentration exists where: (i) a position in financial instruments is affected by changes in a group of correlated factors, or a group of positions is affected by changes in the same risk factor or a group of correlated factors; and (ii) the exposure could, in the event of large but plausible adverse developments, result in significant losses. | ||||
The identification of risk concentrations requires judgment as potential future developments cannot be predicted and may vary from period to period. In determining whether we have a risk concentration, we consider a number of elements, both individually and collectively. These elements include: the shared characteristics of the instruments and counterparties; the size of the position or group of positions; the sensitivity of the position or group of positions to changes in risk factors; and the volatility and correlations of those factors. Also important in our assessment is the liquidity of the markets in which the instruments are traded, and the availability and effectiveness of hedges or other potential risk mitigants. The value of a hedge instrument may not always move in line with the position being hedged, and this mismatch is referred to as basis risk. | ||||
If we identify a risk concentration, we assess it to determine whether it should be reduced or mitigated, and we also evaluate the available means to do so. Our identified risk concentrations are subject to increased monitoring. | ||||
Identified risk concentrations | ||||
Based on our assessment of our portfolios and asset classes with potential for material loss in a stress scenario relevant to the current environment, we believe that our exposures to monoline insurers and student loan auction rate securities shown below can be considered risk concentrations on 31 December 2009, according to the abovementioned definition. | ||||
It is possible that material losses could occur on asset classes, positions and hedges other than those disclosed in this section of the report, particularly if the correlations that emerge in a stressed environment differ markedly from those we anticipated. We are exposed to price risk, basis risk, credit spread risk and default risk, and other idiosyncratic and correlation risks on both our equities and fixed income inventories. We also have price risk on our option to acquire the SNB StabFund’s equity. | ||||
In addition, we have lending, counterparty and country risk exposures that could sustain significant losses if economic conditions were to worsen. | ||||
è | Refer to the discussion of credit risk, market risk and operational risk above for more information on the risks to which we are exposed |
Previously disclosed risk concentrations | ||
In 2009, we significantly reduced exposures to our residual leveraged finance commitments, which were defined as loan commitments entered into with the intent to syndicate or distribute that we assigned an internal credit rating corresponding with external corporate credit ratings of BB– or worse at the time of reporting. We achieved these reductions through both sales and writedowns, and as a result our remaining positions in leveraged finance commitments are no longer considered as a risk concentration. We previously reported exposures on 31 December 2008 to leveraged finance commitments of USD 4.0 billion, net of cumulative gross writedowns, impairment charges and effective hedges. | ||
Exposure to monoline insurers | ||
The vast majority of our direct exposures to monoline insurers arise from OTC derivative contracts, mainly CDSs purchased to hedge specific positions. The “Exposure to monoline insurers, by rating” table shows the CDS protection we bought from monoline insurers to hedge specific positions. It illustrates the notional amounts of the protection held, the fair value of the underlying instruments and the fair value of the CDSs both prior to and after the CVA taken on these contracts. As a result of trade commutations and because a significant portion of the underlying assets are classified asLoans and receivablesfor accounting purposes, the change in CVA reported in the table does not equal the profit and loss associated with this portfolio during the year to 31 December 2009. | ||
Our exposure under CDS contracts with monoline insurers is calculated as the sum of the fair values of individual CDSs after credit valuation adjustments. This, in turn, depends on the valuation of the instruments against which protection has been bought. A positive fair value, or a valuation gain, on the CDS is recognized if the fair value of the instrument it is intended to hedge decreases. Changes in CVA are driven by changes in CDS fair value and also by movements in monoline credit spreads. | ||
We actively reduced our exposures to monoline insurers in 2009 by commuting trades with several monoline insurers. The trade commutations related primarily to US RMBS collateralized debt obligations (CDOs) that we had substantially written down on a fair value basis. Combined with the improved performance and composition of the portfolio, the fair values of our remaining assets hedged with monoline insurers increased over the period with a corresponding decrease in the fair values of the related CDSs. As at 31 December 2009, approximately 75% of the remaining assets were |
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Risk management and control
collateralized loan obligations (CLOs), 20% were collateralized mortgage-backed securities and other asset-backed securities, and 5% related to US RMBS CDOs. The vast majority of our CLO positions were rated AA and above. | ||
As at 31 December 2009, the total fair value of CDS protection purchased from monoline insurers decreased significantly to USD 2.3 billion (USD 5.3 billion at 31 December |
2008) after cumulative CVAs of USD 2.8 billion (USD 7.0 billion at 31 December 2008). These exposures do not take into account any hedging benefits. | ||||
In addition to credit protection bought on the positions detailed in the table above, we held direct derivative exposure to monolines of USD 329 million after CVAs of 199 million on 31 December 2009. | ||||
è | Refer to “Note 27c Fair value of financial instruments” in the “Financial information” section of this report for more information on CVA valuation and sensitivities |
Exposure to auction rate securities | ||||||||||
Auction rate securities held by the Investment Bank Approximately USD 1.6 billion at par value of student loan auction rate securities (ARS) were redeemed by issuers, or sold by us in the secondary market in 2009. We repurchased USD 3.7 billion at par value of student loan ARS in 2009, including approximately USD 0.5 billion of student loan ARS where we accelerated the repurchase from our clients to facilitate redemptions with issuers or resales. Combined with other redemptions directly with clients and amortizations, this resulted in an overall decrease of USD 3,958 million to USD 7,817 million as of 31 December 2009 compared with 31 December 2008, in our commitment to repurchase student loan ARS from clients as described below. Our inventory of student loan ARS increased by USD 1,985 million to USD 10,347 million in 2009 as a result of student loan ARS repurchased in the period which were partially offset by | the abovementioned redemptions, resales and amortizations. At 31 December 2009 approximately 69% of the collateral underlying our inventory of student loan ARS was backed by Federal Family Education Loan Program (FFELP) collateral, which was reinsured by the US Department of Education for not less than 97% of principal and interest. All of our student loan ARS positions are held as Loans and receivables and are subject to an impairment test that includes a detailed review of the quality of the underlying collateral. Impairment charges incurred on our inventory of student loan ARS in 2009 were not significant. Approximately 90% of the USD 7,817 million student loan ARS that we committed to purchase from clients were backed by FFELP-guaranteed collateral. As at 31 December 2009, we also held inventory with a carrying value of USD 1,423 million in US municipal ARS, USD 1,097 million in US taxable | auction preferred securities (APS) and USD 2,729 million in US tax-exempt APS. The vast majority of our inventory of municipal ARS were rated investment grade with approximately 85% rated A or higher. The vast majority of our inventory of taxable and tax-exempt APS were rated AAA. On 31 December 2009, we had not incurred any impairment charges on our inventory of municipal ARS or taxable and tax-exempt APS. As at 31 December 2008, we held USD 451 million in US municipal ARS, USD 782 million in US taxable APS and USD 3,167 million in US tax-exempt APS. Commitment to repurchase client auction rate securities We have committed to restore liquidity to certain client holdings of ARS. This commitment is in line with previously announced agreements in principle with various US state agencies, and the final settlements entered into with the Massachusetts Securities Division, the US Securities and Exchange Commission and the New York State Attorney General. The table on the next page shows the maximum repurchase | ||||||||
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Exposure to monoline insurers, by rating1 | ||||||||||||||||||||||
USD million | 31.12.09 | |||||||||||||||||||||
Fair value of | Fair value of | |||||||||||||||||||||
CDSs prior to | Credit valuation | CDSs after | ||||||||||||||||||||
Fair value of | credit valuation | adjustment as of | credit valuation | |||||||||||||||||||
Notional amount3 | underlying CDOs4 | adjustment5 | 31.12.09 | adjustment | ||||||||||||||||||
Column 1 | Column 2 | Column 3 (=1-2) | Column 4 | Column 5 (=3-4) | ||||||||||||||||||
Credit protection on US sub-prime residential mortgage-backed securities (RMBS) CDOs high grade2 | 2,352 | 457 | 1,895 | 1,463 | 432 | |||||||||||||||||
of which: from monolines rated investment grade (BBB and above) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
of which: from monolines rated sub-investment grade (BB and below) | 2,352 | 457 | 1,895 | 1,463 | 432 | |||||||||||||||||
Credit protection on other assets2 | 11,835 | 8,6266 | 3,208 | 1,332 | 1,876 | |||||||||||||||||
of which: from monolines rated investment grade (BBB and above) | 2,345 | 1,911 | 433 | 72 | 361 | |||||||||||||||||
of which: from monolines rated sub-investment grade (BB and below) | 9,490 | 6,715 | 2,775 | 1,260 | 1,514 | |||||||||||||||||
Total 31.12.09 | 14,187 | 9,083 | 5,103 | 2,795 | 2,308 | |||||||||||||||||
Total 31.12.08 | 21,535 | 9,204 | 12,329 | 6,994 | 5,335 | |||||||||||||||||
1 Excludes the benefit of credit protection purchased from unrelated third parties. 2 Categorization based on the lowest insurance financial strength rating assigned by external rating agencies. 3 Represents gross notional amount of credit default swaps (CDSs) purchased as credit protection. 4 CDOs: collateralized debt obligations. 5 CDSs: credit default swaps. 6 Includes USD 5.6 billion (CHF 5.8 billion) at fair value/USD 6.0 billion (CHF 6.2 billion) at carrying value of assets that were reclassified toLoans and receivables fromHeld-for-tradingin fourth quarter 2008 and first quarter 2009. Refer to “Note 29b Reclassification of financial assets” in the “Financial information” section of this report for more information. | ||||||||||||||||||||||
amount at par of student loan ARS required by the regulatory settlements, which would occur over various time periods according to client type, but not later than 2 July 2012. | ||
Over the same time periods, we also committed to repurchase from clients up to a maximum amount of USD 374 million of municipal ARS, and USD 212 million of taxable and tax-exempt APS at par value on 31 December 2009. As at 31 December 2008, we |
had committed to repurchase from clients up to a maximum of USD 2,041 million of municipal ARS and USD 1,723 million of taxable and tax-exempt APS. | ||
We anticipate that the maximum required repurchase amount of ARS is likely to decline over time, as issuers refinance their debt obligations and we work with issuers, industry peers and US government officials on restructuring initiatives and redemption opportunities. |
In future periods, we will no longer disclose our inventory of and commitments to repurchase municipal ARS and taxable and tax-exempt APS, as we do not consider that they involve material risk exposure. | ||
We will continue to disclose our inventory of and commitment to repurchase student loan ARS as our assessment of this exposure indicates that we consider it a risk concentration. |
Student loan auction rate securities inventory | |||||||||
Carrying value as of | Carrying value as | ||||||||
USD million | 31.12.09 | of 31.12.08 | |||||||
US student loan auction rate securities | 10,347 | 1 | 8,362 | ||||||
1 Includes USD 7.5 billion (CHF 7.7 billion) at carrying value of student loan auction rate securities that were reclassified toLoans and receivables fromHeld-for-tradingin fourth quarter 2008 and first quarter 2009. Refer to “Note 29b Reclassification of financial assets” in the “Financial information” section of this report for more information. |
Client holdings: student loan auction rate securities | ||||||||||||||||||
Buy-back period | ||||||||||||||||||
Par value of maximum | Par value of maximum | |||||||||||||||||
required purchase as of | Remaining unpurchased | Holdings of Institutional | required purchase as of | |||||||||||||||
31.12.09 | holdings of private clients | clients | 31.12.08 | |||||||||||||||
USD million | period ends 4.1.11 | 30.6.10–2.7.12 | ||||||||||||||||
US student loan auction rate securities | 7,817 | 93 | 7,724 | 11,775 | ||||||||||||||
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Treasury management
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We define liquidity risk as the risk of being unable to raise funds to meet payment obligations when they fall due. Funding risk is the risk of being unable, on an ongoing basis, to borrow funds in the market at an acceptable price to fund actual or proposed commitments and thereby support our current business and desired strategy. Liquidity and funding are not the same, but they are closely related and both are critical for a financial institution. | ||
Liquidity and funding must be continuously managed to ensure that we can successfully adjust to sudden adverse changes in market conditions or our operating environment, whether it is a general market crisis, a localized difficulty affecting a smaller number of institutions, or a problem unique to an individual firm. An institution that is unable to meet its liabilities when they fall due may collapse, even though it is not insolvent, because it is unable to borrow sufficient funds on an unsecured basis, or does not have sufficient high quality assets to borrow against or liquid assets to sell to raise immediate cash. | ||
Market liquidity overview: 2009 | ||
The first few months of 2009 saw a continuation of the stressed financial market conditions that had prevailed throughout the latter part of 2008. Economic fundamentals continued to deteriorate, developing into the worst economic recession in the post-war era; average credit spreads for high-quality corporate bonds reached historically high levels; most markets remained fragile and suffered from very limited liquidity and the banking and wider financial sector remained under considerable pressure. For the financial sector, access to financing from the public term-debt markets was mostly limited to government-guaranteed bonds. On the back of large amounts of additional special central bank support and government assistance, signs of improvement emerged during the second quarter and high credit spreads for financial institutions contracted. The general tone of the money markets began to improve noticeably during the second quarter, with flows no longer being effectively limited to very short tenors. Public term-debt markets became broadly accessible to banks for unsecured bond issuances for the first time since late third quarter 2008, across various currencies and a range of tenors. More signs of stabilization emerged in the third quarter on improved earnings in the financial sector, leading to further declines in financial institutions’ credit spreads and improved access to public debt markets. Volumes of new long-term debt issuance increased, particularly in senior unsecured debt and covered bonds, while government-guaranteed bond issuances contracted. |
The policy responses by governments and central banks mirrored market developments during the year. The focus had initially remained on maintaining the extraordinary measures designed to reinforce country-specific financial systems and support their economies. As the year progressed, declines were registered in utilization levels of these facilities. With the intensity of the financial crisis beginning to abate during the first half of the year, and as signs of stabilization gradually emerged, policymakers around the world began to shift their attention toward tightening their regulatory capital and liquidity frameworks with a view to reducing the systemic risks posed by the largest financial institutions. There are many new regulatory and legislative initiatives applicable to large financial firms that have been proposed in Switzerland, the US, UK, European Union and other jurisdictions where we operate. These proposals and their interactions may significantly impact our future liquidity and funding management processes, if and when they are enacted. | ||
Our measures taken in managing out of the crisis | ||
Despite challenging conditions throughout 2009, we maintained our access to funding with a broadly diversified funding base, and continued with measures to further strengthen and safeguard our liquidity position. Throughout this period, funding targets were adjusted and focus was maintained on continuing asset reductions. Combined with the broad diversity of funding sources, global scope and contingency planning processes, these measures enabled us to maintain a balanced asset and liability profile. We also maintain a substantial multi-currency portfolio of unencumbered high-quality short-term assets, and also have unutilized secured liquidity facilities available with several major central banks. In addition to these centralized Group resources, like many other internationally active banks, we maintain several additional dedicated liquidity reserves where these are required by local regulation. Additionally, we have taken significant steps during 2009 including further de-risking and reducing the balance sheet, including the completion of the remaining transfers of assets to the SNB StabFund announced in 2008, and the sale of UBS Pactual, as well as additional medium- and long-term debt issuance, including accessing an important new investor base through our inaugural European covered bond program. The successful tender for certain subordinated notes in March and, in August, the exit of the Swiss Confederation’s stake in UBS through conversion of the MCNs and immediate placement of shares in the market were widely regarded as additional signs of our return to financial stability. |
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While further signs of stabilization in the market emerged throughout 2009, and although access to wholesale term funding improved, we continued to experience a decline in customer deposits and net new money outflows in our client-asset-gathering divisions. Regarding the net outflows of client assets, only the cash deposit component of these constitutes a direct loss of funding for us. We were able to readily compensate for the effects of these outflows, as well as for the periodic reductions in access to wholesale term debt markets, through ample funding from alternative sources within our diversified funding base and our ongoing balance sheet asset reductions. As part of these asset reductions, the funded balance sheet mainly in the Investment Bank was reduced by CHF 242 billion compared with year-end 2008. | ||||||
è | Refer to the “Balance Sheet” section of this report for more information | |||||
Implementation of the new liquidity and funding risk management framework | ||||||
We made progress in implementing the new liquidity and funding risk management framework which was approved by the BoD in late 2008. Significant enhancements to our existing systems and tools used for liquidity and funding management were implemented, allowing us to forecast more accurately potential liquidity and funding demands under both going concern and stressed conditions. The Group Asset and Liability Management Committee (Group ALCO) was established as the primary body for managing our financial resources. Furthermore, governance over the liquidity and funding management process was improved and documented in a complete overhaul of our policies. In addition to balance sheet targets, new supply side limits were introduced to control the funding of the balance sheet, and additional limits on the off-balance sheet exposures were implemented. Our liquidity reserve, a pool of highly liquid cash and cash equivalent assets, was put under the direct management of Group Treasury. | ||||||
Further strategic work is underway to improve the operational setup of the liquidity and funding management process and to refine the funds transfer pricing mechanism. We are also reviewing the technical landscape of our liquidity and funding risk management tools, and have projects underway to upgrade our systems infrastructure. | ||||||
Liquidity approach | ||||||
Our approach to liquidity management, which covers all branches and subsidiaries, aims to ensure that we will always have sufficient liquidity to meet liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking sustained damage to our various businesses. |
Central to the integrated framework is an assessment and regular testing of all material, known and expected cash flows and the level of high-grade collateral that could be used to raise additional funding. Limits are set at Group and Division level by the BoD and the Group ALCO. These limits are monitored by Group Treasury, which reports the results and trends on a regular basis to the BoD Risk Committee and the Group ALCO. Contingency plans for a liquidity crisis are incorporated into our wider crisis management process. | ||||||
Our major sources of liquidity are channeled through entities that are fully consolidated. The liquidity position and asset and liability profile are continuously tracked. This involves monitoring the balance sheet contractual and behavioral maturity profiles and projecting and modeling the liquidity exposures of the firm under a variety of potential scenarios – encompassing both normal and stressed market conditions. We consider the possibility that our access to markets could be impacted by a stress event affecting some, or all, parts of our business. The results are factored into our overall contingency plans. | ||||||
Liquidity management | ||||||
We manage our liquidity position in order to be able to survive a UBS-specific liquidity crisis combined with a generally stressed market environment. This is complemented by our funding risk management, which aims to achieve the optimal liability structure to finance our businesses cost-efficiently and reliably. | ||||||
Our business activities generate asset and liability portfolios which are intrinsically highly diversified with respect to market, product and currency. This reduces our exposure to individual funding sources, and also provides a broad range of investment opportunities, which in turn reduces liquidity risk. | ||||||
Our funding diversification and global scope in turn help protect our liquidity position in the event of a crisis. We adopt a centralized approach to liquidity and funding management to exploit these advantages in full. The liquidity and funding process is undertaken jointly by Group Treasury and the foreign exchange and money market (FXMM) unit within the Investment Bank’s fixed income, currencies and commodities (FICC) business area. Group Treasury establishes a comprehensive control framework, while FICC undertakes operational cash and collateral management within the established limits. | ||||||
This centralization permits close control of both our global cash position and its stock of high-quality liquid securities. Our treasury processes also ensure that the firm’s general access to wholesale cash markets is concentrated in FICC. Funds raised externally are largely channeled into FICC, including the proceeds of debt securities issued by UBS, an activity for which Group Treasury is responsible. FICC in turn meets all internal demands for funding by channeling funds from units generating surplus cash to those requiring fi- |
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nance. In this way, we reduce our external borrowing and use of available credit capacity, and present a consistent and coordinated face to the market. | ||||||
Liquidity modeling and contingency planning | ||||||
For the purpose of monitoring our liquidity situation, we employ the following main measures: | ||||||
– | A cash ladder which is used to manage our funding requirements on a daily basis within limits that are set by the Group CFO and Group Treasurer. This cumulative cash ladder shows the daily liquidity position – the net cumulative funding requirement for a specific day – projected for each business day from the current day forward three months. | |||||
– | A stressed version of the cash ladder which is overlaid with behavioral assumptions that model a severe UBS-specific liquidity crisis combined with a generally stressed market environment. This stress scenario is updated daily and used to monitor potential outflows out to a one-month time horizon. | |||||
– | A contractual maturity gap analysis of our assets and liabilities out to a one-year time horizon. | |||||
– | A behavioral maturity gap analysis under an assumed UBS-specific liquidity crisis combined with a generally stressed market environment out to a one-year time horizon. | |||||
– | A cash capital model which measures the amount of stable funding in relation to the amount and composition of our assets. | |||||
The breakdown of the contractual maturity of our assets and liabilities serves as a starting point for stress testing analyses. A partial breakdown as of year-end is shown in the “Maturity analysis” table at the end of this section. This maturity analysis is an accounting view. It does not fully represent a liquidity risk management perspective, which would also include behavioral stress analyses and a more detailed breakdown of asset and liability types. | ||||||
The liquidity crisis scenario combines a firm-specific crisis with market disruption and focuses on a time horizon extending up to one year. This UBS-specific scenario envisages large drawdowns on otherwise stable client deposits, an inability to renew or replace maturing unsecured wholesale funding and limited capacity to generate liquidity from trading assets. Liquidity crisis scenario analysis and contingency planning supports the liquidity management process so that immediate corrective measures, such as the use of a liquidity buffer to absorb potential sudden liquidity shortfalls, can be put into effect. | ||||||
Since a liquidity crisis could have a myriad of causes, we focus on a scenario that encompasses potential stress effects across all markets, currencies and products. | ||||||
The assessment includes the likelihood of maturing assets and liabilities being rolled over in a UBS-specific crisis within an otherwise stressed market environment, and gauges the extent to which the potential crisis-induced shortfall could be covered by available funding. This would be raised on a |
secured basis against available collateral, which includes securities eligible for pledging at the major central banks, or by selling inventory. In both cases we apply crisis-level discounts to the value of assets. We assume that we would generally be unable to renew any of our wholesale unsecured debt, including all our maturing money market paper (CHF 52 billion outstanding on 31 December 2009). Since liquidity needs may also result from commitments and contingencies, including credit lines extended to secure the liquidity needs of customers, we regularly monitor undrawn committed credit facilities and other latent liquidity risks and factor these into the scenario analysis. Particular emphasis is placed on potential drawdowns of committed credit lines. | ||||||
If our credit rating were to be downgraded, “rating trigger” clauses, especially in derivative contracts, could result in an immediate cash outflow due to the unwinding of derivative positions or the need to deliver additional collateral. | ||||||
We also take into account the potential impact on our net liquidity position of adverse movements in the replacement value of our OTC derivative transactions, which are subject to collateral arrangements. Given the diversity of our derivatives business and that of our counterparties, there is not necessarily a direct correlation between the factors influencing net replacement values with each counterparty and a UBS-specific crisis scenario. | ||||||
è | Refer to the “Note 23 Derivative instruments and hedge accounting” in the “Financial information” section of this report for more information | |||||
Liquidity limits and controls | ||||||
Liquidity and funding limits and targets are set by the BoD, the Group ALCO, the Group CFO and the Group Treasurer, taking into consideration our business model and strategy, the prevailing market conditions and our tolerance for risk. The principles underlying our limit and target framework aim to maximize and sustain the value of our business franchise and appropriately balance the asset/liability structure in light of prevailing market conditions. Structural limits and targets focus on the composition and profile of the balance sheet, while supplementary limits and targets are designed to drive the utilization and allocation of funding resources. Together the limits and targets focus on structural liquidity risk for terms from intra-day out to one year, including stress testing, and on the liability mix, including diversification by source, currency and tenor. Group Treasury is responsible for the oversight of the liquidity and funding limits and targets. Performance versus limits and targets is monitored and regularly communicated to senior management. | ||||||
To complement and support the limit framework, members of our regional and divisional treasuries monitor the markets in which we operate for potential threats and regularly report significant findings to Group Treasury. | ||||||
We have contingency plans for liquidity crisis management, the cornerstone of which are our substantial liquidity |
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reserves, including a large multi-currency portfolio of unencumbered high-quality short-term assets and available and unutilized liquidity facilities at several major central banks. | ||
The liquidity contingency plan is an integral part of the global crisis management concept, which covers all types of crisis events. Its implementation falls under the responsibility of a core crisis team with representatives from Group Treasury, FICC, and related areas including the functions responsible for payments and settlements, market and credit risk control, collateral and margin management, and information technology and infrastructure. Our centralized global management model lends itself naturally to efficient liquidity crisis management. Should a crisis require contingency funding measures to be invoked, Group Treasury takes responsibility for coordinating liquidity generation together with representatives from FICC and the relevant business areas. | ||
Funding | ||
Our wealth management businesses continue to represent valuable and cost-efficient sources of funding. These businesses contributed CHF 323 billion, or 79%, of the CHF 410 billion total customer deposits shown in the “UBS asset funding” graph. Compared with the CHF 307 billion of net loans as of 31 December 2009, customer deposits provided 134% coverage compared with 140% on 31 December 2008. In terms of secured funding (i.e. repurchase agreements and securities lent against cash collateral received), we borrow less cash on a collateralized basis than we lend, leading to a surplus of net securities sourced – shown as the CHF 108 billion cash-equivalent surplus in the “UBS asset funding” graph. Furthermore, funding is provided through numerous short-, medium- and long-term funding programs, which provide specialized investments to institutional and private clients in Europe, the US and Asia. These programs can efficiently raise funds globally, reducing our de- | ||
pendence on any particular source. A maturity breakdown of our long-term straight debt portfolio of CHF 64 billion is shown at the end of this section. | ||
Through broad diversification of our funding sources (by market, product and currency), we maintain a well-balanced portfolio of liabilities, which provide protection in the event of market disruptions. This, together with our centralized funding management, enables us to efficiently fund our business activities. | ||
Funding approach | ||
Medium- and long-term funding activities are planned by assessing the overall funding profile of the balance sheet. The ability to continue to fund ongoing business activities through periods of difficult market conditions is also factored in. Since the beginning of 2007, prior to the outbreak of the recent financial crisis, we have maintained our funding profile through public issuance of senior, straight, and long-term debt. As part of these continuing diversification efforts, in third quarter 2009, we launched our inaugural covered bond program, from which we issued euro-denominated bonds that are indirectly covered by a pool of prime, Swiss franc-denominated Swiss residential mortgages originated and serviced by UBS AG through our branch network in Switzerland. | ||
In addition to continuing to raise medium- and long-term funds through medium-term notes and private placements, during 2009 we raised over CHF 11 billion through benchmark public senior debt issuance, following the CHF 24 billion raised from these sources during 2008. This included two covered bonds totaling around the equivalent of CHF 4.5 billion under the aforementioned new covered bond program. We raised a further CHF 6 billion through Swiss covered bond (Pfandbrief) issuances via the Swiss Mortgage Bond Bank during 2009. Additionally, the placement of new shares from authorized capital in June 2009 generated approximately CHF 3.8 billion of long-term funds. | ||
To ensure that a well-balanced and diversified liability structure is preserved, Group Treasury routinely monitors our funding status and reports its findings on a monthly basis to the Group ALCO. A key measure employed among our main analysis tools is the assessment of our “cash capital” position, this concept is designed to ensure that illiquid assets can be financed by long-term sources of funding. | ||
The cash capital supply consists of long-term sources of funds: unsecured funding with remaining time to maturity of at least one year; shareholders’ equity; and core deposits – the portion of customer deposits deemed to have a “behavioral” maturity of at least one year. Cash capital consumption reflects the illiquid portion of the assets which could not be transformed into cash by secured funding. For a given asset, the illiquid portion is the difference (the “haircut”) between the carrying value of an asset on the balance sheet, and its effective cash value when used as collateral in a secured funding transaction. |
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UBS: funding by product and currency | |||||||||||||||||||||||||||||||||||||||||||||||||
All currencies | CHF | EUR | USD | Others | |||||||||||||||||||||||||||||||||||||||||||||
In % | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||
Securities lending | 1.0 | 1.4 | 0.0 | 0.0 | 0.2 | 0.4 | 0.5 | 0.6 | 0.3 | 0.4 | |||||||||||||||||||||||||||||||||||||||
Repurchase agreements | 8.1 | 10.2 | 1.0 | 0.9 | 1.4 | 1.6 | 4.5 | 6.7 | 1.2 | 1.1 | |||||||||||||||||||||||||||||||||||||||
Interbank | 8.2 | 12.5 | 0.8 | 0.8 | 2.6 | 4.9 | 2.4 | 4.9 | 2.4 | 1.8 | |||||||||||||||||||||||||||||||||||||||
Money market paper | 6.5 | 11.1 | 0.2 | 0.3 | 0.6 | 1.0 | 5.0 | 8.6 | 0.7 | 1.2 | |||||||||||||||||||||||||||||||||||||||
Retail savings/deposits | 12.8 | 9.1 | 8.4 | 6.0 | 0.8 | 0.1 | 3.6 | 3.0 | 0.0 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Demand deposits | 23.7 | 14.8 | 4.8 | 2.8 | 5.1 | 3.1 | 10.5 | 6.8 | 3.3 | 2.1 | |||||||||||||||||||||||||||||||||||||||
Fiduciary | 5.4 | 6.1 | 0.3 | 0.3 | 1.5 | 2.0 | 2.9 | 3.0 | 0.6 | 0.7 | |||||||||||||||||||||||||||||||||||||||
Time deposits | 9.9 | 16.3 | 0.8 | 1.6 | 1.3 | 2.7 | 4.8 | 8.9 | 3.0 | 3.1 | |||||||||||||||||||||||||||||||||||||||
Long-term debt1 | 24.3 | 18.6 | 3.2 | 2.7 | 9.7 | 6.0 | 7.8 | 5.1 | 3.6 | 4.8 | |||||||||||||||||||||||||||||||||||||||
Total | 100.0 | 100.0 | 19.4 | 15.4 | 23.4 | 21.7 | 42.0 | 47.6 | 15.2 | 15.3 | |||||||||||||||||||||||||||||||||||||||
UBS: funding by product type1
UBS: funding by currency1
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Treasury management
As of 31.12.09 | Standard & Poor’s | Moody’s | Fitch Ratings | ||||||||||||||||||||||||||||||||||||||||||||||
Rating | Outlook | Rating | Outlook | Rating | Outlook | ||||||||||||||||||||||||||||||||||||||||||||
Short-term debt rating | A–1 | stable | P–1 | negative | F1+ | stable | |||||||||||||||||||||||||||||||||||||||||||
Long-term senior debt rating | A+ | stable | Aa3 | negative | A+ | stable | |||||||||||||||||||||||||||||||||||||||||||
unsecured sources. Our credit ratings can also influence the performance of some of our businesses and contribute to maintaining client and counterparty confidence. Important factors used by rating agencies to assess a firm’s creditworthiness and determine its credit ratings include stability and quality of earnings, capital adequacy, risk profile and management, liquidity management, diversification of funding sources, asset quality and corporate governance. Credit ratings reflect opinions of the rating agencies and can be changed at any time. | ||
Our short-term credit ratings from all three major rating agencies (Standard & Poor’s, Moody’s and Fitch Ratings) were unchanged and affirmed in 2009. Moody’s Investors | ||
Service downgraded our long-term senior unsecured debt rating from Aa2 to Aa3 in November 2009, while Fitch Ratings and Standard & Poor’s long-term senior unsecured debt ratings remained unchanged during 2009 at A+. The table above summarizes our short- and long-term debt ratings as of 31 December 2009. | ||
Maturity breakdown of long-term straight debt portfolio | ||
The graph on the left-hand side shows a contractual maturity breakdown of our long-term straight debt portfolio, and therefore excludes all structured debt, which is predominantly booked as Financial liabilities designated at fair value. The long-term straight debt portfolio amounted to CHF 64 billion on 31 December 2009, and is part of the CHF 131 billion shown on the Debt issued line on the balance sheet (which in addition includes money market paper issued). It is composed of CHF 53 billion of senior debt including both publicly and privately placed notes and bonds as well as Swiss cash bonds, and CHF 11 billion of subordinated debt. Of the positions shown in the graph, CHF 11 billion, or 17%, will mature during 2010. | ||
Maturity analysis of financial liabilities | ||
Contractual maturity information of our assets and liabilities serves as a starting point for the stress testing analyses which are described above. Following IFRS guidance, the disclosure of contractual maturities includes financial liabilities only. Our liquidity risk management framework includes, beside many other measures, a behavioral stress analysis, a more |
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detailed breakdown and assessment of asset and liability positions, and it also considers cash inflows from assets as well as outflows from various off-balance sheet exposures. | ||
The contractual maturities of our non-derivative and non-trading financial liabilities as of 31 December 2009 presented in the table below are based on the earliest date on which we are required to pay. The total amounts contractually ma- |
turing in each time-band are also shown for 31 December 2008. Derivative positions and trading liabilities, which predominantly include short sale transactions, are assigned to the columnOn demandas management believes that such presentation most accurately reflects the short-term nature of trading activities. The contractual maturity may extend over significantly longer periods. |
Maturity analysis of financial liabilities1 | ||||||||||||||||||||||||||||||
Due | Due | Due | ||||||||||||||||||||||||||||
Due | between | between | between | |||||||||||||||||||||||||||
within | 1 and 3 | 3 and 12 | 1 and 5 | Due after | ||||||||||||||||||||||||||
CHF billion | On demand2 | 1 month2 | months2 | months2 | years3 | 5 years3 | Total | |||||||||||||||||||||||
Financial liabilities recognized on balance sheet | ||||||||||||||||||||||||||||||
Due to banks | 50.3 | 7.1 | 1.9 | 3.2 | 1.3 | 1.4 | 65.2 | |||||||||||||||||||||||
Cash collateral on securities lent | 8.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 8.0 | |||||||||||||||||||||||
Repurchase agreements | 7.2 | 46.6 | 6.6 | 3.8 | 0.0 | 0.0 | 64.2 | |||||||||||||||||||||||
Trading portfolio liabilities4 5 | 47.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 47.5 | |||||||||||||||||||||||
Negative replacement values4 | 409.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 409.9 | |||||||||||||||||||||||
Financial liabilities designated at fair value | 0.0 | 2.3 | 4.7 | 22.3 | 44.7 | 38.7 | 112.7 | |||||||||||||||||||||||
Due to customers | 261.6 | 119.8 | 14.5 | 13.6 | 0.9 | 0.1 | 410.5 | |||||||||||||||||||||||
Accrued expenses and deferred income | 0.0 | 8.5 | 0.0 | 0.0 | 0.0 | 0.0 | 8.5 | |||||||||||||||||||||||
Debt issued | 0.0 | 21.9 | 15.8 | 26.5 | 36.9 | 30.4 | 131.4 | |||||||||||||||||||||||
Other liabilities | 21.7 | 7.4 | 0.0 | 0.0 | 0.0 | 0.0 | 29.1 | |||||||||||||||||||||||
Total 31.12.09 | 806. 3 | 213.5 | 43.4 | 69.4 | 83.8 | 70.6 | 1,286.9 | |||||||||||||||||||||||
Total 31.12.08 | 1,212.3 | 449.4 | 80.6 | 60.7 | 75.9 | 87.0 | 1,965.9 | |||||||||||||||||||||||
Financial liabilities not recognized on balance sheet | ||||||||||||||||||||||||||||||
Irrevocable loan commitments | 57.2 | 1.1 | 0.3 | 0.5 | 0.2 | 0.0 | 59.3 | |||||||||||||||||||||||
Guarantees | 16.1 | 0.3 | 0.2 | 0.2 | 0.1 | 0.1 | 17.1 | |||||||||||||||||||||||
Underwriting commitments | 0.0 | 1.8 | 0.2 | 0.2 | 0.0 | 0.0 | 2.3 | |||||||||||||||||||||||
Total 31.12.09 | 73.3 | 3.2 | 0.8 | 0.9 | 0.3 | 0.1 | 78.6 | |||||||||||||||||||||||
Total 31.12.08 | 59.9 | 0.2 | 0.0 | 0.1 | 0.1 | 0.0 | 60.3 | |||||||||||||||||||||||
1 Only financial instruments (as disclosed in note 29a) are required to be disclosed in the maturity analysis, therefore, not all numbers in the table reconcile to the line items in the balance sheet. The differences relate to accrued expenses, deferred income and other liabilities and also comprise, deferred tax liabilities, provisions and liabilities from employee compensation plans. 2 Our liquidity risk management focus is on short and mid-term cash flows. In these time periods, the carrying values of non-derivative financial liabilities largely approximate the undiscounted cash flows. 3 Represents carrying values. 4 Carrying value is fair value. Management believes that this best represents the cash flows that would have to be paid if these positions had to be settled or closed out. Refer to “Note 23 Derivative instruments and hedge accounting” in the “Financial information” section of this report for undiscounted cash flows of derivatives designated in hedge accounting relationships. 5 Contractual maturities of trading portfolio liabilities are: CHF 45.9 billion due within one month; and CHF 1.6 billion due between one month and one year. |
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Risk and treasury management
Treasury management
Interest rate and currency management
Management of non-trading interest rate risk | ||||
Our largest non-trading interest rate exposures arise within our wealth management business divisions. These exposures are transferred from the originating business into one of two centralized interest rate risk management units: Group Treasury or the Investment Bank’s FICC unit. These units manage the risks on an integrated basis, exploiting the full netting potential across risks from different sources. | ||||
Risks from fixed-maturity, short-term Swiss franc and all non-Swiss franc transactions are generally transferred to FICC. Risks from Swiss franc transactions with fixed maturities greater than one year are transferred to Group Treasury by individual back-to-back transactions. These fixed-rate products do not contain embedded options, such as early prepayment, which would allow clients to prepay at par. All prepayments are therefore subject to market-based unwinding costs. | ||||
Current and savings accounts and many other retail products of Wealth Management & Swiss Bank have no contractual maturity date or direct market-linked rate, and therefore their interest rate risk cannot be transferred by simple back-to-back transactions. Instead, they are transferred on a pooled basis via “replicating” portfolios. A replicating portfolio is a series of loans or deposits at market rates and fixed terms between the originating business unit and Group Treasury, structured to approximate, on average, the interest rate cash flow and repricing behavior of the pooled client transactions. The portfolios are rebalanced monthly. Their structure and parameters are based on long-term market observations and client behavior, and are regularly reviewed and adjusted as necessary. The originating business units are thus immunized as far as possible against market interest rate movements, but retain and manage their product margin. | ||||
A significant amount of interest rate risk also arises from the financing of non-monetary-related balance sheet items, such as the financing of bank property and equity investments in associated companies. These risks are generally transferred to Group Treasury through replicating portfolios which, in this case, are designed to approximate the tenor profile mandated by senior management. | ||||
Group Treasury manages its residual open interest rate exposures, taking advantage of any offsets that arise between positions from different sources, within its approved market risk limits which include VaR and stress loss. The preferred risk management instrument is interest rate swaps, for which there is a liquid and flexible market. All transactions are executed via the Investment Bank. Group Treasury does not directly access the external market. | ||||
è | Refer to the “Market risk” section of this report for further details on our market risk measures and controls |
Market risk arising from management of consolidated capital | ||
The relationship between our capital and RWA, BIS tier 1 ratio, is monitored by regulators and analysts and is a key indicator of our financial strength. | ||
The majority of our capital and many of our assets are denominated in Swiss francs, but we also hold RWA and some eligible capital in other currencies, primarily US dollar, euro and UK sterling. Any significant depreciation of the Swiss franc against these currencies would adversely impact our BIS tier 1 ratio. Group Treasury’s mandate is to minimize adverse currency impacts on this ratio. | ||
On an overall Group basis, Group Treasury’s target profile is based on a currency mix which broadly reflects the currency distribution of the consolidated RWA. As the Swiss franc depreciates or appreciates against these currencies, the consolidated RWA increase or decrease relative to our capital. These currency fluctuations also lead to translation gains or losses on consolidation, which are recorded through equity. Thus, our consolidated equity rises or falls in line with the fluctuations in the RWA, stabilizing the BIS tier 1 ratio. The capital of the parent bank itself is held predominantly in Swiss francs in order to avoid any significant effects of currency fluctuations on its standalone financial results. | ||
Furthermore, Group Treasury has the mandate to generate a stable interest income flow from the capital. The capital of the parent bank and its subsidiaries is placed via interest-bearing cash deposits internally within our network. Group Treasury further maintains a portfolio of interest rate swaps to achieve a target tenor profile and return on invested equity. | ||
To provide a benchmark for investments of equity, Group Treasury defines a replicating portfolio of target tenors and currencies. The effective investment position created by both internal cash deposits and interest rate swaps are then measured against this benchmark tenor replication portfolio. Mismatches between the two are measured, together with other non-trading interest rate risk positions, against Group Treasury’s market risk limits (VaR and stress loss). | ||
The structural foreign currency exposures (to hedge our BIS tier 1 ratio) are controlled by senior management but are not subject to internal market risk limits and are not included in Group Treasury’s reported VaR. | ||
On 31 December 2009, our consolidated equity was deployed as follows: in Swiss francs (including most of the capital of the parent bank) with an average duration of approximately three years and an interest rate sensitivity of CHF 8.0 |
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Group Treasury: Value-at-Risk (1-day, 95% confidence, 5 years of historical data) | ||||||||||||||||||||||||||||||||
Year ended 31.12.09 | Year ended 31.12.08 | |||||||||||||||||||||||||||||||
CHF million | Min. | Max. | Average | 31.12.09 | Min. | Max. | Average | 31.12.08 | ||||||||||||||||||||||||
Interest rates | 1 | 7 | 3 | 3 | 2 | 9 | 5 | 5 | ||||||||||||||||||||||||
Foreign exchange | 0 | 15 | 3 | 2 | 1 | 24 | 7 | 3 | ||||||||||||||||||||||||
Diversification effect | 1 | 1 | (1 | ) | (1 | ) | 1 | 1 | (3 | ) | (2 | ) | ||||||||||||||||||||
Total management VaR | 2 | 16 | 5 | 4 | 3 | 25 | 9 | 6 | ||||||||||||||||||||||||
1 As the minimum and maximum occur on different days for different risk types, it is not meaningful to calculate a portfolio diversification effect. |
million per basis point; in US dollars with an average duration of approximately four years and a sensitivity of CHF 7.1 million per basis point; in euros with an average duration of approximately three years and a sensitivity of CHF 1.0 million per basis point; and in UK sterling with a duration of approximately three years and a sensitivity of CHF 0.4 million per basis point. The interest rate sensitivity of these positions is directly related to the chosen duration – targeting significantly shorter tenors would reduce the apparent interest rate sensitivity but would lead to greater fluctuations in interest income. | ||
Corporate currency management | ||
Our corporate currency management activities are designed to reduce the impact of adverse currency fluctuations on our reported financial results, given regulatory constraints. We specifically focus on three principal areas of currency risk management: match funding and investment of non-Swiss franc assets and liabilities; sell-down of non-Swiss franc profits and losses; and selective hedging of anticipated non-Swiss franc profits and losses. | ||
Match funding and investment of non-Swiss franc assets and liabilities | ||
For monetary balance sheet items and non-core investments, we follow the principle of matching the currency of our assets with the same currency of the liabilities which fund them, as far as it is practical and efficient to do so. A US dollar asset thus is typically funded in US dollars, while a euro |
liability is typically offset by an asset in euros. This avoids profits and losses arising from the retranslation of foreign currency assets and liabilities at the prevailing exchange rates to the Swiss franc at quarter ends. | ||
Sell-down of reported profits and losses | ||
For accounting purposes, reported profit and losses are translated each month from their original transaction currencies into Swiss francs at exchange rates fixed at the prevailing month end. In order to eliminate earnings volatility on the retranslation of previously recognized earnings in foreign currencies, Group Treasury centralizes the profits and losses arising in the parent bank and sells or buys them for Swiss francs. Our other operating entities follow a similar monthly sell-down process into their own reporting currencies. Retained earnings in operating entities with a reporting currency other than the Swiss franc are integrated and managed as part of our consolidated equity. | ||
Hedging of anticipated future reported profits and losses | ||
Our corporate currency management executes a dynamic and cost-efficient hedging strategy to protect anticipated future profit and losses in foreign currencies against a negative impact of adverse trends of foreign exchange rates from one reporting period to the next. At any point in time Group Treasury may hedge according to market perception part or all of the anticipated next three months’ earnings. Although intended to hedge future earnings, these transactions are accounted as open currency positions and are subject to internal market risk VaR and stress loss limits. |
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Risk and treasury management
Capital management
Sufficient capital must be available to support business activities, in accordance with both our own internal assessment and the requirements of our regulators, in particular our lead regulator FINMA. | ||||
We aim to maintain sound capital ratios at all times, and we therefore consider not only the current situation but also projected developments in both our capital base and capital requirements. The main tools by which we manage our capital ratios are active management of own shares, capital instruments, dividends, and risk-weighted assets (RWAs). | ||||
Capital adequacy management | ||||
Ensuring compliance with minimum regulatory capital requirements and target capital ratios is central to capital adequacy management. In this ongoing process, we manage towards tier 1 and total capital target ratios. In the target setting process we take into account the regulatory minimum capital requirements, regulators’ expectations that we hold additional capital above minimum requirements, our internal assessment of aggregate risk exposure in terms of capital-at-risk, the views of rating agencies and comparisons with peer institutions considering our business mix and market presence. | ||||
è | Refer to the “Risk management and control” section of this report for more information on earnings-at-risk and capital-at-risk | |||
Regulatory requirements | ||||
We are subject to FINMA regulatory capital requirements, which result in higher RWA than under BIS guidelines. | ||||
è | Refer to the additional capital management disclosure in the “Basel II Pillar 3” section of this report | |||
To allow for comparability, published RWA are determined in accordance with the BIS guidelines. For the determination of the eligible capital, there are no differences between the BIS guidelines and FINMA regulations. | ||||
In 2009, we complied with all externally imposed capital requirements. | ||||
Regulatory developments | ||||
In July 2009, the Basel Committee on Banking Supervision (the Committee) published the revised Basel II market risk framework and issued enhancements to the Basel II framework. Swiss banks are expected to comply with the revised requirements by 1 January 2011. |
The revisions to the Basel II market risk framework aim to address perceived shortcomings in the current VaR framework, most notably by introducing new capital requirements to incorporate effects of “stressed markets”. This is achieved by introducing a new incremental risk charge that accounts for default and migration risk of trading book positions and a stressed VaR requirement taking into account a one-year observation period relating to significant losses, which must be calculated in addition to the VaR based on the most recent one-year observation period. Furthermore, securitization positions, even though held for trading, will attract banking book capital charges.
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BIS Capital ratios | ||||
The BIS capital ratios compare eligible capital (tier 1 and total capital) with total RWA. | ||||
At year-end 2009, the tier 1 ratio amounted to 15.4% and the total capital ratio to 19.8%, up from 11.0% and 15.0%, respectively, on 31 December 2008. In this period, RWA declined to CHF 206.5 billion from CHF 302.3 billion, while tier 1 capital decreased to CHF 31.8 billion from CHF 33.2 billion. | ||||
è | Refer to the discussion on “Capital adequacy” and “Eligible capital” in this section for more information | |||
Capital requirements | ||||
Our capital requirements are based on our consolidated financial statements in accordance with IFRS, adjusted for regulatory differences. Under IFRS, subsidiaries and special purpose entities that are directly or indirectly controlled by UBS must be consolidated, whereas for regulatory capital purposes, different consolidation principles apply. For example, subsidiaries that are not active in the banking and finance business are not consolidated. | ||||
è | Refer to the additional capital management disclosure in the “Basel II Pillar 3” section of this report | |||
On 31 December 2009 BIS RWA were CHF 206.5 billion, compared with CHF 302.3 billion at year-end 2008. The analysis by component is as follows: | ||||
Credit risk | ||||
RWA for credit risk amounted to CHF 140.5 billion on 31 December 2009, compared with CHF 222.6 billion on 31 December 2008. The reduction was primarily related to lower derivatives RWA of CHF 42.1 billion and reduced loan book RWA of CHF 25.8 billion. The loan book decrease occurred mainly in the Investment Bank and Wealth Management & Swiss Bank. Further, RWA declined for security finance transactions, committed credit lines and guarantees as well as seed money exposures. In addition, a CHF 2.0 billion RWA reduction stemmed from the UBS Pactual sale. | ||||
è | Refer to the “Credit risk” section of this report for more information |
Non-counterparty related assets
Market risk
è | Refer to the “Market risk” section of this report for further information |
Operational risk
è | Refer to the “Operational risk” section of this report for further information |
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Risk and treasury management
Treasury management
Eligible capital | ||||
Eligible capital, the capital available to support RWA, consists of tier 1 and tier 2 capital. To determine eligible tier 1 and total capital, specific adjustments must be made to equity attributable to our shareholders as defined by IFRS and as shown on our balance sheet. The most notable adjustments are the deductions for goodwill, intangible assets, investments in unconsolidated entities engaged in banking and financial activities and own credit effects on liabilities designated at fair value. | ||||
Tier 1 capital | ||||
BIS tier 1 capital amounted to CHF 31.8 billion on 31 December 2009, down from CHF 33.2 billion on 31 December 2008. The decrease in BIS tier 1 capital of CHF 1.4 billion is attributable to the CHF 2.7 billion loss recognized under IFRS, CHF 1.8 billion of own shares related components, CHF 2.8 billion capital impact related to coupon payments in connection with the mandatory convertible notes (MCNs) issued in March 2008 and the MCNs issued in December 2008, of which the latter was redeemed in August 2009. Further CHF 1.0 billion was due to changes in tier 1 deduction items and CHF 0.2 billion from other effects including FX. These negative impacts were partly offset by the CHF 3.8 billion share issuance in June 2009, an adjustment for capital purposes of CHF 2.1 billion for losses on own credit and the positive effect of CHF 1.2 billion from the sale of UBS Pactual. | ||||
Hybrid tier 1 capital | ||||
These instruments are perpetual and can only be redeemed if they are called by the issuer after having received regula- |
tory approval. The payment of interest is subject to compliance with minimum capital ratios and other requirements. Any missed payment is non-cumulative. As of 31 December 2009, our hybrid tier 1 instruments amounted to CHF 7.2 billion. Under IFRS, these instruments are accounted for as equity attributable to minority interests. | ||||
Tier 2 capital | ||||
These instruments consist mainly of our subordinated long-term debt that ranks senior to both our shares and hybrid tier 1 instruments but is subordinated to all our senior obligations. Tier 2 capital net of tier 2 deductions accounted for CHF 9.1 billion in total capital as of year-end 2009. | ||||
è | Refer to the “Shares and capital instruments” section of this report for details about our issuance of capital securities during 2009, including hybrid tier 1 instruments and tier 1 instruments | |||
Transfer of capital within UBS Group | ||||
Under Swiss company law, UBS is organized as a limited company, a corporation that has issued shares of common stock to investors. UBS AG is the parent company of UBS Group. The legal entity structure of the Group is designed to support our businesses within an efficient legal, tax, regulatory and funding framework. We enter into intragroup transactions in order to provide funding and capital to individual UBS entities. As of 31 December 2009, we were not aware of any material restrictions, or other major impediments, concerning the transfer of funds or regulatory capital within the Group apart from those which apply to these entities by way of local laws and regulations. |
Capital adequacy | ||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | ||||||
BIS tier 1 capital | 31,798 | 33,154 | ||||||
of which: hybrid tier 1 capital | 7,224 | 7,393 | ||||||
BIS total capital | 40,941 | 45,367 | ||||||
BIS tier 1 capital ratio (%) | 15.4 | 11.0 | ||||||
BIS total capital ratio (%) | 19.8 | 15.0 | ||||||
BIS risk-weighted assets | 206,525 | 302,273 | ||||||
of which: credit risk1 | 140,494 | 222,563 | ||||||
of which: non-counterparty related risk | 7,026 | 7,411 | ||||||
of which: market risk | 12,861 | 27,614 | ||||||
of which: operational risk | 46,144 | 44,685 | ||||||
1 Includes securitization exposures and equity exposures not part of the trading book and capital requirements for settlement risk (failed trades). |
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Capital components | ||||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||||
BIS tier 1 capital prior to deductions | 47,367 | 48,758 | ||||||||
of which: paid-in share capital | 356 | 293 | ||||||||
of which: share premium, retained earnings, currency translation differences and other elements | 39,788 | 41,072 | ||||||||
of which: non-innovative hybrid tier 1 capital instruments | 1,785 | 1,810 | ||||||||
of which: innovative hybrid tier 1 capital instruments | 5,438 | 5,583 | ||||||||
Less: treasury shares/deduction for own shares1 | (2,424 | ) | (1,488 | ) | ||||||
Less: goodwill&intangible assets | (11,008 | ) | (12,950 | ) | ||||||
Less: other deduction items2 | (2,138 | ) | (1,167 | ) | ||||||
BIS tier 1 capital | 31,798 | 33,154 | ||||||||
Upper tier 2 capital | 50 | 1,090 | ||||||||
Lower tier 2 capital | 11,231 | 12,290 | ||||||||
Less: other deduction items2 | (2,138 | ) | (1,167 | ) | ||||||
BIS total capital | 40,941 | 45,367 | ||||||||
1 Consists of: i) net long position in own shares held for trading purposes; ii) own shares bought for unvested or upcoming share awards and iii) accrual build for upcoming share awards. 2 Positions to be deducted as 50% from tier 1 and 50% from total capital mainly consist of: net long position of non-consolidated participations in the finance sector; expected loss on advanced internal rating-based portfolio less general provisions (if difference is positive); expected loss for equities (simple risk weight method); first loss positions from securitization exposures. |
IFRS equity to BIS tier 1 capital
The main differences between IFRS equity attributable to shareholders and tier 1 capital result from:
– | An increase in BIS share premium of which CHF 3.7 billion stems from the MCNs issued in March 2008 and the outstanding accrual related to the MCN coupon of CHF 0.2 billion. | |
– | The difference of CHF 1.2 billion inNet income recognized directly in equity, net of taxis due to fair value changes recorded directly in equity under IFRS fromFinancial investments available-for-saleand cash flow hedges (reduction of CHF 1.6 billion). This was partly offset by CHF 0.4 |
billion of foreign currency translation differences due to a different regulatory scope of consolidation. | ||
– | The increase of BIS share premium of CHF 3.7 billion resulted in an equivalent reduction of the IFRS retained earnings which were reduced for gains on own credit net of tax of CHF 0.8 billion related to the application of the fair value option under IAS 39 and CHF 0.2 billion related to different regulatory scope of consolidation. | |
– | Removing minority interests of CHF 0.3 billion for regulatory purposes not eligible as tier 1 capital. | |
– | A negative adjustment inTreasury shares/deduction for own sharesof CHF 1.4 billion mainly due to accruals for upcoming share awards. |
Reconciliation of International Financial Reporting Standards equity to BIS tier 1 capital | ||||||||||||||
31.12.09 | ||||||||||||||
CHF million | IFRS view | 1 | Reconciliation items | BIS view | ||||||||||
Share capital | 356 | 0 | 356 | |||||||||||
Share premium | 34,786 | 3,888 | 38,674 | |||||||||||
Net income recognized directly in equity, net of tax | (4,875 | ) | (1,214 | ) | (6,089 | ) | ||||||||
Revaluation reserve from step acquisitions, net of tax | 38 | 0 | 38 | |||||||||||
Retained earnings | 11,751 | (4,687 | ) | 7,064 | ||||||||||
Equity classified as obligation to purchase own shares | (2 | ) | 2 | 0 | ||||||||||
Equity attributable to minority interests | 7,620 | (295 | ) | 7,325 | ||||||||||
Treasury shares/deduction for own shares2 | (1,040 | ) | (1,384 | ) | (2,424 | ) | ||||||||
Total equity/gross tier 1 including MCNs and hybrid tier 1 instruments | 48,633 | (3,690 | ) | 44,944 | ||||||||||
Less: goodwill, intangible assets and other deduction items | (13,146 | )3 | ||||||||||||
Less: accrual for expected future dividend payments | 0 | |||||||||||||
Eligible BIS tier 1 capital | 31,798 | |||||||||||||
1 International Financial Reporting Standards (IFRS). 2 Generally, treasury shares are fully deducted from equity under IFRS, whereas for capital adequacy purposes this position covers the following: i) net long position in own shares held for trading purposes; ii) own shares bought for unvested or upcoming share awards; and iii) accrual build for upcoming share awards. 3 “Other deduction items” include primarily 50% of the deductions for net long position of non-consolidated participations in the finance sector, expected loss on advanced internal rating-based approach portfolio less general provisions (if difference is positive); expected loss for equities (simple risk weight method); first loss positions from securitization exposures. |
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– | Calculate and assess return on attributed equity (RoaE) in each of our businesses. RoaE and return on BIS RWA are disclosed for all business groups and units. | |
– | Integrate Group-wide capital management activities with those at business group and business unit levels. | |
– | Measure performance in a consistent manner across business divisions and business units. | |
– | Make better comparisons between our businesses and those of competitors. |
– | Equity requirements based on aggregated risk exposure, including the potential for losses exceeding our earnings capacity as defined by the firm’s risk-based capital. At certain other institutions, this factor is referred to as “Economic Capital”. | |
– | Regulatory capital requirements which are based on RWA usage of the businesses. | |
– | The asset size of the businesses is capitalized with a specific leverage ratio. |
CHF billion, except where indicated | Average 4Q09 | Average 4Q08 | |||||||||||||||||||||||||||||||||||||||||||||||
Total assets (IFRS) prior to deductions1 | 1,426.2 | 2,211.7 | |||||||||||||||||||||||||||||||||||||||||||||||
Less: netting of replacement values2 | (420.9 | ) | (653.5 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Less: loans to Swiss clients (excluding banks)3 | (161.4 | ) | (165.5 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Less: cash and balances with central banks | (22.1 | ) | (26.0 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Less: other4 | (12.4 | ) | (14.6 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total adjusted assets | 809.4 | 1,352.1 | |||||||||||||||||||||||||||||||||||||||||||||||
BIS tier 1 capital (at year-end) | 31.8 | 33.2 | |||||||||||||||||||||||||||||||||||||||||||||||
FINMA leverage ratio (%) | 3.93 | 2.45 | |||||||||||||||||||||||||||||||||||||||||||||||
1 Total assets are calculated as the average of the month-end values for the three months in the calculation period. 2 Includes the impact of netting agreements (including cash collateral) in accordance with Swiss Federal Banking law, based on the IFRS scope of consolidation. 3 Includes mortgage loans to international clients for properties located in Switzerland. 4 Refer to the “Capital components” table in this section for more information on deductions of assets from BIS tier 1 capital. |
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CHF billion | 4Q09 | 4Q08 | |||||||||||||||||||||||||||||||||||||||||||||||
Wealth Management&Swiss Bank | 9.0 | 9.0 | |||||||||||||||||||||||||||||||||||||||||||||||
Wealth Management Americas | 8.0 | 9.0 | |||||||||||||||||||||||||||||||||||||||||||||||
Global Asset Management | 2.5 | 3.0 | |||||||||||||||||||||||||||||||||||||||||||||||
Investment Bank | 24.0 | 26.0 | |||||||||||||||||||||||||||||||||||||||||||||||
Corporate Center | 1.0 | 1.0 | |||||||||||||||||||||||||||||||||||||||||||||||
Surplus/(Deficit) | (4.2 | ) | (8.5 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Average equity attributable to UBS shareholders | 40.3 | 39.5 | |||||||||||||||||||||||||||||||||||||||||||||||
Average excess total equity | |||||||||||||||||||||||||||||||||||||||||||||||||
CHF billion | 4Q09 | 4Q08 | |||||||||||||||||||||||||||||||||||||||||||||||
Average equity attributable to UBS shareholders | 40.3 | 39.5 | |||||||||||||||||||||||||||||||||||||||||||||||
Average equity attributable to minority interests | 7.7 | 8.2 | |||||||||||||||||||||||||||||||||||||||||||||||
Pro forma average total equity | 47.9 | 47.7 | |||||||||||||||||||||||||||||||||||||||||||||||
Average equity attributed to business divisions and CC | 44.5 | 48.0 | |||||||||||||||||||||||||||||||||||||||||||||||
Average excess total equity | 3.4 | (0.3 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
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Shares issued
For the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||
Number of shares | 31.12.09 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at the beginning of the year | 2,932,580,549 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issue of shares for capital increase (conversion December 2008 MCN) | 332,225,913 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issue of shares for capital increase (share placement) | 293,258,050 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issue of shares for employee options | 48,241 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at the end of the year | 3,558,112,753 | ||||||||||||||||||||||||||||||||||||||||||||||||
Year approved by | |||||||||||||||||||||||||||||||||||||||||||||||||
Maximum number of | shareholder general | % of shares issued | |||||||||||||||||||||||||||||||||||||||||||||||
shares to be issued | meeting | 31.12.09 | |||||||||||||||||||||||||||||||||||||||||||||||
Authorized capital | |||||||||||||||||||||||||||||||||||||||||||||||||
Capital increase | 5,001,246 | 2008 | 0.14 | ||||||||||||||||||||||||||||||||||||||||||||||
Conditional capital | |||||||||||||||||||||||||||||||||||||||||||||||||
March 2008 mandatory convertible notes | 277,750,000 | 2008 | 7.81 | ||||||||||||||||||||||||||||||||||||||||||||||
SNB warrants | 100,000,000 | 2009 | 2.81 | ||||||||||||||||||||||||||||||||||||||||||||||
Employee equity participation plans of UBS AG | 149,994,296 | 2006 | 4.22 | ||||||||||||||||||||||||||||||||||||||||||||||
Employee stock ownership plan of former PaineWebber | 29,350 | 2000 | 0.00 | ||||||||||||||||||||||||||||||||||||||||||||||
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Treasury shares purchased for employee share | |||||||||||||||||||||||||||||||||||||||||||||||||
and option participation plans and acquisitions1 | Total number of shares | ||||||||||||||||||||||||||||||||||||||||||||||||
Number of shares | |||||||||||||||||||||||||||||||||||||||||||||||||
Month of purchase | Number of shares | Average price in CHF | (cumulative) | Average price in CHF | |||||||||||||||||||||||||||||||||||||||||||||
January 2009 | 0 | 0.00 | 0 | 0.00 | |||||||||||||||||||||||||||||||||||||||||||||
February 2009 | 4,982,914 | 10.93 | 4,982,914 | 10.93 | |||||||||||||||||||||||||||||||||||||||||||||
March 2009 | 15,000,000 | 12.00 | 19,982,914 | 11.73 | |||||||||||||||||||||||||||||||||||||||||||||
April 2009 | 0 | 0.00 | 19,982,914 | 11.73 | |||||||||||||||||||||||||||||||||||||||||||||
May 2009 | 0 | 0.00 | 19,982,914 | 11.73 | |||||||||||||||||||||||||||||||||||||||||||||
June 2009 | 0 | 0.00 | 19,982,914 | 11.73 | |||||||||||||||||||||||||||||||||||||||||||||
July 2009 | 0 | 0.00 | 19,982,914 | 11.73 | |||||||||||||||||||||||||||||||||||||||||||||
August 2009 | 672,876 | 16.02 | 20,655,790 | 11.87 | |||||||||||||||||||||||||||||||||||||||||||||
September 2009 | 2,661,037 | 18.85 | 23,316,827 | 12.67 | |||||||||||||||||||||||||||||||||||||||||||||
October 2009 | 0 | 0.00 | 23,316,827 | 12.67 | |||||||||||||||||||||||||||||||||||||||||||||
November 2009 | 0 | 0.00 | 23,316,827 | 12.67 | |||||||||||||||||||||||||||||||||||||||||||||
December 2009 | 1,050,000 | 16.03 | 24,366,827 | 12.81 | |||||||||||||||||||||||||||||||||||||||||||||
Amount | Conversion price per | Conversion into | ||||||||||||||||||||||||||
Coupon | (CHF billion) | Issuance date | Conversion period /maturity | UBS share (CHF) | number of UBS shares | |||||||||||||||||||||||
MCNs | 9% | 13 | 5 March 2008 | 6 September 2008 | 5 March 2010 | 47.68 | 1 | 272,651,005 | ||||||||||||||||||||
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UBS share price chart vs DJ Banks Titans 30 Index |
è | Refer to the “Capital structure” section of this report for more information on UBS shares including par value, type and rights of security |
Trading exchange | Bloomberg | Reuters | |||||||||||||||||||||||||||||||||||||||||||||||
SIX Swiss Exchange | UBSN VX | UBSN.VX | |||||||||||||||||||||||||||||||||||||||||||||||
New York Stock Exchange | UBS US | UBS.N | |||||||||||||||||||||||||||||||||||||||||||||||
Tokyo Stock Exchange | 8657 JP | 8657.T | |||||||||||||||||||||||||||||||||||||||||||||||
ISIN | CH0024899483 | ||||||||||||||||||||||||||||||||||||||||||||||||
Valoren | 2.489.948 | ||||||||||||||||||||||||||||||||||||||||||||||||
Cusip | CINS H89231 33 8 | ||||||||||||||||||||||||||||||||||||||||||||||||
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As of | |||||||||||||||||||||||||||||||||||||||||||||||||
Registered shares | 31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||||||||||||||||||||||||||||||
Total ordinary shares issued | 3,558,112,753 | 2,932,580,549 | 2,073,547,344 | ||||||||||||||||||||||||||||||||||||||||||||||
Treasury shares | 37,553,872 | 61,903,121 | 158,105,524 | ||||||||||||||||||||||||||||||||||||||||||||||
Weighted average shares (for basic EPS calculations) | 3,661,086,266 | 2,792,023,098 | 2,182,836,078 | ||||||||||||||||||||||||||||||||||||||||||||||
Weighted average shares (for diluted EPS calculations) | 3,661,841,214 | 2,793,174,654 | 2,184,303,404 | ||||||||||||||||||||||||||||||||||||||||||||||
For the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||
CHF | 31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share (EPS) | |||||||||||||||||||||||||||||||||||||||||||||||||
Basic EPS | (0.75 | ) | (7.63 | ) | (2.40 | ) | |||||||||||||||||||||||||||||||||||||||||||
Basic EPS from continuing operations | (0.74 | ) | (7.68 | ) | (2.59 | ) | |||||||||||||||||||||||||||||||||||||||||||
Diluted EPS | (0.75 | ) | (7.63 | ) | (2.41 | ) | |||||||||||||||||||||||||||||||||||||||||||
Diluted EPS from continuing operations | (0.74 | ) | (7.69 | ) | (2.59 | ) | |||||||||||||||||||||||||||||||||||||||||||
As of | % change from | ||||||||||||||||||||||||||||||||||||||||||||||||
31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||
Share price (CHF) | 16.05 | 14.84 | 46.60 | 8 | |||||||||||||||||||||||||||||||||||||||||||||
Market capitalization (CHF million)1 | 57,108 | 43,519 | 108,654 | 31 | |||||||||||||||||||||||||||||||||||||||||||||
1 Market capitalization is calculated based on the total UBS ordinary shares issued multiplied by the UBS share price at period end. The total UBS ordinary shares issued as of 31 December 2009 and as of 31 December 2008 do not reflect the 272.7 million UBS shares to be issued through the conversion of mandatory convertible notes placed with two investors in March 2008. In addition, the total UBS ordinary shares as of 31 December 2008 do not reflect the 332.2 million shares issued through the conversion of mandatory convertible notes issued in December 2008 and converted in August 2009. Refer to “Note 8 Earnings per share (EPS) and shares outstanding” in the “Financial information” section of this report for more information. |
For the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||
1000 shares | 31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||||||||||||||||||||||||||||||
SIX Swiss Exchange total | 5,105,358 | 7,174,486 | 4,079,863 | ||||||||||||||||||||||||||||||||||||||||||||||
SIX Swiss Exchange daily average | 20,340 | 28,584 | 16,451 | ||||||||||||||||||||||||||||||||||||||||||||||
NYSE total | 222,052 | 539,856 | 304,446 | ||||||||||||||||||||||||||||||||||||||||||||||
NYSE daily average | 881 | 2,134 | 1,213 | ||||||||||||||||||||||||||||||||||||||||||||||
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SIX Swiss Exchange | New York Stock Exchange | ||||||||||||||||||||||||||||||||||||||||||||||||
High (CHF) | Low (CHF) | Period end (CHF) | High (USD) | Low (USD) | Period end (USD) | ||||||||||||||||||||||||||||||||||||||||||||
2009 | 19.65 | 8.20 | 16.05 | 19.31 | 7.06 | 15.51 | |||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2009 | 19.34 | 14.76 | 16.05 | 19.18 | 15.03 | 15.51 | |||||||||||||||||||||||||||||||||||||||||||
December | 16.67 | 15.56 | 16.05 | 16.49 | 15.03 | 15.51 | |||||||||||||||||||||||||||||||||||||||||||
November | 17.86 | 14.76 | 15.58 | 17.60 | 15.36 | 15.69 | |||||||||||||||||||||||||||||||||||||||||||
October | 19.34 | 16.90 | 17.30 | 19.18 | 16.47 | 16.59 | |||||||||||||||||||||||||||||||||||||||||||
Third quarter 2009 | 19.65 | 12.50 | 18.97 | 19.31 | 11.25 | 18.31 | |||||||||||||||||||||||||||||||||||||||||||
September | 19.64 | 17.66 | 18.97 | 19.31 | 16.64 | 18.31 | |||||||||||||||||||||||||||||||||||||||||||
August | 19.65 | 14.95 | 19.54 | 18.55 | 14.10 | 18.32 | |||||||||||||||||||||||||||||||||||||||||||
July | 15.94 | 12.50 | 15.61 | 14.80 | 11.25 | 14.74 | |||||||||||||||||||||||||||||||||||||||||||
Second quarter 2009 | 17.51 | 10.56 | 13.29 | 15.82 | 9.40 | 12.21 | |||||||||||||||||||||||||||||||||||||||||||
June | 16.40 | 12.95 | 13.29 | 15.82 | 12.17 | 12.21 | |||||||||||||||||||||||||||||||||||||||||||
May | 17.51 | 14.12 | 15.93 | 15.82 | 12.92 | 15.03 | |||||||||||||||||||||||||||||||||||||||||||
April | 16.27 | 10.56 | 15.95 | 14.25 | 9.40 | 13.64 | |||||||||||||||||||||||||||||||||||||||||||
First quarter 2009 | 17.00 | 8.20 | 10.70 | 15.31 | 7.06 | 9.43 | |||||||||||||||||||||||||||||||||||||||||||
March | 13.69 | 8.20 | 10.70 | 12.35 | 7.06 | 9.43 | |||||||||||||||||||||||||||||||||||||||||||
February | 14.33 | 9.35 | 11.06 | 12.37 | 8.08 | 9.05 | |||||||||||||||||||||||||||||||||||||||||||
January | 17.00 | 11.22 | 14.64 | 15.31 | 10.00 | 12.45 | |||||||||||||||||||||||||||||||||||||||||||
2008 | 45.98 | 10.67 | 14.84 | 46.40 | 8.33 | 14.30 | |||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2008 | 24.00 | 10.67 | 14.84 | 21.30 | 8.33 | 14.30 | |||||||||||||||||||||||||||||||||||||||||||
Third quarter 2008 | 25.76 | 15.18 | 18.46 | 23.07 | 12.22 | 17.54 | |||||||||||||||||||||||||||||||||||||||||||
Second quarter 2008 | 35.11 | 20.96 | 21.44 | 36.02 | 20.41 | 20.66 | |||||||||||||||||||||||||||||||||||||||||||
First quarter 2008 | 45.98 | 21.52 | 25.67 | 46.40 | 22.33 | 28.80 | |||||||||||||||||||||||||||||||||||||||||||
2007 | 71.95 | 42.69 | 46.60 | 66.26 | 43.50 | 46.00 | |||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2007 | 61.05 | 42.69 | 46.60 | 58.01 | 43.50 | 46.00 | |||||||||||||||||||||||||||||||||||||||||||
Third quarter 2007 | 66.88 | 53.67 | 55.67 | 62.34 | 49.84 | 53.25 | |||||||||||||||||||||||||||||||||||||||||||
Second quarter 2007 | 71.55 | 63.72 | 65.46 | 66.26 | 58.73 | 60.01 | |||||||||||||||||||||||||||||||||||||||||||
First quarter 2007 | 71.95 | 59.76 | 64.21 | 64.30 | 55.40 | 59.43 | |||||||||||||||||||||||||||||||||||||||||||
2006 | 71.06 | 53.23 | 65.86 | 63.39 | 48.34 | 60.33 | |||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2006 | 71.06 | 62.88 | 65.86 | 63.39 | 58.50 | 60.33 | |||||||||||||||||||||||||||||||||||||||||||
Third quarter 2006 | 66.52 | 53.23 | 66.52 | 59.77 | 48.34 | 59.31 | |||||||||||||||||||||||||||||||||||||||||||
Second quarter 2006 | 66.97 | 54.31 | 59.32 | 61.70 | 49.36 | 54.85 | |||||||||||||||||||||||||||||||||||||||||||
First quarter 2006 | 64.05 | 55.60 | 63.39 | 55.55 | 48.66 | 54.99 | |||||||||||||||||||||||||||||||||||||||||||
2005 | 56.39 | 41.19 | 55.38 | 49.30 | 38.47 | 47.58 | |||||||||||||||||||||||||||||||||||||||||||
Fourth quarter 2005 | 56.39 | 46.52 | 55.38 | 49.30 | 40.73 | 47.58 | |||||||||||||||||||||||||||||||||||||||||||
Third quarter 2005 | 49.84 | 43.60 | 48.69 | 43.49 | 38.55 | 42.75 | |||||||||||||||||||||||||||||||||||||||||||
Second quarter 2005 | 45.68 | 41.37 | 44.27 | 43.06 | 38.47 | 38.93 | |||||||||||||||||||||||||||||||||||||||||||
First quarter 2005 | 46.70 | 41.19 | 44.71 | 45.10 | 39.61 | 42.20 | |||||||||||||||||||||||||||||||||||||||||||
1 Historical share price adjusted for the rights issue and stock dividend 2008. |
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Basel II Pillar 3
è | Qualitative disclosures related to our risk management and control, definitions and risk exposures as well as to capital management can be found in the “Risk management and control” and “Treasury management” sections of this report |
Basel II Pillar 3 requirement | Disclosure in the annual report | ||
Capital structure | “Capital management” section of this report | ||
Capital adequacy | “Capital management” and “Basel II Pillar 3” sections of this report | ||
Risk management objectives, policies and methodologies (qualitative disclosures) | “Risk management and control” section of this report | ||
Credit risk | “Basel II Pillar 3” section of this report | ||
Investment positions | “Basel II Pillar 3” section of this report | ||
Market risk | “Risk management and control” section of this report | ||
Securitization | “Basel II Pillar 3” section of this report | ||
Operational risk | “Risk management and control” section of this report | ||
Interest rate risk in the banking book | “Basel II Pillar 3” section of this report |
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Category | UBS approach | ||
Credit risk | Under the Advanced Internal Ratings Based (Advanced IRB) approach applied for the majority of our businesses, credit risk weights are determined by reference to internal counterparty ratings and loss given default estimates. We use internal models, approved by FINMA, to measure the credit risk exposures to third parties on over-the-counter derivatives and repurchase-style (repo-style) transactions. For a subset of our credit portfolio, we apply the Standardized approach, based on external ratings. | ||
Non-counterparty related risk | Non-counterparty related assets such as our premises, other properties and equipment require capital underpinning according to prescribed regulatory risk weights. | ||
Settlement risk | Capital requirements for failed transactions are determined according to the rules for failed trades and non-delivery-versus-payment transactions under the BIS Basel II framework. | ||
Equity exposures outside trading book | Simple risk weight method under the IRB approach. | ||
Market risk | Regulatory capital requirement is derived from our Value at Risk (VaR) model, which is approved by FINMA. | ||
Operational risk | We developed a model to quantify operational risk, which meets the regulatory capital standard under the Basel II Advanced Measurement Approach (AMA). | ||
Securitization exposures | Securitization exposures in the banking book are assessed using the Ratings Based approach under the IRB, applying risk weights based on external ratings. |
– | Real estate and commercial companies as well as collective investment schemes are not consolidated for regulatory capital purposes but are risk-weighted. | |
– | Insurance companies are not consolidated for regulatory capital purposes but are deducted from capital. | |
– | Securitization vehicles are not consolidated for regulatory capital purposes but are treated under the securitization framework. | |
– | Joint ventures that are controlled by two ventures are fully consolidated for regulatory capital purposes, whereas they are valued under equity method accounting for IFRS. |
è | For further information on risk-weighted assets or the determination of the eligible capital, please refer to the “Capital management” section of this report |
31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net EAD | Basel II RWA | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | Advanced | 1 | Standardized | 2 | Total | Total | |||||||||||||||||||||||||||||||||||||||||||
Credit risk | 585,549 | 95,161 | 32,057 | 127,218 | 208,459 | ||||||||||||||||||||||||||||||||||||||||||||
Sovereigns | 128,957 | 6,680 | 380 | 7,060 | 10,196 | ||||||||||||||||||||||||||||||||||||||||||||
Banks | 109,049 | 16,651 | 1,654 | 18,305 | 28,209 | ||||||||||||||||||||||||||||||||||||||||||||
Corporates | 165,246 | 56,377 | 26,802 | 83,179 | 148,062 | ||||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 119,859 | 12,332 | 1,166 | 13,498 | 14,650 | ||||||||||||||||||||||||||||||||||||||||||||
Lombard lending | 58,723 | 2,682 | 0 | 2,682 | 4,502 | ||||||||||||||||||||||||||||||||||||||||||||
Other retail | 3,714 | 441 | 2,055 | 2,496 | 2,840 | ||||||||||||||||||||||||||||||||||||||||||||
Securitization exposures | 31,277 | 8,515 | 8,515 | 6,202 | |||||||||||||||||||||||||||||||||||||||||||||
Non-counterparty related risk | 19,499 | 7,026 | 7,026 | 7,411 | |||||||||||||||||||||||||||||||||||||||||||||
Settlement risk (failed trades) | 128 | 30 | 73 | 103 | 256 | ||||||||||||||||||||||||||||||||||||||||||||
Equity exposures outside trading book | 1,303 | 4,657 | 3 | 4,657 | 7,646 | ||||||||||||||||||||||||||||||||||||||||||||
Market risk | 12,861 | 4 | 12,861 | 27,614 | |||||||||||||||||||||||||||||||||||||||||||||
Operational risk | 46,144 | 5 | 46,144 | 44,685 | |||||||||||||||||||||||||||||||||||||||||||||
Total BIS risk-weighted assets | 637,756 | 167,369 | 39,156 | 206,525 | 302,273 | ||||||||||||||||||||||||||||||||||||||||||||
Additional risk-weighted assets according to FINMA regulations6 | 19,103 | 6 | 32,620 | ||||||||||||||||||||||||||||||||||||||||||||||
Total FINMA risk-weighted assets | 225,628 | 7 | 334,893 | ||||||||||||||||||||||||||||||||||||||||||||||
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Average regulatory | Risk-weighted | ||||||||||||||||||||||||||||||||||||||||||||||||
Exposure | risk-weighting2 | assets | |||||||||||||||||||||||||||||||||||||||||||||||
Average | Less: regulatory | ||||||||||||||||||||||||||||||||||||||||||||||||
regulatory gross | Regulatory gross | credit risk offsets | Regulatory net | ||||||||||||||||||||||||||||||||||||||||||||||
CHF million | credit exposure | credit exposure | and adjustments1 | credit exposure | |||||||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 28,634 | 18,114 | (98 | ) | 18,016 | 4 | % | 662 | |||||||||||||||||||||||||||||||||||||||||
Due from banks | 27,789 | 26,842 | (8,948 | ) | 17,893 | 20 | % | 3,490 | |||||||||||||||||||||||||||||||||||||||||
Loans | 272,384 | 259,131 | (10,183 | ) | 248,948 | 19 | % | 48,363 | |||||||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value | 10,613 | 9,386 | (4,829 | ) | 4,557 | 33 | % | 1,481 | |||||||||||||||||||||||||||||||||||||||||
Off-balance sheet3 | 43,961 | 42,407 | (344 | ) | 42,064 | 27 | % | 11,417 | |||||||||||||||||||||||||||||||||||||||||
Banking products | 383,382 | 355,880 | (24,402 | ) | 331,478 | 20 | % | 65,413 | |||||||||||||||||||||||||||||||||||||||||
Derivatives | 118,749 | 96,063 | 96,063 | 39 | % | 37,454 | |||||||||||||||||||||||||||||||||||||||||||
Securities financing | 52,327 | 40,756 | 40,756 | 10 | % | 4,147 | |||||||||||||||||||||||||||||||||||||||||||
Traded products | 171,076 | 136,819 | 136,819 | 30 | % | 41,601 | |||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | 27,172 | 25,803 | 25,803 | 28 | % | 7,257 | |||||||||||||||||||||||||||||||||||||||||||
Financial investments available-for-sale4 | 35,623 | 79,680 | 79,680 | 2 | % | 1,957 | |||||||||||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 5,855 | 5,369 | (69 | ) | 5,299 | 88 | % | 4,663 | |||||||||||||||||||||||||||||||||||||||||
Other assets | 7,454 | 6,485 | (14 | ) | 6,472 | 98 | % | 6,326 | |||||||||||||||||||||||||||||||||||||||||
Other products | 76,104 | 117,336 | (83 | ) | 117,253 | 17 | % | 20,204 | |||||||||||||||||||||||||||||||||||||||||
Total 31.12.09 | 630,562 | 610,036 | (24,487 | ) | 585,549 | 22 | % | 127,218 | |||||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 715,064 | (33,116 | ) | 681,947 | 31 | % | 208,459 | ||||||||||||||||||||||||||||||||||||||||||
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Africa/ | Total regulatory | ||||||||||||||||||||||||||||||||||||||||||||||||
Switzer- | Other | North | Latin | Asia/ | Middle | gross credit | Total regulatory | ||||||||||||||||||||||||||||||||||||||||||
CHF million | land | Europe | America1 | America | Pacific | East | exposure | net exposure | |||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 2,974 | 7,525 | 4,195 | 3,420 | 18,114 | 18,016 | |||||||||||||||||||||||||||||||||||||||||||
Due from banks | 642 | 17,392 | 4,384 | 169 | 3,889 | 365 | 26,842 | 17,893 | |||||||||||||||||||||||||||||||||||||||||
Loans | 158,684 | 22,420 | 58,381 | 3,741 | 12,662 | 3,242 | 259,131 | 248,948 | |||||||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value | 1,760 | 7,255 | 345 | 25 | 9,386 | 4,557 | |||||||||||||||||||||||||||||||||||||||||||
Off-balance sheet | 6,850 | 8,914 | 24,014 | 638 | 1,630 | 361 | 42,407 | 42,064 | |||||||||||||||||||||||||||||||||||||||||
Banking products | 169,151 | 58,012 | 98,229 | 4,549 | 21,947 | 3,993 | 355,880 | 331,478 | |||||||||||||||||||||||||||||||||||||||||
Derivatives | 6,192 | 44,131 | 33,694 | 488 | 10,467 | 1,091 | 96,063 | 96,063 | |||||||||||||||||||||||||||||||||||||||||
Securities financing | 7,176 | 14,266 | 12,282 | 37 | 6,786 | 210 | 40,756 | 40,756 | |||||||||||||||||||||||||||||||||||||||||
Traded products | 13,368 | 58,396 | 45,976 | 525 | 17,253 | 1,301 | 136,819 | 136,819 | |||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | 11,601 | 4,947 | 245 | 8,932 | 77 | 25,803 | 25,803 | ||||||||||||||||||||||||||||||||||||||||||
Financial investments available-for-sale2 | 655 | 24,765 | 50,175 | 3 | 3,950 | 132 | 79,680 | 79,680 | |||||||||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 365 | 718 | 4,087 | 21 | 159 | 19 | 5,369 | 5,299 | |||||||||||||||||||||||||||||||||||||||||
Other assets | 3,744 | 1,108 | 1,295 | 2 | 309 | 27 | 6,485 | 6,472 | |||||||||||||||||||||||||||||||||||||||||
Other products | 4,765 | 38,193 | 60,504 | 270 | 13,350 | 255 | 117,336 | 117,253 | |||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.09 | 187,283 | 154,601 | 204,709 | 5,344 | 52,550 | 5,548 | 610,036 | 585,549 | |||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.08 | 208,777 | 184,294 | 257,654 | 8,887 | 48,037 | 7,415 | 715,064 | 681,947 | |||||||||||||||||||||||||||||||||||||||||
Public entities | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
(including | Banks and | regulatory | |||||||||||||||||||||||||||||||||||||||||||||||
Private | sovereigns and | multilateral | gross credit | Total regulatory | |||||||||||||||||||||||||||||||||||||||||||||
CHF million | individuals | Corporates1 | central banks) | institutions | exposure | net exposure | |||||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 17,931 | 183 | 18,114 | 18,016 | |||||||||||||||||||||||||||||||||||||||||||||
Due from banks | 96 | 26,745 | 26,842 | 17,893 | |||||||||||||||||||||||||||||||||||||||||||||
Loans | 154,793 | 96,793 | 7,544 | 259,131 | 248,948 | ||||||||||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value | 4,982 | 27 | 4,376 | 9,386 | 4,557 | ||||||||||||||||||||||||||||||||||||||||||||
Off-balance sheet | 3,259 | 36,882 | 1,045 | 1,221 | 42,407 | 42,064 | |||||||||||||||||||||||||||||||||||||||||||
Banking products | 158,052 | 138,658 | 26,644 | 32,526 | 355,880 | 331,478 | |||||||||||||||||||||||||||||||||||||||||||
Derivatives | 1,363 | 45,418 | 18,338 | 30,943 | 96,063 | 96,063 | |||||||||||||||||||||||||||||||||||||||||||
Securities financing | 172 | 21,615 | 7,691 | 11,279 | 40,756 | 40,756 | |||||||||||||||||||||||||||||||||||||||||||
Traded products | 1,535 | 67,033 | 26,030 | 42,222 | 136,819 | 136,819 | |||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | 8,652 | 16,760 | 391 | 25,803 | 25,803 | ||||||||||||||||||||||||||||||||||||||||||||
Financial investments available-for-sale2 | 2 | 7,638 | 69,120 | 2,920 | 79,680 | 79,680 | |||||||||||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 4,043 | 1,118 | 40 | 168 | 5,369 | 5,299 | |||||||||||||||||||||||||||||||||||||||||||
Other assets | 1,380 | 4,231 | 123 | 751 | 6,485 | 6,472 | |||||||||||||||||||||||||||||||||||||||||||
Other products | 5,425 | 21,639 | 86,043 | 4,230 | 117,336 | 117,253 | |||||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.09 | 165,012 | 227,330 | 138,717 | 78,977 | 610,036 | 585,549 | |||||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.08 | 165,016 | 344,012 | 89,627 | 116,408 | 715,064 | 681,947 | |||||||||||||||||||||||||||||||||||||||||||
è | Refer to the “Financial information” section of this report for more information. The counterparty type is different from the Basel II defined exposure segments used in certain other tables in this section |
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Total | |||||||||||||||||||||||||||||||||||||||||||||||||
regulatory | Total regulatory | ||||||||||||||||||||||||||||||||||||||||||||||||
Due in | Due over | Due over | gross credit | net credit | |||||||||||||||||||||||||||||||||||||||||||||
CHF million | 1 year or less | 1 year to 5 years | 5 years | Other1 | exposure | exposure | |||||||||||||||||||||||||||||||||||||||||||
Cash and balances with central banks | 18,114 | 18,114 | 18,016 | ||||||||||||||||||||||||||||||||||||||||||||||
Due from banks | 3,008 | 299 | 130 | 23,405 | 26,842 | 17,893 | |||||||||||||||||||||||||||||||||||||||||||
Loans | 101,202 | 77,379 | 40,942 | 39,607 | 259,131 | 248,948 | |||||||||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value | 1,059 | 6,040 | 1,339 | 949 | 9,386 | 4,557 | |||||||||||||||||||||||||||||||||||||||||||
Off-balance sheet | 10,127 | 29,934 | 1,605 | 741 | 42,407 | 42,064 | |||||||||||||||||||||||||||||||||||||||||||
Banking products | 115,395 | 113,651 | 44,016 | 82,817 | 355,880 | 331,478 | |||||||||||||||||||||||||||||||||||||||||||
Derivatives | 34,959 | 24,551 | 36,553 | 96,063 | 96,063 | ||||||||||||||||||||||||||||||||||||||||||||
Securities financing | 9,338 | 2 | 116 | 31,300 | 40,756 | 40,756 | |||||||||||||||||||||||||||||||||||||||||||
Traded products | 44,297 | 24,553 | 36,669 | 31,301 | 136,819 | 136,819 | |||||||||||||||||||||||||||||||||||||||||||
Trading portfolio assets | 17,466 | 6,476 | 1,846 | 15 | 25,803 | 25,803 | |||||||||||||||||||||||||||||||||||||||||||
Financial investments available-for-sale2 | 71,888 | 6,971 | 819 | 1 | 79,680 | 79,680 | |||||||||||||||||||||||||||||||||||||||||||
Accrued income and prepaid expenses | 5,369 | 5,369 | 5,299 | ||||||||||||||||||||||||||||||||||||||||||||||
Other assets | 6,485 | 6,485 | 6,472 | ||||||||||||||||||||||||||||||||||||||||||||||
Other products | 89,355 | 13,447 | 2,665 | 11,870 | 117,336 | 117,253 | |||||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.09 | 249,047 | 151,651 | 83,350 | 125,988 | 610,036 | 585,549 | |||||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.08 | 247,904 | 171,558 | 125,600 | 170,001 | 715,064 | 681,947 | |||||||||||||||||||||||||||||||||||||||||||
Advanced IRB | Standardized | Total | Total | ||||||||||||||||||||||||||||||||||||||||||||||
CHF million | approach1 | approach | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure | 463,836 | 146,200 | 610,036 | 715,064 | |||||||||||||||||||||||||||||||||||||||||||||
Less: regulatory credit risk offsets and adjustments2 | (18,310 | ) | (6,176 | ) | (24,487 | ) | (33,116 | ) | |||||||||||||||||||||||||||||||||||||||||
Total regulatory net credit exposure | 445,526 | 140,024 | 585,549 | ||||||||||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 592,107 | 89,841 | 681,947 | ||||||||||||||||||||||||||||||||||||||||||||||
Breakdown of the regulatory net credit exposure by exposure segment | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 128,146 | 37,100 | 165,246 | 286,321 | |||||||||||||||||||||||||||||||||||||||||||||
Sovereigns | 36,163 | 92,794 | 128,957 | 70,089 | |||||||||||||||||||||||||||||||||||||||||||||
Banks | 103,280 | 5,769 | 109,049 | 142,473 | |||||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 118,213 | 1,646 | 119,859 | 118,540 | |||||||||||||||||||||||||||||||||||||||||||||
Lombard lending | 58,723 | 58,723 | 60,099 | ||||||||||||||||||||||||||||||||||||||||||||||
Other retail | 1,000 | 2,715 | 3,714 | 4,426 | |||||||||||||||||||||||||||||||||||||||||||||
Total regulatory net credit exposure | 445,526 | 140,024 | 585,549 | ||||||||||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 592,107 | 89,841 | 681,947 | ||||||||||||||||||||||||||||||||||||||||||||||
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This table provides a breakdown of collateral information, showing exposures covered by guarantees and those covered by credit derivatives, according to Basel II defined exposure segments. These are defined as follows: |
– | Corporates: consists of all exposures that do not fit into any of the other exposure segments below. It includes private commercial entities such as corporations, partnerships or proprietorships, insurance companies, funds, exchanges and clearing houses. | |
– | Sovereigns (“Central governments and central banks” under Swiss and EU regulations): consists of exposures relating to sovereign states and their central banks, the Bank for International Settlement (BIS), the International Monetary Fund (IMF), the European Union including the European Central Bank and eligible multilateral development banks (MDB). | |
– | Banks (“Institutions” under Swiss and EU regulations): consists of exposures towards banks, i.e. legal entities holding a banking license. It also includes those securities firms that are subject to supervisory and regulatory arrangements comparable to those applied to banks accord- |
ing to the Basel II Revised Framework, including, in particular, risk-based capital requirements. Basel II also defines this regulatory exposure segment such that it contains exposures to public sector entities with tax raising power or whose liabilities are fully guaranteed by a public entity. | ||
– | Residential mortgages (“Claims secured on residential real estate” under Swiss and EU regulations): consists of residential mortgages, regardless of exposure size, if the obligor owns and occupies or rents out the mortgaged property. | |
– | Lombard lending: loans which are made against the pledge of eligible marketable securities or cash. | |
– | Other retail: consists of exposures to small businesses, private clients and other retail customers without mortgage financing. |
Exposure covered by | Exposure covered by | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | guarantees1 | credit derivatives | |||||||||||||||||||||||||||||||||||||||||||||||
Exposure segment | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 3,359 | 23,991 | |||||||||||||||||||||||||||||||||||||||||||||||
Sovereigns | 334 | 47 | |||||||||||||||||||||||||||||||||||||||||||||||
Banks | 380 | 940 | |||||||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 11 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
Lombard lending | 611 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
Other retail | 50 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.09 | 4,746 | 24,978 | |||||||||||||||||||||||||||||||||||||||||||||||
Total regulatory gross credit exposure 31.12.08 | 4,302 | 28,368 | |||||||||||||||||||||||||||||||||||||||||||||||
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UBS-internal rating | Total | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Investment grade | Sub-investment grade | Defaulted2 | regulatory | regulatory | |||||||||||||||||||||||||||||||||||||||||||||
net credit | net credit | ||||||||||||||||||||||||||||||||||||||||||||||||
exposure | exposure | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 0/1 | 2/3 | 4/5 | 6–8 | 9–13 | 31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||
Regulatory net credit exposure-weighted average PD | 0.009% | 0.057% | 0.279% | 0.955% | 5.742% | 0.548% | 0.484% | ||||||||||||||||||||||||||||||||||||||||||
Exposure segment | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 4,187 | 45,381 | 31,940 | 26,991 | 14,306 | 5,341 | 128,146 | 237,704 | |||||||||||||||||||||||||||||||||||||||||
Sovereigns | 18,491 | 17,103 | 465 | 26 | 71 | 8 | 36,163 | 45,270 | |||||||||||||||||||||||||||||||||||||||||
Banks | 5,069 | 86,579 | 10,036 | 1,330 | 231 | 35 | 103,280 | 130,493 | |||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 1 | 5,425 | 53,979 | 52,732 | 5,477 | 599 | 118,213 | 116,539 | |||||||||||||||||||||||||||||||||||||||||
Lombard lending | 50,462 | 4,630 | 2,812 | 703 | 116 | 58,723 | 60,099 | ||||||||||||||||||||||||||||||||||||||||||
Other retail | 135 | 70 | 768 | 18 | 9 | 1,000 | 2,002 | ||||||||||||||||||||||||||||||||||||||||||
Total 31.12.09 | 27,748 | 205,085 | 101,119 | 84,659 | 20,805 | 6,109 | 445,526 | ||||||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 61,691 | 261,108 | 134,083 | 102,651 | 24,929 | 7,644 | 592,107 | ||||||||||||||||||||||||||||||||||||||||||
UBS-internal rating | Regulatory | Regulatory | |||||||||||||||||||||||||||||||||||||||||||||||
Investment grade | Sub-investment grade | net credit | net credit | ||||||||||||||||||||||||||||||||||||||||||||||
exposure- | exposure- | ||||||||||||||||||||||||||||||||||||||||||||||||
weighted average | weighted average | ||||||||||||||||||||||||||||||||||||||||||||||||
LGD (%) | LGD (%) | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 0/1 | 2/3 | 4/5 | 6–8 | 9–13 | 31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||
Regulatory net credit exposure-weighted average LGD (%) | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 39 | 34 | 32 | 32 | 25 | 31 | 35 | ||||||||||||||||||||||||||||||||||||||||||
Sovereigns | 38 | 50 | 64 | 37 | 30 | 44 | 37 | ||||||||||||||||||||||||||||||||||||||||||
Banks | 23 | 28 | 38 | 41 | 47 | 29 | 26 | ||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 10 | 10 | 10 | 10 | 11 | 10 | 11 | ||||||||||||||||||||||||||||||||||||||||||
Lombard lending | 20 | 20 | 20 | 20 | 20 | 20 | |||||||||||||||||||||||||||||||||||||||||||
Other retail | 20 | 12 | 40 | 16 | 35 | 40 | |||||||||||||||||||||||||||||||||||||||||||
Average 31.12.09 | 35 | 29 | 20 | 18 | 21 | 25 | |||||||||||||||||||||||||||||||||||||||||||
Average 31.12.08 | 25 | 28 | 26 | 21 | 26 | 26 | |||||||||||||||||||||||||||||||||||||||||||
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UBS-internal rating | Regulatory net | Regulatory net | |||||||||||||||||||||||||||||||||||||||||||||||
Investment grade | Sub-Investment grade | credit exposure- | credit exposure- | ||||||||||||||||||||||||||||||||||||||||||||||
weighted average | weighted average | ||||||||||||||||||||||||||||||||||||||||||||||||
risk weight (%) | risk weight (%) | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 0/1 | 2/3 | 4/5 | 6–8 | 9–13 | 31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||
Regulatory net credit exposure-weighted average risk weight (%) | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 15 | 17 | 36 | 59 | 83 | 42 | 39 | ||||||||||||||||||||||||||||||||||||||||||
Sovereigns | 3 | 32 | 60 | 65 | 106 | 17 | 19 | ||||||||||||||||||||||||||||||||||||||||||
Banks | 8 | 11 | 40 | 79 | 154 | 15 | 17 | ||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 1 | 2 | 5 | 12 | 29 | 10 | 10 | ||||||||||||||||||||||||||||||||||||||||||
Lombard lending | 3 | 11 | 6 | 30 | 4 | 6 | |||||||||||||||||||||||||||||||||||||||||||
Other retail | 3 | 6 | 51 | 24 | 42 | 43 | |||||||||||||||||||||||||||||||||||||||||||
Average 31.12.09 | 5 | 12 | 19 | 28 | 68 | 20 | |||||||||||||||||||||||||||||||||||||||||||
Average 31.12.08 | 8 | 13 | 28 | 35 | 87 | 24 | |||||||||||||||||||||||||||||||||||||||||||
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– | Central governments and central banks; | |
– | Regional governments and local authorities; | |
– | Multilateral development banks; | |
– | Institutions; and | |
– | Corporates. |
Total exposure | Total exposure | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 0% | >0–35% | 36–75% | 76–100% | 150% | 31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||
Regulatory gross credit exposure | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 1 | 12,988 | 904 | 27,179 | 1,087 | 42,159 | 53,651 | ||||||||||||||||||||||||||||||||||||||||||
Sovereigns2 | 92,174 | 300 | 369 | 92,843 | 24,885 | ||||||||||||||||||||||||||||||||||||||||||||
Banks | 1 | 4,156 | 2,640 | 23 | 6,821 | 13,654 | |||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 961 | 685 | 1,646 | 2,065 | |||||||||||||||||||||||||||||||||||||||||||||
Lombard lending | |||||||||||||||||||||||||||||||||||||||||||||||||
Other retail | 2,704 | 27 | 2,731 | 2,476 | |||||||||||||||||||||||||||||||||||||||||||||
Total 31.12.09 | 92,176 | 17,444 | 7,209 | 28,256 | 1,115 | 146,200 | |||||||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 23,884 | 14,773 | 8,732 | 47,731 | 1,612 | 96,731 | |||||||||||||||||||||||||||||||||||||||||||
Regulatory net credit exposure3 | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 1 | 12,988 | 904 | 22,120 | 1,087 | 37,100 | 48,618 | ||||||||||||||||||||||||||||||||||||||||||
Sovereigns2 | 92,174 | 300 | 320 | 92,794 | 24,818 | ||||||||||||||||||||||||||||||||||||||||||||
Banks | 1 | 4,140 | 1,605 | 23 | 5,769 | 11,979 | |||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 961 | 685 | 1,646 | 2,001 | |||||||||||||||||||||||||||||||||||||||||||||
Lombard lending | |||||||||||||||||||||||||||||||||||||||||||||||||
Other retail | 2,688 | 27 | 2,715 | 2,424 | |||||||||||||||||||||||||||||||||||||||||||||
Total 31.12.09 | 92,176 | 17,428 | 6,157 | 23,148 | 1,115 | 140,024 | |||||||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 23,884 | 14,165 | 7,550 | 42,630 | 1,611 | 89,841 | |||||||||||||||||||||||||||||||||||||||||||
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31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||||
Regulatory net credit | Eligible financial | Regulatory net credit | Eligible financial collateral | ||||||||||||||||||||||||||||||||||||||||||||||
exposure under | collateral recognized in | exposure under | recognized in capital | ||||||||||||||||||||||||||||||||||||||||||||||
CHF million | standardized approach | capital calculation1 | standardized approach | calculation1 | |||||||||||||||||||||||||||||||||||||||||||||
Exposure segment | |||||||||||||||||||||||||||||||||||||||||||||||||
Corporates | 37,100 | 20,852 | 48,618 | 8,911 | |||||||||||||||||||||||||||||||||||||||||||||
Sovereigns | 92,794 | 60 | 24,818 | 1,148 | |||||||||||||||||||||||||||||||||||||||||||||
Banks | 5,769 | 4,916 | 11,979 | 5,942 | |||||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 1,646 | 2,001 | 64 | ||||||||||||||||||||||||||||||||||||||||||||||
Lombard lending | |||||||||||||||||||||||||||||||||||||||||||||||||
Other retail | 2,715 | 18 | 2,424 | 648 | |||||||||||||||||||||||||||||||||||||||||||||
Total | 140,024 | 25,847 | 89,841 | 16,713 | |||||||||||||||||||||||||||||||||||||||||||||
Exposure net | Total allowances, | ||||||||||||||||||||||||||||||||||||||||||||||||
Specific | of specific | Total allowances, | provisions and | ||||||||||||||||||||||||||||||||||||||||||||||
allowances, | allowances, | provisions and | specific credit | ||||||||||||||||||||||||||||||||||||||||||||||
provisions and | provisions and | Collective | specific credit | valuation | |||||||||||||||||||||||||||||||||||||||||||||
Regulatory gross | credit valuation | credit valuation | allowances and | valuation | adjustments | ||||||||||||||||||||||||||||||||||||||||||||
CHF million | credit exposure | Impaired assets | 1 | adjustments | adjustments | provisions | adjustments | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||
Switzerland | 187,283 | 1,480 | (836 | ) | 644 | (49 | ) | (885 | ) | (873 | ) | ||||||||||||||||||||||||||||||||||||||
Other Europe | 154,601 | 2,364 | (1,185 | ) | 1,179 | (1,185 | ) | (1,138 | ) | ||||||||||||||||||||||||||||||||||||||||
North America2 | 204,709 | 7,375 | (3,584 | ) | 3,791 | (3,584 | ) | (4,808 | ) | ||||||||||||||||||||||||||||||||||||||||
Latin America | 5,344 | 37 | (25 | ) | 12 | (25 | ) | (56 | ) | ||||||||||||||||||||||||||||||||||||||||
Asia / Pacific | 52,550 | 575 | (121 | ) | 454 | (121 | ) | (361 | ) | ||||||||||||||||||||||||||||||||||||||||
Africa / Middle East | 5,548 | 90 | (80 | ) | 10 | (80 | ) | (41 | ) | ||||||||||||||||||||||||||||||||||||||||
Total 31.12.09 | 610,036 | 11,920 | (5,831 | ) | 6,090 | (49 | ) | (5,881 | ) | ||||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 715,064 | 13,947 | 3 | (7,252 | ) | 6,695 | (23 | ) | (7,275 | ) | |||||||||||||||||||||||||||||||||||||||
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Total | Total allowances, | ||||||||||||||||||||||||||||||||||||||||||||||||
Specific | allowances, | provisions and | |||||||||||||||||||||||||||||||||||||||||||||||
allowances, | provisions and | specific credit | |||||||||||||||||||||||||||||||||||||||||||||||
provisions and | Collective | specific credit | valuation | ||||||||||||||||||||||||||||||||||||||||||||||
Regulatory gross | of which | credit valuation | allowances and | valuation | adjustments | ||||||||||||||||||||||||||||||||||||||||||||
CHF million | credit exposure | impaired assets | 1 | adjustments | provisions2 | adjustments2 | Write-offs | 3 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||
Corporates | 200,573 | 11,201 | (5,470 | ) | (5,470 | ) | (1,990 | ) | (6,777 | ) | |||||||||||||||||||||||||||||||||||||||
Sovereigns | 130,060 | 14 | (10 | ) | (10 | ) | (2 | ) | (12 | ) | |||||||||||||||||||||||||||||||||||||||
Banks | 96,851 | 53 | (42 | ) | (42 | ) | (7 | ) | (20 | ) | |||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 119,980 | 320 | (92 | ) | (92 | ) | (103 | ) | |||||||||||||||||||||||||||||||||||||||||
Lombard lending | 58,798 | 262 | (147 | ) | (147 | ) | |||||||||||||||||||||||||||||||||||||||||||
Other retail | 3,774 | 71 | (71 | ) | (71 | ) | (42 | ) | (340 | ) | |||||||||||||||||||||||||||||||||||||||
Not allocated segment4 | (49 | ) | (49 | ) | (5 | ) | (23 | ) | |||||||||||||||||||||||||||||||||||||||||
Total 31.12.09 | 610,036 | 11,920 | (5,831 | ) | (49 | ) | (5,881 | ) | (2,046 | ) | |||||||||||||||||||||||||||||||||||||||
Total 31.12.08 | 715,064 | 13,947 | 5 | (7,252 | ) | (23 | ) | (7,275 | ) | (868 | ) | (7,275 | ) | ||||||||||||||||||||||||||||||||||||
Specific | |||||||||||||||||||||||||||||||||||||||||||||||||
allowances and | Total specific | ||||||||||||||||||||||||||||||||||||||||||||||||
provisions for | Specific credit | allowances, | For the | For the | |||||||||||||||||||||||||||||||||||||||||||||
banking products | valuation | provisions and | Collective | twelve-month | twelve-month | ||||||||||||||||||||||||||||||||||||||||||||
and securities | adjustments for | credit valuation | allowances and | period ended | period ended | ||||||||||||||||||||||||||||||||||||||||||||
CHF million | financing | derivatives | adjustments | provisions1 | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||
Opening balance as at 1.1.09 | 3,047 | 4,205 | 7,252 | 23 | 7,275 | Opening balance as at 1.1.08 1,981 | |||||||||||||||||||||||||||||||||||||||||||
Write-offs | (2,046 | ) | (2,046 | ) | (2,046 | ) | (868 | ) | |||||||||||||||||||||||||||||||||||||||||
Recoveries (on written-off positions) | 52 | 52 | 52 | 44 | |||||||||||||||||||||||||||||||||||||||||||||
Increase/(decrease) in allowances, provisions and specific credit valuation adjustments2 | 1,806 | (722 | ) | 1,084 | 26 | 1,110 | 7,545 | ||||||||||||||||||||||||||||||||||||||||||
Foreign currency translations and other adjustments | (37 | ) | (423 | ) | (460 | ) | (460 | ) | (867 | ) | |||||||||||||||||||||||||||||||||||||||
Transfers | (51 | ) | (51 | ) | (51 | ) | (561 | ) | |||||||||||||||||||||||||||||||||||||||||
Closing balance as at 31.12.09 | 2,771 | 3,060 | 5,831 | 49 | 5,881 | Closing balance as at 31.12.08 7,275 | |||||||||||||||||||||||||||||||||||||||||||
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Expected loss | Actual credit loss and credit valuation adjustments | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.08 | 31.12.09 | 31.12.08 | ||||||||||||||||||||||||||||||||||||||||||||||
Specific credit | Total actual | Total actual | |||||||||||||||||||||||||||||||||||||||||||||||
valuation adjustments | credit loss and | credit loss and | |||||||||||||||||||||||||||||||||||||||||||||||
for defaulted | credit valuation | credit valuation | |||||||||||||||||||||||||||||||||||||||||||||||
Total expected loss | Actual credit loss | derivatives | adjustments | adjustments | |||||||||||||||||||||||||||||||||||||||||||||
Corporates1 | 610 | 1,815 | (722 | ) | 1,093 | 6,681 | |||||||||||||||||||||||||||||||||||||||||||
Sovereigns | 13 | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Banks | 57 | 22 | 22 | 547 | |||||||||||||||||||||||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgages | 87 | 1 | 1 | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Lombard lending | 34 | (52 | ) | (52 | ) | 308 | |||||||||||||||||||||||||||||||||||||||||||
Other retail | 11 | 30 | 30 | 34 | |||||||||||||||||||||||||||||||||||||||||||||
Not specified2 | 17 | 17 | (24 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Total | 812 | 3 | 1,832 | (722 | ) | 1,110 | 7,545 | ||||||||||||||||||||||||||||||||||||||||||
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CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Gross positive replacement values | 424,548 | 860,943 | |||||||||||||||||||||||||||||||||||||||||||||||
Netting benefits recognized1 | (313,172 | ) | (651,756 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Collateral held | (38,012 | ) | (51,765 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net current credit exposure | 73,364 | 157,422 | |||||||||||||||||||||||||||||||||||||||||||||||
Regulatory net credit exposure (total counterparty credit risk)2 | 96,063 | 190,047 | |||||||||||||||||||||||||||||||||||||||||||||||
of which treated with internal models (effective expected positive exposure (EPE))2 | 79,111 | 164,707 | |||||||||||||||||||||||||||||||||||||||||||||||
of which treated with supervisory approaches (current exposure method)2 | 16,952 | 25,340 | |||||||||||||||||||||||||||||||||||||||||||||||
Breakdown of the collateral held | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral | 34,049 | 46,967 | |||||||||||||||||||||||||||||||||||||||||||||||
Securities collateral and debt instruments collateral (excluding equity) | 3,243 | 4,246 | |||||||||||||||||||||||||||||||||||||||||||||||
Equity instruments collateral | 95 | 121 | |||||||||||||||||||||||||||||||||||||||||||||||
Other collateral | 625 | 430 | |||||||||||||||||||||||||||||||||||||||||||||||
Total collateral held | 38,012 | 51,765 | |||||||||||||||||||||||||||||||||||||||||||||||
Regulatory banking book | Regulatory trading book | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Protection | Protection | Protection | Protection | ||||||||||||||||||||||||||||||||||||||||||||||
Notional amounts, CHF million | bought | sold | Total | bought | sold | Total | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||
Credit Default Swaps | 22,043 | 527 | 22,571 | 1,262,541 | 1,181,843 | 2,444,383 | 2,466,954 | 3,617,457 | |||||||||||||||||||||||||||||||||||||||||
Total Return Swaps | 62 | 62 | 6,354 | 4,707 | 11,061 | 11,123 | 24,044 | ||||||||||||||||||||||||||||||||||||||||||
Total 31.12.09 | 22,043 | 589 | 22,633 | 1,268,895 | 1,186,550 | 2,455,445 | 2,478,077 | 3,641,502 | |||||||||||||||||||||||||||||||||||||||||
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% of total notional | % of buy notional | % of sell notional | |||||||||||||||||||||||||||||||||||||||||||||||
Portfolio segment | |||||||||||||||||||||||||||||||||||||||||||||||||
Developed markets commercial banks | 64 | 63 | 66 | ||||||||||||||||||||||||||||||||||||||||||||||
Broker-dealers, investment and merchant banks | 28 | 28 | 28 | ||||||||||||||||||||||||||||||||||||||||||||||
Hedge funds | 1 | 1 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||
All other | 7 | 8 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||
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Book value | |||||||||||||||||||||||||||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||||||||||
Equity investments | |||||||||||||||||||||||||||||||||||||||||||||||||
Financial investments available-for-sale | 1,351 | 1,681 | |||||||||||||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value | 841 | 1,079 | |||||||||||||||||||||||||||||||||||||||||||||||
Investments in associates | 870 | 892 | |||||||||||||||||||||||||||||||||||||||||||||||
Total equity investments under IFRS | 3,062 | 3,653 | |||||||||||||||||||||||||||||||||||||||||||||||
Realized gains and (losses), net | 77 | 815 | |||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains and (losses), net | 466 | 421 | |||||||||||||||||||||||||||||||||||||||||||||||
Consolidation scope adjustment | (30 | ) | (80 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Other positions designated equity exposures under BIS | 743 | 405 | |||||||||||||||||||||||||||||||||||||||||||||||
Total equity exposure under BIS | 3,774 | 3,978 | |||||||||||||||||||||||||||||||||||||||||||||||
of which: to be risk weighted | |||||||||||||||||||||||||||||||||||||||||||||||||
publicly traded | 1,452 | 1,423 | |||||||||||||||||||||||||||||||||||||||||||||||
privately held | 1,110 | 1,681 | |||||||||||||||||||||||||||||||||||||||||||||||
of which: deducted from equity | 1,212 | 874 | |||||||||||||||||||||||||||||||||||||||||||||||
Capital requirement according to simple risk weight method | 373 | 612 | |||||||||||||||||||||||||||||||||||||||||||||||
Total capital charge | 1,585 | 1,486 | |||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains included in tier 2 | 50 | 69 | |||||||||||||||||||||||||||||||||||||||||||||||
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securitization structures
è | Refer to the “Exposure to auction rate securities” sidebar in the “Risk management and control” section of this report for more information | ||
è | Refer to “Note 29b Reclassification of financial assets” in the “Financial information” section of this report for more information |
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Exposure Type | Exposure amount | ||||||||
CHF million | 31.12.09 | 31.12.08 | |||||||
Commercial mortgages | 3,316 | N/A | |||||||
CDOs and CLOs | 9,565 | N/A | |||||||
Student Loans | 18,010 | 21,543 | |||||||
Other | 2,182 | 13,592 | 1 | ||||||
Total | 33,074 | 35,135 | |||||||
Exposure amount | Capital charge | Exposure amount | Capital charge | |||||||||||||||||
CHF million | 31.12.09 | 31.12.09 | 31.12.08 | 31.12.08 | ||||||||||||||||
over 0–10% | 9,047 | 57 | 10,492 | 62 | ||||||||||||||||
over 10–15% | 13,236 | 139 | 16,551 | 176 | ||||||||||||||||
over 15–20% | 4,511 | 75 | 5,533 | 94 | ||||||||||||||||
over 20–35% | 2,560 | 71 | 464 | 13 | ||||||||||||||||
over 35–50% | 222 | 9 | 253 | 11 | ||||||||||||||||
over 50–75% | 295 | 17 | 321 | 19 | ||||||||||||||||
over 75–100% | 504 | 43 | 1,181 | 100 | ||||||||||||||||
over 100–250% | 289 | 61 | 24 | 5 | ||||||||||||||||
over 250–1,250% | 613 | 209 | 10 | 17 | ||||||||||||||||
deducted from capital | 1,797 | 1,797 | 306 | 306 | ||||||||||||||||
Total | 33,074 | 2,478 | 35,135 | 803 | ||||||||||||||||
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CHF million | 31.12.09 | ||||||||||||||||||||||||||||||||||||||||||||||||
CHF | (0.3 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
EUR | (0.2 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
GBP | (0.3 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
USD | (0.8 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Other | (0.1 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Total impact on interest-rate-sensitive banking book positions | (1.8 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
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of theSwiss Code of Obligations
Table of Contents
– | Our corporate governance principles are designed to support UBS towards sustainable profitability and protect the interests of our shareholders, as well as to create value for shareholders and stakeholders |
Table of Contents
– | Revised Total Reward Principles were approved by the Board of Directors and implemented during 2009 | |
– | New compensation guidelines were implemented to focus on risk awareness, deferred pay, variable compensation and forfeiture conditions |
Compensation recommendations | |||||||||
Recipients | developed by | Approved by | Communicated by | ||||||
Chairman of the BoD | Chairman of the HRCC1 | HRCC | HRCC | ||||||
Group CEO | Chairman of the BoD / HRCC | BoD | HRCC | ||||||
Members of the GEB | Group CEO | HRCC | Group CEO | ||||||
Independent BoD members (remuneration system and fees) | Chairman of the BoD / HRCC | BoD | Chairman of the BoD |
Variable compensation recommendations | |||||||||||||||||
Recipients | developed by | Approved by | Communicated by | ||||||||||||||
Employees (excl. GEB) | Respective member of the GEB together with functional management team | Divisional pools: HRCC Overall: Board of Directors | Line Manager | ||||||||||||||
Table of Contents
Corporate governance
– | The SIX “Directive on Information Relating to Corporate Governance”, with regard to: Group structure and shareholders; capital structure; Board of Directors (BoD); Group Executive Board (GEB); compensation, shareholdings and loans; shareholders’ participation rights; change of control and defense measures; auditors and information policy. |
– | Articles 663bbis and 663c (paragraph three) of the CO, “Supplementary disclosures for companies whose shares are listed on a stock exchange: compensations and participations”, with regard to share and option ownership and loans. |
– | The NYSE “Corporate Governance Listing Standards” with regard to foreign listed companies: independence of directors, BoD committees and differences from the NYSE standards applicable to US domestic issuers. |
è | Refer towww.ubs.com/governance for more details on the Organization Regulations |
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è | Refer to “Note 34 Significant subsidiaries and associates” in the “Financial information” section of this report for details of significant operating subsidiary companies of the Group |
On 1 December 2009, BlackRock Inc., New York, disclosed according to the Swiss Stock Exchange Act, a holding of 3.45% of the total share capital of UBS AG.
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Corporate governance and compensation
Corporate governance
Significant shareholders1 | ||||||||||||
In % of shares issued | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Chase Nominees Ltd, London | 11.63 | 7.19 | 7.99 | |||||||||
DTC (Cede & Co.), New York2 | 8.42 | 9.89 | 14.15 | |||||||||
Mellon Bank N.A., Everett | 3.21 | less than 3 | less than 3 | |||||||||
Nortrust Nominees Ltd, London | 3.07 | less than 3 | less than 3 | |||||||||
1 Lists shareholders registered in our share register with 3% or more of the total share capital at the relevant reference dates. 2 DTC (Cede & Co.), New York, “The Depository Trust Company” is a US securities clearing organization. |
Distribution of UBS shares1 | ||||||||||||||||||
On 31 December 2009 | Shareholders registered | Shares registered | ||||||||||||||||
Number of shares registered | Number | % | Number | % of shares issued | ||||||||||||||
1–100 | 42,351 | 11.7 | 2,497,703 | 0.1 | ||||||||||||||
101–1,000 | 208,118 | 57.3 | 94,609,316 | 2.7 | ||||||||||||||
1,001–10,000 | 103,827 | 28.6 | 278,983,450 | 7.8 | ||||||||||||||
10,001–100,000 | 8,025 | 2.2 | 191,103,931 | 5.4 | ||||||||||||||
100,001–1,000,000 | 608 | 0.2 | 169,169,180 | 4.8 | ||||||||||||||
1,000,001–5,000,000 | 94 | 0.0 | 202,775,659 | 5.7 | ||||||||||||||
5,000,001–35,581,127 (1%) | 32 | 0.0 | 313,629,304 | 8.8 | ||||||||||||||
1–2% | 1 | 0.0 | 54,622,566 | 1.5 | ||||||||||||||
2–3% | 0 | 0.0 | 0 | 0.0 | ||||||||||||||
3–4% | 2 | 0.0 | 223,676,913 | 6.3 | ||||||||||||||
4–5% | 0 | 0.0 | 0 | 0.0 | ||||||||||||||
Over 5% | 2 | 1 | 0.0 | 713,346,857 | 20.0 | |||||||||||||
Total registered | 363,060 | 100.0 | 2,244,414,879 | 63.1 | ||||||||||||||
Unregistered2 | 1,313,697,874 | 36.9 | ||||||||||||||||
Total shares issued | 3,558,112,753 | 3 | 100.0 | |||||||||||||||
1 On 31 December 2009, Chase Nominees Ltd., London, was entered as a trustee/nominee holding 11.63% of all shares issued. DTC (Cede & Co.), New York, the US securities clearing organization, was registered with 8.42% of all shares issued. 2 Shares not entered in the share register at 31 December 2009. 3 400,665,834 registered shares do not carry voting rights. |
Shareholders: type and geographical distribution1 | ||||||||||||||||||
Shareholders | Shares | |||||||||||||||||
On 31 December 2009 | Number | % | Number | % | ||||||||||||||
Individual shareholders | 353,827 | 97.5 | 562,329,116 | 15.8 | ||||||||||||||
Legal entities | 8,682 | 2.4 | 469,388,746 | 13.2 | ||||||||||||||
Nominees, fiduciaries | 551 | 0.1 | 1,212,697,017 | 34.1 | ||||||||||||||
Unregistered | 1,313,697,874 | 36.9 | ||||||||||||||||
Total | 363,060 | 100.0 | 3,558,112,753 | 100.0 | ||||||||||||||
Switzerland | 327,674 | 90.3 | 836,731,688 | 23.5 | ||||||||||||||
Europe | 20,436 | 5.6 | 831,206,788 | 23.4 | ||||||||||||||
North America | 7,316 | 2.0 | 499,420,433 | 14.0 | ||||||||||||||
Other countries | 7,634 | 2.1 | 77,055,970 | 2.2 | ||||||||||||||
Unregistered | 1,313,697,874 | 36.9 | ||||||||||||||||
Total | 363,060 | 100.0 | 3,558,112,753 | 100.0 | ||||||||||||||
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è | Refer to “Note 38 Reorganizations and disposals” in the “Financial information” section of this report for more information |
è | Refer to the “Statement of changes in equity” in the “Financial information” section of this report for more information on changes in shareholders’ equity over the last three years |
è | Refer to the “Shareholders’ participation rights” section of this report for more information |
Share capital in CHF | Number of shares | Par value in CHF | |||||||||||||||||||||||||||||||||||||||||||||||
On 31 December 2007 | 207,354,734 | 2,073,547,344 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||
On 31 December 2008 | 293,258,055 | 2,932,580,549 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||
Issue of shares for capital increase (MCNs conversion) | 33,222,591 | 332,225,913 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||
Issue of shares for capital increase (private placement) | 29,325,805 | 293,258,050 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||
Issue of shares out of employee options exercised from conditional capital | 4,824 | 48,241 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||
On 31 December 2009 | 355,811,275 | 3,558,112,753 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||
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è | Refer to the discussion on shares and capital instruments in the “Treasury management” section of the 2008 annual report for more information on the MCNs |
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Kaspar Villiger Swiss, born 5 February 1941 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Functions in UBS Chairman of the Board of Directors / chair of the Governance and Nominating Committee / chair of the Corporate Responsibility Committee Year of initial appointment: 2009 | Professional history and education Kaspar Villiger was elected to the BoD at the 2009 AGM and was thereafter appointed Chairman of the BoD. He chairs the Governance and Nominating Committee and the Corporate Responsibility Committee. Mr. Villiger was elected Federal Councilor in 1989, and served as the Minister of Defense and Head of the Federal Military Department. He served as Finance Minister and Head of the Federal Department of Finance from 1995 until he stepped down at the end of 2003. Simultaneously, he served as President of the Swiss Confederation in 1995 and 2002. In 2004, he was elected to the boards of Nestlé, Swiss Re and the Neue Zürcher Zeitung, all of which he resigned from in 2009, when he took on the position of Chairman of UBS. As co-owner of the Villiger Group, Mr. Villiger managed the Swiss parent firm, Villiger Söhne AG, from 1966 until 1989. In addition, Mr. Villiger held several political positions, first in the parliament of the canton of Lucerne and, from 1982, in the Swiss Parliament. He graduated from the Swiss Federal Institute of Technology (ETH) in Zurich with a degree in mechanical engineering in 1966. | ||||
Sergio Marchionne Canadian and Italian, born 17 June 1952 Fiat S.p.A., Via Nizza 250, I-10126 Turin Functions in UBS Independent Vice Chairman and Senior Independent Director / member of the Governance and Nominating Committee Year of initial appointment: 2007 | Professional history and education Sergio Marchionne was elected to the BoD at the 2007 AGM, and was appointed independent Vice Chairman and Senior Independent Director in 2008. He is a member of the Governance and Nominating Committee. Mr. Marchionne is the Chief Executive Officer (CEO) of Fiat S.p.A., where he has been a member of the board since 2003. He is the CEO of Fiat Group Automobiles as well as of Chrysler Group LLC. He is also the Chairman of CNH Case New Holland, a Fiat Group company. From 1983 to 1985, he worked as a chartered accountant and tax specialist for Deloitte & Touche in Canada. From 1985 to 1988, he was Group Controller and then became Director of Corporate Development at Lawson Mardon Group of Toronto. In 1989 and 1990, he served as the Executive Vice President of Glenex Industries. In the following two years, Mr. Marchionne acted as Vice President of Finance and Chief Financial Officer (CFO) of Acklands Ltd. He returned to Lawson Mardon Group in 1992 as the Vice President of Legal and Corporate Development and CFO. The company was acquired by Alusuisse Lonza in 1994. Following the acquisition, he became CEO in 1996. Upon the completion of the merger of Alusuisse with Alcan Inc., he acted as CEO and Chairman of the spin-off, Lonza Group, until 2002. In 2002, Mr. Marchionne was appointed CEO of the Société Générale de Surveillance (SGS) Group of Geneva. Mr. Marchionne studied philosophy at the University of Toronto, business at the University of Windsor, and law at Osgoode Hall Law School in Toronto. He is a lawyer and a chartered accountant. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Marchionne is the Chairman of SGS and a member of the BoD of Philip Morris International Inc. He is also a member of the European Automobile Manufacturers’ Association (ACEA). | ||||
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Sally Bott American (US), born 11 November 1949 BP plc, 1 St. James’s Square, GB-London SW1Y 4PD Functions in UBS Chair of the Human Resources and Compensation Committee / member of the Corporate Responsibility Committee Year of initial appointment: 2008 | Professional history and education Sally Bott was elected to the BoD at the October 2008 EGM. She chairs the Human Resources and Compensation Committee and is a member of the Corporate Responsibility Committee. Sally Bott serves as the Group Human Resources (HR) Director of BP plc, which she joined in early 2005, and is a member of BP’s Group Executive Committee. Ms. Bott has spent most of her career in financial services. Between 2000 and 2005, she was a Managing Director at Marsh & McLennan Companies, a US-based global risk and insurance services business, and Head of Global HR for Marsh Inc. She was at Barclays Bank from 1994 to 2000, first as Barclays de Zoete Wedd HR Director and then as Group HR Director from 1997 to 2000. In 1970 she joined Citibank out of college as a research analyst in the economics department. She was credit trained and worked in the finance function. She moved into HR in 1978 and worked as an HR Director in most of Citibank’s wholesale bank and investment banking businesses for the next 15 years. She was the Global HR Director of the wholesale bank from 1990 to 1993. Ms. Bott studied at Manhattanville College in the US and graduated with a bachelor’s degree in economics. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Ms. Bott is a member of the board of the Royal College of Music in London and the Carter Burden Center for the Aging in New York City. | ||||
Michel Demaré Belgian, born 31 August 1956 ABB Ltd., Affolternstrasse 44, P.O. Box 5009, CH-8050 Zurich Function in UBS Member of the Audit Committee Year of initial appointment: 2009 | Professional history and education Michel Demaré was elected to the BoD at the 2009 AGM and is a member of the Audit Committee. Mr. Demaré joined ABB in 2005 as CFO and as a member of the Group Executive Committee. In addition, he became President of Global Markets in November 2008. Between February and September 2008, he acted as the interim CEO of ABB. Mr. Demaré joined ABB from Baxter International Inc., a global healthcare company, where he was CFO Europe from 2002 to 2005. Prior to this role, he spent 18 years at the Dow Chemical Company holding various treasury and risk management positions in Belgium, France, the US and Switzerland. Between 1997 and 2002 he was the CFO of the Global Polyolefins and Elastomers division. Mr. Demaré began his career as an officer in the multinational banking division of Continental Illinois National Bank of Chicago, based in Antwerp. He graduated with an MBA from the Katholieke Universiteit Leuven, Belgium, and holds a degree in applied economics from the Université Catholique de Louvain, Belgium. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Demaré is a member of the IMD Foundation Board, Lausanne. | ||||
Rainer-Marc Frey Swiss, born 10 January 1963 Horizon21, Poststrasse 4, CH-8808 Pfäffikon Function in UBS Member of the Risk Committee Year of initial appointment: 2008 | Professional history and education Rainer-Marc Frey was elected to the BoD at the October 2008 EGM and is a member of the Risk Committee. Mr. Frey is the founder and Chairman of the investment management company Horizon21. In 1992, he founded RMF Investment Group, one of the first hedge fund groups in Europe, and was appointed CEO. RMF was acquired by Man Group plc in 2002. Between 2002 and 2004, he held a number of senior roles within Man Group and was the largest individual shareholder. From 1989 to 1992, Mr. Frey served as a director at Salomon Brothers in Zurich, Frankfurt and London, where he was primarily involved with equity derivatives. Between 1987 and 1989, he worked for Merrill Lynch covering equity, fixed income and swaps markets. He holds a degree in economics from the University of St. Gallen. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Frey is a member of the BoD of DKSH Group, Zurich, and a member of the Advisory Board of Invision Private Equity AG, Zug. He is a member of the BoD of the Frey Charitable Foundation, Freienbach. | ||||
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Bruno Gehrig Swiss, born 26 December 1946 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Functions in UBS Member of the Governance and Nominating Committee / member of the Human Resources and Compensation Committee Year of initial appointment: 2008 | Professional history and education Bruno Gehrig was elected to the BoD at the October 2008 EGM and is a member of the Governance and Nominating Committee and the Human Resources and Compensation Committee. From 2003 to 2009, Mr. Gehrig was Chairman of Swiss Life Holding. Between 1996 and 2003, he worked at the Swiss National Bank, starting as a member of the Governing Board and becoming Vice Chairman in 2000. From 1992 to 1996, he was a professor of banking and finance at the University of St. Gallen and concurrently served as a member of the Swiss Federal Banking Commission. Between 1989 and 1991, he held the position of CEO at Cantrade Private Banking Group. Mr. Gehrig worked for the former Union Bank of Switzerland (UBS) between 1981 and 1989, where he started as a chief economist before assuming responsibility for securities sales and trading. He studied economics at the University of Bern, where he completed his PhD studies, and then continued on to postgraduate studies at the University of Rochester, New York. He was an assistant professor at the University of Bern and received an honorary doctorate from the University of Rochester. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Gehrig is the Vice Chairman of the BoD of Roche Holding Ltd., Basel, and the Chairman of the Swiss Air Transport Foundation, Zug. | ||||
Ann F. Godbehere Canadian and British, born 14 April 1955 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Functions in UBS Member of the Audit Committee / member of the Corporate Responsibility Committee Year of initial appointment: 2009 | Professional history and education Ann F. Godbehere was elected to the BoD at the 2009 AGM and is a member of the Audit Committee and the Corporate Responsibility Committee. Ms. Godbehere was appointed CFO and Executive Director of Northern Rock in February 2008, serving in these roles during the initial phase of the business’ public ownership – she left at the end of January 2009. Prior to this role, she served as CFO of Swiss Re Group from 2003 to 2007. Ms. Godbehere was CFO of the Property and Casualty division in Zurich for two years, before this she served as CFO of the Life & Health division in London for three years. From 1997 to 1998, Ms. Godbehere was CEO of Swiss Re Life & Health in Canada. In 1996 and 1997, she was CFO of Swiss Re Life & Health North America. She is a certified general accountant and was made a fellow of the Certified General Accountants Association of Canada in 2003. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Ms. Godbehere is a board member of Prudential plc, Rio Tinto plc and Rio Tinto Limited. She is on the board of Lloyd’s managing agency, Atrium Underwriters Ltd. and Atrium Underwriting Group Ltd., which were acquired in 2007 by Ariel Holdings Ltd. She is also a member of the board of Ariel Holdings, an insurance and reinsurance company. | ||||
Axel P. Lehmann Swiss, born 23 March 1959 Zurich Financial Services, Mythenquai 2, CH-8002 Zurich Function in UBS Member of the Risk Committee Year of initial appointment: 2009 | Professional history and education Axel P. Lehmann was elected to the BoD at the 2009 AGM and is a member of the Risk Committee. He has been the Group Chief Risk Officer of Zurich Financial Services (Zurich) since January 2008. In addition, he is responsible for Group IT. In September 2004, Mr. Lehmann was appointed CEO of Zurich North America Commercial in Schaumburg, Illinois. He became a member of Zurich’s Group Executive Committee and CEO of its Continental Europe business division in 2002. He was subsequently put in charge of integrating Continental Europe, the UK and Ireland to create, in 2004, the Europe General Insurance business division, of which he was the CEO. Mr. Lehmann became a member of the Group Management Board, responsible for Group-wide business development functions in 2000. A year later, he took over the responsibility for Northern, Central and Eastern Europe and was appointed CEO of the Zurich Group Germany. Before he joined Zurich in 1996, he was Head of Corporate Planning and Controlling for Swiss Life in Zurich. Mr. Lehmann was a lecturer at several universities and institutes. In 1990, he became Vice President of the Institute of Insurance Economics and the European Center at the University of St. Gallen, responsible for consulting and management development. He holds a PhD and a master’s degree in business administration and economics from the University of St. Gallen. He is a graduate of the Wharton Advanced Management Program and an honorary professor of business administration and service management at the University of St. Gallen. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Lehmann is Chairman of the Board of the Institute of Insurance Economics at the University of St. Gallen and Vice Chairman of the Chief Risk Officer Forum. | ||||
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Helmut Panke German, born 31 August 1946 BMW AG, Petuelring 130, D-80788 Munich Functions in UBS Member of the Human Resources and Compensation Committee / member of the Risk Committee Year of initial appointment: 2004 | Professional history and education Helmut Panke was elected to the BoD at the 2004 AGM and is a member of the Human Resources and Compensation Committee and the Risk Committee. Between 2002 and 2006, Mr. Panke was Chairman of the Board of Management at BMW, Munich. In 1982, he joined BMW’s Research and Development division as Head of Planning and Controlling. He subsequently assumed management functions in corporate planning, organization and corporate strategy. Before his appointment as Chairman, he was a member of BMW’s Board of Management from 1996. Between 1993 and 1996, he was Chairman and CEO of BMW Holding Corporation in the US. Mr. Panke graduated from the University of Munich with a PhD in physics and was on special research assignment at the University of Munich and the Swiss Institute for Nuclear Research before joining McKinsey & Company in Dusseldorf and Munich as a consultant. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Panke is a member of the BoD of Microsoft Corporation and Singapore Airlines Ltd. He is a member of the Supervisory Board of Bayer AG, Germany. | ||||
William G. Parrett American (US), born 4 June 1945 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Chair of the Audit Committee Year of initial appointment: 2008 | Professional history and education William G. Parrett was elected to the BoD at the October 2008 EGM and chairs the Audit Committee. Mr. Parrett served his entire career with Deloitte Touche Tohmatsu, a global organization of member firms that employs 160,000 people in nearly 140 countries. He was CEO from 2003 until his retirement in 2007. Between 1999 and 2003, he was a Managing Partner of Deloitte & Touche USA LLP and served on Deloitte’s Global Executive Committee. Mr. Parrett founded Deloitte’s US National Financial Services Industry Group in 1995 and its Global Financial Services Industry Group in 1997, both of which he led as Chairman. In his 40 years of experience in professional services, Mr. Parrett served public, private, governmental, and state-owned clients worldwide, in order to help Deloitte achieve superior financial performance and growth. Mr. Parrett has a bachelor’s degree in accounting from St. Francis College, New York, and is a certified public accountant. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Parrett is an independent Director of the Eastman Kodak Company, the Blackstone Group LP, and Thermo Fisher Scientific Inc. He is also the Chairman of the BoD of the United States Council for International Business and United Way Worldwide. He is a Carnegie Hall Board of Trustees member and is also a member of the International Chamber of Commerce Executive Committee. | ||||
David Sidwell American (US) and British, born 28 March 1953 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Chair of the Risk Committee Year of initial appointment: 2008 | Professional history and education David Sidwell was elected to the BoD at the 2008 AGM and chairs the Risk Committee. Mr. Sidwell was Executive Vice President and CFO of Morgan Stanley in New York between March 2004 and October 2007. Before joining Morgan Stanley, he was with JPMorgan Chase & Co., New York, where in his 20 years of service, he held a number of different positions including Controller and CFO of the Investment Bank. Prior to this, he was with Price Waterhouse in both London and New York. Mr. Sidwell graduated from Cambridge University and is a chartered accountant qualifying in the Institute of Chartered Accountants in England and Wales. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Sidwell is a Director of the Federal National Mortgage Association (Fannie Mae) and a Senior Advisor at Oliver Wyman. He is a trustee of the International Accounting Standards Committee Foundation, London, the Chairman of the BoD of Village Care of New York, a not-for-profit organization, and a Director of the National Council on Aging. | ||||
Peter R. Voser Swiss, born 29 August 1958 Royal Dutch Shell plc, 2501 AN, NL-The Hague Function in UBS Member of the Governance and Nominating Committee Year of initial appointment: 2005 | Professional history and education Peter R. Voser was elected to the BoD at the 2005 AGM and is a member of the Governance and Nominating Committee. As of July 2009, Mr. Voser has been serving as the CEO and an executive BoD member of Royal Dutch Shell plc, where he also acted as CFO from 2004 to 2009. Between 2002 and 2004, he was CFO of ABB in Switzerland. Between 1982 and 2002, he worked for the Royal Dutch / Shell Group, holding various assignments in Switzerland, the UK, Argentina and Chile. Mr. Voser graduated in business administration from the University of Applied Sciences in Zurich. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Voser is a member of the BoD of the Swiss Federal Audit Oversight Authority. |
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è | Refer to the “Corporate responsibility” section of this report for more information on corporate responsibility |
è | Refer to the “Compensation and shareholdings” section of this report for more information on the Human Resources and Compensation Committee’s decision-making procedures |
Board of Directors
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Group Executive Board
è | Refer to www.ubs.com/governance for more details on checks and balances for the BoD and GEB |
Group Executive Board
è | Refer to the “Risk management and control” section of this report for more information |
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Oswald J. Grübel German, born 23 November 1943 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Group CEO Year of initial appointment: 2009 | Professional history and education Oswald J. Grübel was named UBS Group CEO in February 2009. Before joining UBS he was the CEO of Credit Suisse Group and Credit Suisse. He stepped down from this role in May 2007. From 2002 to 2004, he was CEO of Credit Suisse Financial Services and co-CEO of Credit Suisse Group from 2003 until 2004. Mr. Grübel was a member of the Credit Suisse Group Executive Board from 1997 to 2001 and again from 2002 to 2007. From 1991 until 1997 he was a member of the Group Executive Board of Credit Suisse, responsible for equities, fixed income, global foreign exchange, money markets and asset / liability management in Zurich. Before that he was a member of the Financière Credit Suisse First Boston Group Executive Board in Zug. In 1970, Mr. Grübel joined White Weld Securities and became its CEO in 1978. From 1961 to 1970 he worked for Deutsche Bank, where he completed his training as a banker. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups:Mr. Grübel is a board member of the Spanish residential estate La Zagaleta, of the Swiss American Chamber of Commerce, the Institute of International Finance and the Financial Services Forum. He is a member of the Shanghai International Financial Advisory Council, the Institut International d’Etudes Bancaires and the International Monetary Conference. | ||||
John Cryan British, born 16 December 1960 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Group CFO Year of initial appointment: 2008 | Professional history and education John Cryan was appointed Group CFO and became a member of the Group Executive Board (GEB) in September 2008. In 2002 he became the European Head of the Financial Institutions Group of the UBS Investment Bank and three years later he was made its Global Head. A former employee of Arthur Andersen LLP, Mr. Cryan joined S.G. Warburg & Co. in London in 1987. Since 1992, he has specialized in providing strategic and financial advice to a wide range of companies in the financial services sector globally. Mr. Cryan graduated in 1981 with an MA with honors from the University of Cambridge. | ||||
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Markus U. Diethelm Swiss, born 22 October 1957 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Group General Counsel Year of initial appointment: 2008 | Professional history and education Markus U. Diethelm was appointed Group General Counsel of UBS in September 2008. From 1998 until 2008, he served as Swiss Re’s Group Chief Legal Officer and was appointed to its Group Executive Board in 2007. Prior to that, he was at the Los Angeles-based law firm Gibson, Dunn & Crutcher, focusing on corporate matters, securities transactions, litigation and regulatory investigations while working out of the firm’s Brussels and Paris offices. From 1989 until 1992, he practiced at New York’s Shearman & Sterling law firm, specializing in mergers and acquisitions, and in 1988, he worked at Paul, Weiss, Rifkind, Wharton & Garrison in New York as a foreign associate. He started his career in 1983 with Bär & Karrer. Mr. Diethelm holds a law degree from the University of Zurich and a master’s degree and PhD from Stanford Law School. He is a qualified attorney-at-law in Switzerland and admitted to the Zurich and New York Bar. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Diethelm is the Chairman of the Legal Committee of the Swiss American Chamber of Commerce. | ||||
John A. Fraser Australian, born 8 August 1951 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Functions in UBS Chairman and CEO Global Asset Management Year of initial appointment: 2002 | Professional history and education John A. Fraser was appointed Chairman and CEO of the Global Asset Management business division in late 2001. Prior to that, he was President and Chief Operating Officer (COO) of UBS Asset Management and Head of Asia Pacific. In 2008, he became Chairman of UBS Saudi Arabia. From 1994 to 1998, he was the Executive Chairman and CEO of the Australia funds management business. Before joining UBS, Mr. Fraser spent over 20 years in various positions at the Australian Treasury, including two international postings in Washington DC, first, at the International Monetary Fund and second, as a minister (economic) at the Australian Embassy. He was the Deputy Secretary (economic) of the Australian Treasury from 1990 to 1993. Mr. Fraser graduated from Monash University in Australia in 1972 and holds a first-class honors degree in economics. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Fraser is a non-executive Chairperson of the Victorian Funds Management Corporation, Melbourne, and is a member of the Board of Governors of the Marymount International School at Kingston-upon-Thames in the UK. | ||||
Carsten Kengeter German, born 31 March 1967 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Co-CEO Investment Bank Year of initial appointment: 2009 | Professional history and education Carsten Kengeter was appointed co-CEO of the UBS Investment Bank and became a member of the GEB in April 2009. He joined UBS in December 2008 and served as the joint Global Head of Fixed Income, Currencies & Commodities (FICC) of the UBS Investment Bank until January 2010. Previously, Mr. Kengeter worked for Goldman Sachs as the co-Head of Asia (ex-Japan) Securities division in Hong Kong. In 2003, he co-headed the European FICC and Structured Equities Distribution in London, and in 2002 he became partner and Head of the FICC German Region in Frankfurt. In 2000 he was made Head of the European and Asian CDO business in London, and before that he was in derivatives marketing in Frankfurt. From 1992 to 1997, Mr. Kengeter worked for Barclays de Zoete Wedd, setting up its credit derivatives trading desk. He graduated as Diplom-Betriebswirt from FH Reutlingen, holds a bachelor’s in business administration from Middlesex University and a finance and accounting MS from the London School of Economics and Political Science. | ||||
Ulrich Körner German and Swiss, born 25 October 1962 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Functions in UBS Group Chief Operating Officer CEO Corporate Center Year of initial appointment: 2009 | Professional history and education Ulrich Körner was appointed Group Chief Operating Officer (COO) and CEO Corporate Center and was made a member of the GEB in April 2009. In this function, he leads the Corporate Center. Mr. Körner was previously with Credit Suisse from 1998 and served as a member of the Credit Suisse Group executive management in his last six years where he held various management positions, including CFO and COO. Most recently, he was responsible for the entire Swiss client business as CEO of the Switzerland region. Mr. Körner received a PhD from the University of St. Gallen in business administration and served several years as an auditor for Price Waterhouse and management consultant for McKinsey & Company. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Körner is the Chairman of the Widder Hotel, Vice President of the BoD of Lyceum Alpinum Zuoz, member of the Foundation Board of the UBS Pension Fund, member of the Financial Service Chapter Board of the Swiss-American Chamber of Commerce and member of the board of the Swiss Banking Institute of the University of Zurich. | ||||
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Philip J. Lofts British, born 9 April 1962 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Group Chief Risk Officer Year of initial appointment: 2008 | Professional history and education Philip J. Lofts was appointed Group Chief Risk Officer (CRO) in November 2008. He has been with UBS for over 20 years. In 2008, he became the Group Risk COO, after having previously been the Group Chief Credit Officer for three years. Before this, Mr. Lofts worked for the Investment Bank in a number of business and risk control positions in Europe, Asia Pacific and the US. He successfully completed his A-levels at Cranbrook School. From 1981 to 1984 he was a trainee at Charterhouse Japhet plc, a merchant bank acquired by the Royal Bank of Scotland in 1985. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Lofts is a board member of the University of Connecticut Foundation. | ||||
Robert J. McCann American (US), born 15 March 1958 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS CEO Wealth Management Americas Year of initial appointment: 2009 | Professional history and education Robert J. McCann was appointed CEO of Wealth Management Americas and became a member of the GEB in October 2009. Before joining UBS, he worked for Merrill Lynch & Company as Vice Chairman and President of the Global Wealth Management Group. In 2003 he served as Vice Chairman of Distribution and Marketing for AXA Financial. He started his career with Merrill Lynch in 1982, working in various positions in capital markets and research. From 1998 to 2000, he was the Global Head of Global Institutional Debt and Equity Sales. In 2000 he became the COO of Global Markets and Investment Banking, and from 2001 to 2003, he was the Head of Global Securities Research and Economics. Mr. McCann graduated with a bachelor’s in economics from Bethany College, West Virginia. He holds an MBA from Texas Christian University, Fort Worth, and completed the Advanced Management Program at Harvard Business School. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. McCann is a board member of the American Ireland Fund and is Vice Chairman of the Bethany College Board of Trustees. He is a member of the No Greater Sacrifice Advisory Board and is Chairman of the Executive Advisory Board of Sponsors for Educational Opportunity. | ||||
Francesco Morra Swiss and Italian, born 31 August 1967 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS CEO UBS Switzerland, Wealth Management & Swiss Bank Year of initial appointment: 2009 | Professional history and education Francesco Morra was appointed CEO of UBS Switzerland, Wealth Management & Swiss Bank, and became a member of the GEB in 2009. In November 2007 he was appointed Head of Wealth Management Western Europe, Mediterranean, Middle East and Africa. In addition, as of September 2008, he was responsible for the business unit Latin America, Caribbean & Canada. Mr. Morra joined UBS in 2005 as the Head of Wealth Management Italy and as a member of the former Group Managing Board (GMB). Before joining UBS, he held various management positions at the Boston Consulting Group between 1992 and 2005. He holds a master’s and PhD in economics from the University of St. Gallen. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Morra is Vice Chairman of the Swiss Bankers Association and Swiss Finance Institute. He is on the Committee of the Zurich Chamber of Commerce. | ||||
Alexander Wilmot-Sitwell British, born 16 March 1961 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS Co-CEO Investment Bank Year of initial appointment: 2008 | Professional history and education Alexander Wilmot-Sitwell was appointed co-CEO of the UBS Investment Bank in April 2009. He became a member of the GEB in February 2008 and served as the joint Global Head of Investment Banking and Chairman and CEO of UBS Group Europe, Middle East & Africa. In 2006, Mr. Wilmot-Sitwell became a member of the former GMB. He joined the firm in 1996 as the Head of Corporate Finance in South Africa and moved to London in 1998 as Head of UK Investment Banking. Mr. Wilmot-Sitwell previously worked for Warburg Dillon Read and served as the Head of Corporate Finance at SBC Warburg in South Africa. Mr. Wilmot-Sitwell graduated from Bristol University with a degree in modern history. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Wilmot-Sitwell is Vice President of the Save the Children Fund, London. | ||||
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Robert Wolf American (US), born 8 March 1962 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Functions in UBS Chairman and CEO, UBS Group Americas / President Investment Bank Year of initial appointment: 2008 | Professional history and education Robert Wolf was appointed President of the UBS Investment Bank in 2007 and was COO of the UBS Investment Bank from 2004 to 2008. Since 2007, he has also served as Chairman and CEO of UBS Group Americas. Prior to that, Mr. Wolf served as the Global Head of Fixed Income from 2002 to 2004 and previously as Global Head of Credit Trading, Research and Distribution. He joined Union Bank of Switzerland (UBS) in 1994, after spending approximately 10 years at Salomon Brothers in fixed income. In 1984, Mr. Wolf graduated from the Wharton School of the University of Pennsylvania with a degree in economics. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Wolf is a member of President Obama’s Economic Recovery Advisory Board. He is a member of the Undergraduate Executive Board of the Wharton School, the University of Pennsylvania Athletics Board of Overseers and the Financial Services Round Table. Mr. Wolf is also a member of the Council on Foreign Relations and the Committee Encouraging Corporate Philanthropy. He is in the Leadership Council of the Multiple Myeloma Research Foundation, Norwalk, on the Board of Trustees of the Children’s Aid Society, New York, and the Partnership New York City. He is a member of the Robert F. Kennedy Center for Justice & Human Rights Leadership Council. | ||||
Chi-Won Yoon American (US), born 2 June 1959 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Functions in UBS Chairman and CEO Asia Pacific Year of initial appointment: 2009 | Professional history and education Chi-Won Yoon became Chairman and CEO of UBS, Asia Pacific (APAC) and a member of the GEB in June 2009. He continues to serve APAC’s securities businesses such as Equities, which he headed from 2004 to 2009 and FICC, which he was brought in to lead in February 2009. Mr. Yoon, who joined UBS in 1997, began his career in financial services eleven years earlier. He worked first at Merrill Lynch in New York and then at Lehman Brothers in New York and Hong Kong. Before embarking on a Wall Street career, Mr. Yoon worked as an electrical engineer in satellite communications. In 1982, Mr. Yoon earned a bachelor’s degree in electrical engineering from the Massachusetts Institute of Technology (MIT) and in 1986, a master’s degree in management from MIT’s Sloan School of Management. He was born in Korea. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Yoon is on the Asian Executive Board of MIT’s Sloan School of Management. | ||||
Jürg Zeltner Swiss, born 4 May 1967 UBS AG, Bahnhofstrasse 45, CH-8098 Zurich Function in UBS CEO Wealth Management, Wealth Management & Swiss Bank Year of initial appointment: 2009 | Professional history and education Jürg Zeltner was appointed CEO Wealth Management, Wealth Management & Swiss Bank, and became a member of the GEB in February 2009. In November 2007, he was appointed Head of Wealth Management North, East & Central Europe and became a member of the former GMB in the same year. From 2005 to 2007, he was CEO of UBS Deutschland, Frankfurt. Prior to that, he held various management positions in the Wealth Management division of UBS. Between 1987 and 1998, Mr. Zeltner was with SBC in various roles within the Private and Corporate Client division in Berne, New York and Zurich. He graduated from the School of Economics and Business Administration in Berne and completed the Advanced Management Program at Harvard Business School. Other activities and functions Mandates on boards of important corporations, organizations and foundations or interest groups: Mr. Zeltner is a board member of the German Swiss Chamber of Commerce and the UBS Optimus Foundation. |
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Corporate governance
principles of the Group Executive Board
è | Refer to the Organization Regulations, which are available at www.ubs.com/governance, for more information on the authorities of the GEB |
Executive Committee and the new Group Asset and
Liability Management Committee
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Shareholders’ participation rights
è | Refer to the “Information policy” section of this report for further information on these documents |
Relationships with shareholders
We fully subscribe to the principle of equal treatment of all shareholders, who range from large investment institutions to individual investors, and regularly inform them about the development of the company of which they are co-owners.
Voting rights, restrictions and representation
We place no restrictions on share ownership and voting rights. Nominee companies and trustees, who normally represent a large number of individual shareholders, may hold an unlimited number of shares, but voting rights are limited to a maximum of 5% of outstanding UBS shares in order to avoid the risk of unknown shareholders with large stakes being entered in the share register. Securities clearing organizations, such as The Depository Trust Company in New York, are not subject to the 5% voting limit.
appointing UBS, another bank or another registered shareholder of their choice to vote on their behalf. Nominee companies normally submit the proxy material to the beneficial owners and transmit the collected votes to UBS.
Statutory quorums
Shareholder resolutions, the election and reelection of members of the BoD and the appointment of the Group and statutory auditors are decided at the AGM by an absolute majority of the votes cast, excluding blank and invalid ballots. Swiss company law requires that, for certain specific issues, a majority of two-thirds of the votes represented at the meeting must vote in favor of the resolution. These issues include, among others, the creation of shares with privileged voting right, the introduction of restrictions on the transferability of registered shares, conditional and authorized capital increases, and restrictions or exclusion of shareholders’ pre-emptive rights.
Convocation of general meetings of shareholders
The AGM normally takes place each year in April, but in any case within six months of the close of the financial year. A personal invitation including a detailed agenda and explanation of each motion is sent to every registered shareholder at least 20 days ahead of the scheduled meeting. The meeting agenda is also published in various Swiss newspapers and on the internet atwww.ubs.com/agm.
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Corporate governance
with a specific issue put forward by them. Such a request may also be brought forward during the AGM.
Placing of items on the agenda
Shareholders individually or jointly representing shares with an aggregate par value of CHF 62,500 may submit proposals for matters to be placed on the agenda for consideration at the shareholders’ meeting.
together with a short explanation, if necessary. The BoD formulates opinions on the proposals, which are published together with the motions.
Registrations in the share register
The general rules for being entered with voting rights in our Swiss or US share registers also apply before general meetings of shareholders. There is no “closing of the share register” in the days before the meeting. Registrations, including the transfer of voting rights, are processed for as long as technically possible, normally until two days before the meeting.
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Change of control and defense measures
We refrain from restrictions that would hinder developments initiated in or supported by the financial markets. We also do not have any specific defenses in place to prevent hostile takeovers.
Duty to make an offer
An investor who acquires more than 331/3% of all voting rights (directly, indirectly or in concert with third parties), whether they are exercisable or not, is required to submit a takeover offer for all shares outstanding, according to Swiss stock exchange law. We have not elected to change or opt out of this rule.
Clauses on change of control
The service agreements and employment contracts with the Chairman of the BoD and with the GEB members do not contain change of control clauses, except for two agreements with GEB members. In one clause, a change of control would reduce the employment notice of termination period from six to two months, and in the other clause, which was
applicable only until 1 March 2010, compensation plan awards would be treated as if employment had ceased due to “mutually agreed termination”.
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Corporate governance and compensation
Corporate governance
Auditors
Audit is an integral part of corporate governance. While safeguarding their independence, the external auditors closely coordinate their work with Group Internal Audit. The AC, and ultimately the BoD, supervises the effectiveness of audit work.
External, independent auditors
At the 2009 AGM, Ernst & Young Ltd., Basel, (Ernst & Young) were reelected as principal auditors for the Group for a further one-year term of office. Ernst & Young assume virtually all auditing functions according to laws, regulatory requests and the “Articles of Association of UBS AG”. The Ernst & Young lead partner in charge of the UBS audit has been Andrew Mclntyre since 2005, who will be replaced in 2010 by Jonathan Bourne due to a five-year rotation requirement; Andreas Blumer has acted as the global engagement partner since 2004, and his incumbency is limited to seven years. Ernst & Young will be proposed for reelection at the AGM in 2010.
Fees paid to external independent auditors
The fees (including expenses) paid to our principal auditors Ernst & Young, are set forth in the table below. In addition, Ernst & Young received CHF 37,030,000 in 2009 (CHF 31,561,000 in 2008) for services performed on behalf of our investment funds, many of which have independent fund boards or trustees.
Fees paid to external auditors
UBS paid the following fees (including expenses) to its external auditors Ernst & Young Ltd.:
For the year ended | ||||||||
in CHF thousand | 31.12.09 | 31.12.08 | ||||||
Audit | ||||||||
Global audit fees | 45,276 | 45,848 | ||||||
Additional services classified as audit (services required by law or statute, including work of a non-recurring nature mandated by regulators) | 8,856 | 9,918 | ||||||
Total audit | 54,132 | 55,766 | ||||||
Non-audit | ||||||||
Audit-related fees | 7,405 | 8,430 | ||||||
of which assurance and attest services | 3,142 | 3,143 | ||||||
of which control and performance reports | 4,023 | 4,622 | ||||||
of which advisory on accounting standards, transaction consulting including due diligence, other | 240 | 665 | ||||||
Tax advisory | 509 | 504 | ||||||
Other | 279 | 1,246 | ||||||
Total non-audit | 8,193 | 10,180 | ||||||
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“Other” services are approved on an exceptional basis only. In 2008 and 2009, they mainly comprised on-call advisory services.
Pre-approval procedures and policies
To ensure Ernst & Young’s independence, all services provided by them have to be pre-approved by the AC. A pre-approval may be granted either for a specific mandate, or in the form of a bucket pre-approval authorizing a limited and well-defined type and amount of services.
Group Internal Audit
Group Internal Audit, with 313 personnel worldwide on 31 December 2009, performs the internal auditing function for the entire Group. Group Internal Audit supports
the BoD and its committees in discharging their governance responsibilities by independently assessing the effectiveness of our system of internal controls and our compliance with statutory, legal and regulatory requirements. All reports with key issues are provided to the Group CEO, the members of the GEB responsible for the business divisions and other responsible management. In addition, the Chairman of the BoD, the RC and the AC are regularly informed about important issues. Group Internal Audit closely cooperates with internal and external legal advisors and risk control units on investigations into major control issues.
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Information policy
We provide regular information to our shareholders and to the financial community.
Financial results will be published as follows
First quarter 2010 | 4 May 2010 | |
Second quarter 2010 | 27 July 2010 | |
Third quarter 2010 | 26 October 2010 | |
The Annual General Meeting of shareholders will
take place as follows
2010 | 14 April 2010 | |
2011 | 20 April 2011 | |
We meet with institutional investors worldwide throughout the year and regularly hold results presentations, special investor seminars, road shows, individual and group meetings. Where possible, meetings involve senior management as well as members of the investor relations team. We make use of diverse technologies such as webcasting, audio links and cross-location video-conferencing to widen our audience and maintain contact with shareholders around the world.
è | Refer to www.ubs.com/investors for a complete set of published reporting documents, the corporate calendar, access to recent webcasts and a selection of senior management industry conference presentations |
Financial disclosure principles
Based on discussions with analysts and investors, we believe that the market rewards companies that provide clear, consistent and informative disclosure about their business. Therefore, we aim to communicate our strategy and results in a manner that allows shareholders and investors to gain an understanding of how our company works, what our
growth prospects are and what risks our strategy and results might entail. Feedback from analysts and investors is continually assessed and, where relevant, reflected in our quarterly and annual reports. To continue to achieve these goals, we apply the following principles in our financial reporting and disclosure:
– | Transparencyin disclosure enhances understanding of the economic drivers and builds trust and credibility. | |
– | Consistencyin disclosure within each reporting period and between reporting periods. | |
– | Simplicityin disclosure allows readers to gain an understanding of the performance of our businesses. | |
– | Relevancein disclosure avoids information overload by focusing on what is required by regulation or statute and is relevant to our stakeholders. | |
– | Best practicein line with industry norms, leading the way to improved standards where possible. |
Financial reporting policies
We report our results after the end of every quarter, including a breakdown of results by business division and extensive disclosures relating to credit and market risk.
è | Refer to “Note 1 Summary of significant accounting policies” in the “Financial information” section of this report for a detailed explanation of the basis of UBS’s accounting |
US regulatory disclosure requirements
As a “foreign private issuer”, we must file reports and other information, including certain financial reports, with the US Securities and Exchange Commission (SEC) under the US federal securities laws. We file an annual report on Form 20-F, and submit our quarterly financial reports under cover of Form 6-K to the SEC. These reports, as well as materials sent to shareholders in connection with AGMs and EGMs, are all available atwww.ubs.com/investors.
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Corporate governance
Regulation and supervision
As a Swiss-registered company, our home country regulator and consolidated supervisor is FINMA. However, our operations are global and are therefore regulated and supervised by the relevant authorities in each of the jurisdictions in which we conduct business. The next sections describe the regulation and supervision of our business in Switzerland, our home market, and the regulatory and supervisory environments in the US and the UK, our next two largest areas of operations.
Regulation and supervision in Switzerland
Swiss Federal Legislation
We are regulated by the Swiss Federal Law relating to Banks and Savings Banks of 8 November 1934, as amended, and the related Implementing Ordinance of 17 May 1972, as amended, which are together known as the Federal Banking Law. Depending on the license obtained under this law, banks in Switzerland may engage in a full range of financial services activities, including commercial banking, investment banking and asset management. Banking groups may also engage in insurance activities, but these must be undertaken through a separate subsidiary. The Federal Banking Law establishes a framework for supervision by FINMA.
è | Refer to the “Capital management” section of this report for more details about capital requirements |
Regulation by the Swiss Financial Market Supervisory Authority
FINMA is strongly involved in the shaping of the legislative framework for banks, especially through the following mechanisms:
– | FINMA has substantial influence on the drafting of Swiss federal acts and ordinances from the Federal Council or the parliament (e.g. the Ordinance on the Money Laundering Reporting Office dated 25 August 2004, as amended). | |
– | On a more technical level, FINMA is empowered to issue its own ordinances and circulars, 55 of which are presently effective. These include, for example, FINMA-Circular 08/38 on Market Behavior, FINMA-Circular 08/24 on Supervision and Internal Controls at Banks, and FINMA-Circular 09/1 on Guidelines on Asset Management. |
Self-regulation by the SIX Swiss Exchange and the
Swiss Bankers Association
Certain aspects of securities brokering, such as the organization of trading, are subject to self-regulation through the SIX Swiss Exchange, under the overall supervision of FINMA. Examples are:
– | the Listing Regulations of 24 January 1996, as amended on 1 July 2009, and the General Conditions dated 31 March 2009; and | |
– | the Directive on the Disclosure of Management Transactions of 29 October 2008. |
FINMA also officially endorses self-regulatory guidelines issued by the banking industry (through the Swiss Bankers Association), making them an integral part of banking regulation. Examples are:
– | Directives on Fiduciary Investments, 2009; | |
– | Agreement on the Swiss banks’ Code of Conduct with regard to the Exercise of Due Diligence, 2008; | |
– | Directives on the Independence of Financial Research, 2008; | |
– | Guidelines on the Simplified Prospectus for Structured Products, 2007; | |
– | Agreement of Swiss Banks on Deposit Insurance, 2005; and | |
– | Guidelines on the Handling of Dormant Accounts, Custody Accounts and Safe-Deposit Boxes Held in Swiss Banks, 2000. |
Two-tier system of supervision and direct supervision of UBS
and Credit Suisse
Generally, supervision in Switzerland is based on a division of tasks between FINMA and a number of authorized audit
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firms. Under this two-tier supervisory system, FINMA has the responsibility for overall supervision and enforcement measures while the authorized audit firms carry out official duties on behalf of, and subject to, sanctions imposed by FINMA. The responsibility of external auditors encompasses the audit of financial statements, the reviewing of banks’ compliance with all prudential requirements and on-site audits.
Disclosures to the Swiss National Bank
While Switzerland’s banks are primarily supervised by FINMA, compliance with liquidity rules is monitored by the SNB. The SNB also takes a direct interest in the stress testing practice of both large banks. Liquidity regulation is currently being reformed.
è | Refer to the “Liquidity and funding management” section of this report for more details about liquidity requirements |
Regulation and supervision in the US
Banking regulation
Our operations in the US are subject to a variety of regulatory regimes. We maintain branches of UBS AG in California, Connecticut, Florida, Illinois and New York. The branches located in California, Florida and New York are federally licensed by the Office of the Comptroller of the Currency. Branches located in Connecticut and Illinois are licensed by the state banking authority of the state in which the branch is located. Each US branch is subject to regulation and examination by its licensing authority. We also maintain state and federally chartered trust companies and other limited purpose banks, which are regulated by state regulators or the Office of the Comptroller of the Currency. In addition, the Board of Governors of the Federal Reserve System exercises examination and regulatory authority over our state-licensed US branches. Only the deposits of our subsidiary
bank located in the state of Utah are insured by the Federal Deposit Insurance Corporation. The regulation of our US branches and subsidiaries imposes restrictions on the activities of those branches and subsidiaries, as well as prudential restrictions, such as limits on extensions of credit to a single borrower, including UBS subsidiaries and affiliates.
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US regulation of other US operations
In the US, UBS Securities LLC and UBS Financial Services Inc., as well as our other US-registered broker-dealer entities, are subject to regulations that cover all aspects of the securities business, including: sales methods; trade practices among broker-dealers; use and safekeeping of clients’ funds and securities; capital structure; record-keeping; the financing of clients’ purchases; and the conduct of directors, officers and employees.
rum for investors and registered firms. It also performs market regulation under contract for the NASDAQ Stock Market, the American Stock Exchange and the Chicago Climate Exchange.
Regulation and supervision in the UK
Our operations in the UK are regulated by the Financial Services Authority (FSA), which establishes a regime of rules and guidance governing all relevant aspects of financial services businesses.
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Compliance with NYSE listing standards on corporate governance
As a Swiss company listed on the NYSE, we comply with the NYSE corporate governance standards for foreign private issuers.
Independence of directors
Based on the listing standards of the NYSE, our BoD has established specific criteria for defining the independence of our external members. Each external director has to personally confirm his or her compliance with the criteria, which are published on our website underwww.ubs.com/governance.
Board of Directors and its committees
We operate under a strict dual board structure mandated by Swiss banking law. No member of the GEB may also be a member of the BoD and vice versa. This structure ensures the institutional independence of the entire BoD from the day-to-day management. UBS has established committees for the following BoD mandates: audit; human resources and compensation; governance and nominating; risk and corporate responsibility.
è | Refer to the “Board of Directors” section of this report for further information on these committees – including their mandates, responsibilities and authorities – as well as their activities during 2009 |
In addition, the BoD elects at least one Vice Chairman who must be independent and who acts as the Senior Independent Director. Sergio Marchionne assumed these roles in 2009. Mr. Marchionne will not stand for reelection to the BoD at the AGM in April 2010. The BoD may elect another Vice Chairman who does not need to be independent, but has not done so this time. More details about the Vice Chairman function can be found in the Organization Regulations, which are published onwww.ubs.com/governance.
Differences from corporate governance standards relevant to US listed companies
According to the NYSE listing standards on corporate governance, foreign private issuers have to disclose any significant ways in which their corporate governance practices differ from those to be followed by domestic companies.
Responsibility of the Audit Committee for appointment,
compensation, retention and oversight of the independent auditors
Our AC has been assigned all the abovementioned responsibilities, except for appointment of the independent auditors, which are elected by the shareholders as per Swiss company law. The AC assesses the performance and qualification of the external auditors and submits its proposal for appointment, re-appointment or removal to the full BoD, which brings its proposal to the shareholders for vote at the AGM.
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Corporate governance
Discussion of risk assessment and risk management policies by
the Risk Committee
In accordance with our Organization Regulations, the RC has the authority to define our risk principles and risk capacity. The RC is responsible for monitoring our adherence to those risk principles and for monitoring whether business and control units run appropriate systems for the management and control of risks.
Assistance by Risk Committee of the internal audit function
Both the Chairman and the RC have the responsibility for and authority to supervise the internal audit function.
Responsibility of the Human Resources and Compensation
Committee for oversight of management and evaluation by the Board
of Directors
Performance evaluations of our senior management, comprising the Group CEO and the members of the GEB, are completed by the Chairman of the BoD and the HRCC and reported to the full BoD. All BoD committees perform a self-assessment of their activities and report back to the full BoD.
The BoD has direct responsibility and authority to evaluate its own performance, without preparation by a BoD committee.
Proxy statement reports of the Audit and Human Resources
and Compensation Committees
Under Swiss company law, all reports addressed to shareholders are provided and signed by the full BoD, which has ultimate responsibility vis-a-vis shareholders. The committees submit their reports to the full BoD.
Shareholders’ votes on Equity Compensation Plans
Swiss company law authorizes the BoD to approve compensation plans. Though Swiss law does not allocate such authority to the AGM, it requires that Swiss companies determine capital in their articles of association and each increase of capital is required to be submitted for shareholders’ approval. This means that, if equity-based compensation plans result in a need for a capital increase, AGM approval is mandatory. If, however, shares for such plans are purchased in the market, shareholders do not have the authority to vote on their approval.
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Compensation and shareholdings
The UBS Total Reward Principles are designed to align employees’ interests with those of shareholders – the creation of long-term value and sustainable shareholder returns. These principles, reproduced in full at the end of the report, are established by the Human Resources and Compensation Committee of the Board of Directors, and provide the basis for 2009 compensation practices.
Letter from the Human Resources and Compensation Committee
of the Board of Directors
Throughout 2009, the new UBS has faced the crucial challenge of rebuilding its key businesses, regaining the trust of shareholders and clients and establishing and developing the pursuit of its longer term strategy to bring about sustained profitability. All these factors taken together have underscored the need to attract and retain key talent, which is critical to attaining our strategic goals. At the same time, the increased competitive market pressures, extensive regulatory oversight and a rapidly changing commercial environment have also continued. Our approach to providing both a robust and impactful compensation and talent framework has certainly been affected by these often competing pressures.
Sally Bott
Chairman of the HRCC
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Compensation and shareholdings
Compensation governance
Human Resources and Compensation Committee
Authorities and responsibilities
– | reviewing and approving the design of the total compensation framework, including compensation strategy, programs and plans, and proposing significant changes to plans and new plans to the BoD for approval; | |
– | defining the relationship between compensation and performance; |
– | reviewing variable incentive funding throughout the year and proposing the final outcome to the BoD for approval; | |
– | approving base salaries and annual incentive awards for GEB members, excluding the Group CEO whose compensation needs to be approved by the BoD upon recommendation by the HRCC; | |
– | proposing individual GEB appointments to the BoD and approving the associated employment agreements; and | |
– | working with the Governance and Nominating Committee and the full BoD on reviewing succession plans for GEB members including the Group CEO. |
Compensation authorities
Recipients | Compensation recommendations developed by | Approved by | Communicated by | ||||||
Chairman of the BoD | Chairman of the HRCC1 | HRCC | HRCC | ||||||
Group CEO | Chairman of the BoD/HRCC | BoD | HRCC | ||||||
Members of the GEB | Group CEO | HRCC | Group CEO | ||||||
Independent BoD members (remuneration system and fees) | Chairman of the BoD/HRCC | BoD | Chairman of the BoD | ||||||
Recipients | Variable compensation recommendations developed by | Approved by | Communicated by | ||||||
Employees (excl. GEB) | Respective member of the GEB together with functional management team | Divisional pools: HRCC Overall: Board of Directors | Line Manager | ||||||
1 The Human Resources and Compensation Committee. |
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Decision-making process for Group Executive Board Member Total Compensation
One of the most important responsibilities of the HRCC is to decide and approve the actual amount of variable cash and equity compensation to be awarded to each GEB member for performance during 2009. This relies on a detailed and balanced review of not only Group performance, but also that of the relevant business division and also the impact of specific individuals. It considers Group and divisional performance information (economic profit, other financial and non-financial factors such as leadership effectiveness, strategy execution, reputation impact, etc.) performance assessments from the Board, initial compensation recommendations from the Group CEO, contractual and related commitments and relevant market data.
The 2010 non-binding vote on the compensation report
We value the opinions of our shareholders and, at the AGM to be held in April 2010, we will provide shareholders with an opportunity to express their views through a vote on this compensation report. As the ultimate decision on compensation is legally within the powers of the BoD, such a vote is non-binding and advisory in nature. We believe that this vote presents a meaningful way of involving our shareholders in compensation matters. We also encourage shareholders to share their views regarding our compensation programs and related matters directly with BoD members by contacting the Company Secretary.
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Compensation and shareholdings
Total Reward Principles
In September 2009, revised Group-wide Total Reward Principles were approved by the BoD following a review by the GEB and a proposal by the HRCC. The Total Reward Principles summarize the compensation structure for all UBS employees. While the principles reflect recent regulatory developments, they also focus on long-standing drivers including reward for performance, sustainable profitability, effective risk and capital management, outstanding client focus and teamwork as well as sound governance practices. They also build on our strategy of enhancing reputation, integration and execution.
– | align reward with sustainable performance; | |
– | support appropriate and controlled risk taking; | |
– | foster effective individual performance management and communication; and | |
– | attract and engage a diverse, talented workforce. |
Align reward with sustainable performance
Within the context of UBS as a whole and the markets in which we operate, the sustainable performance of an employee’s business division is a key component of reward. In considering the Group and business division performance, a range of factors will be taken into account including financial results, risk, capital usage, market positioning and the views of shareholders and other stakeholders. Assessment will focus on both current key performance indicators, and the long-term actions that preserve and improve our ability to deliver value in the future.
Support appropriate and controlled risk taking
Rewards are consistent with our risk framework and tolerance. Performance reviews recognize the different risk profile and nature of each business, including additional factors such as the quality and time-horizon of earnings, the nature of the relevant industry segment and competitive trends.
Foster effective individual performance management and communication
Beyond contribution to business results and achievement of individual performance objectives, rewards also take into account:
– | observing our corporate values and principles; | |
– | implementing our strategy of enhancing reputation, integration and execution; | |
– | demonstrating leadership of clients, business, people and change; | |
– | leading and supporting effective collaboration and team work; | |
– | actively managing risk and professional behavior; and | |
– | finding the appropriate balance between risk and reward. |
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Attract and engage a diverse, talented workforce
Our reward structure is designed to provide talented employees with rewards that are appropriately balanced between fixed and variable elements, that are competitive within the market and are paid out over an appropriate period of time.
Components of compensation
In general, total compensation comprises an annual base salary, reflecting the individual’s role, skills and knowledge, local market-based benefits and, where applicable, a discretionary incentive award. Base salary levels are sufficient to allow for a flexible discretionary incentive policy. Discretionary annual incentives may vary from year to year, particularly for senior revenue producers and more highly paid employees. Discretionary incentive awards may be split between immediate cash and long-term awards to be granted in the form of either deferred UBS equity or deferred cash. The proportion of deferred incentive awards generally vest over three years, and increase with total compensation in order to maintain focus on our long-term profitability and continued responsible behavior of the employee. Stock options and/or appreciation rights may be awarded as part of total reward to recognize the capabilities of key employees who are expected to carry out our strategic objectives. For employees in senior positions, reward focus is founded on sustainable long-term profitability that may require the application of multi-year performance conditions to recognize outstanding performance. Guaranteed incentive awards are used only exceptionally and are generally limited to a one-year duration.
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Compensation and shareholdings
Cash and equity incentives
Compensation plan awards
This section describes key features of the deferred compensation plans that are used to deliver variable incentive awards to members of the GEB and other employees.
Cash Balance Plan
The CBP applies to GEB members only and is designed as one of several tools to ensure that GEB compensation is directly and tightly linked to performance over the longer term. This ensures that the effect of risk events which occur after grant are fully captured “over the life of the instrument”. As such, the CBP relies on a cash deferral system. Generally, 50% of a GEB member’s variable incentive is delivered via the CBP.
Performance Equity Plan
The PEP applies to GEB members and is one of two deferred equity components that comprise the remaining 50% of their variable incentive award. This plan focuses on creating mid- to long-term added value over a three-year period. At the start of the performance period, executives are granted a certain number of restricted performance shares that, subject to the achievement of predefined economic profit and total shareholder return targets at a Group level cliff vest after three years.
– | Economic profit (EP)is a market-recognized standard for measuring risk-adjusted profit. It is an internal measure which is broadly calculated by subtracting the cost of equity from the annual net profit attributable to UBS shareholders. EP is only realized when the return on capital achieved is greater than the firm’s cost of capital. |
– | Total shareholder return (TSR)measures the total return of a UBS share, i.e. both the dividend yield and the capital appreciation of the share price. TSR is measured over a three-year period relative to the Dow Jones Banks Titans 30 Index©, a global index comprising the top 30 companies in the banking sector as defined by Dow Jones. The Dow Jones Banks Titans 30 Index© has been chosen as a TSR measure because of its relevance to UBS (banking), its transparency (known listed companies), and its sector coverage (30 leading global banks assessed by market capitalization, revenues, and net profit), as well as for its objectivity and independence (managed by Dow Jones). |
The three-year target performance levels were set after consideration of our strategic business plan.
Incentive Performance Plan
The IPP, which applies to GEB members and certain other senior employees, is designed to be aligned with the long-term performance and value of UBS shares. The award is granted to senior key talent who are actively leading the drive to achieve sustained profitability at UBS and who are expected to contribute most significantly to our long-term future and economic success. The IPP acknowledges the strategic importance of retaining our key talents, returning to leading performance levels in all of our businesses and growing the UBS share price.
Equity Ownership Plan/Senior Executive Equity Ownership Plan
Eligible employees receive a portion of their annual variable compensation above a certain threshold in the form of a mandatory Equity Ownership Plan (EOP) award. This award can be in actual UBS shares or in notional UBS shares. For
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certain employees in the Global Asset Management business only, a percentage of their variable incentive award that would have been delivered in UBS shares was instead granted over a specifically created Alternative Investment Vehicle. The vesting and forfeiture provisions of these awards mirror those of EOP.
compliance standards or individual behavior that contributes substantially to a material financial loss, restatement or reputational risk.
Conditional Variable Compensation Plan
As part of the constrained 2008 compensation program, the firm implemented CVCP as a one-time forward looking compensation plan. Under this program awards were granted to certain employees (excluding GEB members) in second quarter 2009. These awards constituted a contingent right to receive cash at vesting, subject to the satisfaction of predefined performance conditions, and were scheduled to vest in three equal tranches over a three-year period.
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Compensation and shareholdings
Variable compensation funding framework
Overview
Following approval of the revised Total Reward Principles, we also reviewed the framework used to fund variable compensation. This year, we amended our variable compensation funding framework to explicitly further take into consideration factors such as profitability after deducting cost of capital and also the underlying business risk.
Market driven pool funding
Within UBS, not all units achieved a satisfactory level of economic contribution in 2009. However, achievement of our strategic goals including offering a greater integrated firm to our clients calls for us to continue investment in these lines of business. Different businesses are at different stages of development and different places on a profitability spectrum. Further, competitors are emerging from the global economic crisis at differing paces which is creating significant compensation tension. Our compensation system needs to be able to anticipate and respond to these pressures in
order to maintain our ability to attract and retain key talent. We need to be able to react decisively by maintaining the flexibility to pay top-performing individuals adequately and appropriately by taking into account predefined personal objectives, and achievements against other relevant key performance indicators, as set out in the Total Reward Principles.
Benchmarking against peers
Compensation and benefit levels are primarily result-driven and further benchmarked against appropriate peers. These companies are selected for the similarity of their core business to that of UBS, as well as for comparable size, geographic distribution, business strategy and performance. Typically, these are also the companies from which we are most likely to hire and to which we are most likely to lose employees. When benchmarking GEB members, generally ten peers are considered to represent the most relevant labor market for compensation namely Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley and RBS. In the view of the HRCC, our executive compensation structure is positioned appropriately relative to these peers. For certain positions, in particular those below the GEB, additional competitors may be taken into account including other major international banks, the large Swiss private banks, private equity firms and hedge funds, which are increasingly becoming attractive alternatives for our employees.
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Compensation framework
Compensation structure
Chairman of the Board of Directors
è | Refer to the “2009 compensation for the Board of Directors and Group Executive Board” section of this report for details of the Chairman’s compensation for 2009 |
Independent members of the Board of Directors
mance of the Group. Fees for independent members are reviewed annually. The HRCC reviews a proposal by the Chairman of the BoD, and then submits a recommendation to the full BoD. Fees are paid 50% in cash and 50% in blocked UBS shares. However, members can elect to have 100% of their remuneration paid in blocked UBS shares. These shares are attributed with a price discount of 15% and restricted from sale for four years from the date they are granted. None of the independent members of the BoD have a contract with UBS that provides benefits upon the termination of their term of office.
Group Executive Board
All UBS employees
Base salary
Compensation structure
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Compensation and shareholdings
During 2009, the banking industry faced increasing regulatory pressure to ensure that salaries comprise a sufficient proportion of total remuneration, while still allowing a firm to operate a flexible incentive policy. We recognized this risk-based requirement and increased employee base salary levels in certain parts of the business where this was deemed both necessary and appropriate. While we need to pay competitively in relation to the market, nevertheless, we believe that a policy which encourages a general increase in fixed remuneration simply in order to reduce the proportion of variable remuneration would only increase fixed costs, and is not in the long-term interest of shareholders.
Benefits
Pensions
è | Refer to “Note 30 Pension and other post-retirement benefit plans” in the “Financial information” section of this report for details on the various retirement benefit plans established in Switzerland and other major markets |
Cash and equity incentives
client focus, teamwork and sound governance. Since performance can vary, the amount of variable compensation an individual receives can also vary considerably from year to year.
– | an increase in the amount to be deferred into UBS shares for higher-paid staff above a fixed threshold; | |
– | a reduction in the fixed threshold; | |
– | a limit on the amount of the incentive that may be paid out immediately in cash; | |
– | the inclusion of additional forfeiture provisions applying to unvested shares in the event of material financial losses, restatement, breach of risk or compliance parameters, and reputational risk; and | |
– | the introduction of the IPP with a five-year performance period for senior employees (including GEB members). |
Employment contracts
Regulatory framework
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pensation practices for 2009 already materially comply with the relevant rules and guidelines issued by the G-20, as well as by FINMA, the US Federal Reserve, the UK FSA and other jurisdictions in which we have a substantial presence. These rules require that material portions of compensation, in par-
ticular for senior management and risk-takers, are principally deferred into UBS shares over at least a three-year period. These awards are also required to be subject to forfeiture linked to conduct that contributes to substantial future underperformance or restatement of financial results.
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Compensation and shareholdings
2009 performance
Besides total UBS and market performance, business division and individual performance are key criteria in our employee reward process.
Business division performance
When considering compensation funding for 2009, the HRCC took into account a thorough assessment of business divisional performance as well as the improvement in the stability, security and risk position of the firm and overall improvement in underlying Group profitability throughout the year.
è | Refer to the “UBS business divisions and Corporate Center” section of this report for more information on the performance of UBS’s business divisions |
Individual performance
Individual performance is formally assessed each year by measuring achievement against personal objectives. These objectives are focused on a range of financial and non-financial areas such as:
– | contribution to Group and business division results; | |
– | exceptional contribution in cooperating across all businesses; | |
– | strategic leadership skills and potential; | |
– | outstanding professional and technical expertise; | |
– | a commitment to UBS; | |
– | adherence to corporate values and principles; | |
– | active risk management; and | |
– | the creation of shareholder value. |
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2009 compensation for the Board of Directors and
Group Executive Board
Board of Directors remuneration
Chairman of the Board of Directors
Highest paid member of the Board of Directors
Remuneration for the former Chairman of the
Board of Directors
Independent members of the Board of Directors
Group Executive Board compensation
In 2009, total compensation for members of the GEB in their capacity as such, reflected not only the individual performance of each executive, but also the improved operating performance of each business division and the overall UBS Group. The HRCC also considered the relevant external competitive market and the steps required to ensure that the firm makes further significant strives in 2010 towards its strategic objectives.
Compensation details and additional information for executive members of the BoD | ||||||||||||||||||||||||||||||||
CHF, except where indicateda | ||||||||||||||||||||||||||||||||
Annual | ||||||||||||||||||||||||||||||||
For the | Annual | incentive | Discretionary | Contributions | ||||||||||||||||||||||||||||
year | Base | incentive | award (shares | award (options | Benefits | to retirement | ||||||||||||||||||||||||||
Name, function1 | ended | salary | award (cash) | – fair value)c | – fair value)d | in kinde | benefits plans1 | Total | ||||||||||||||||||||||||
Kaspar Villiger, Chairman | 2009 | 602,083 | 0 | 0 | 0 | 74,488 | 0 | 676,571 | ||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||
Peter Kurer, former Chairman | 2009 | 666,667 | 0 | 0 | 0 | 37,561 | 89,780 | 794,008 | ||||||||||||||||||||||||
2008 | 1,333,333 | 0 | 0 | 0 | 58,267 | 174,047 | 1,565,647 | |||||||||||||||||||||||||
Marcel Ospel, former Chairman | 2009 | |||||||||||||||||||||||||||||||
2008 | 666,667 | 0 | 0 | 0 | 80,755 | 87,023 | 834,445 | |||||||||||||||||||||||||
Stephan Haeringer, former Executive Vice Chairman | 2009 | |||||||||||||||||||||||||||||||
2008 | 1,125,000 | 0 | 0 | 0 | 108,846 | 195,802 | 1,429,648 | |||||||||||||||||||||||||
1 2009: Kaspar Villiger was the only non-indendendent member in office on 31 December 2009; Peter Kurer did not stand for reelection at the AGM on 15 April 2009. 2008: Peter Kurer was the only executive member in office on 31 December 2008; Marcel Ospel did not stand for reelection at the AGM on 23 April 2008 and Stephan Haeringer stepped down during the year as a member of the BoD, and both of these payments are pro-rata for the four and nine months, respectively, in their functions. |
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Compensation and shareholdings
very strong strategic hire for the Investment Bank. Carsten Kengeter’s drive, leadership and impact have materially contributed to the turnaround in the FICC business, to the effective unwinding of a large portion of the legacy positions and to the overall effort to transform the Investment Bank as a whole. The resulting compensation is fully supported by the HRCC in light of the skills and experience that he possesses, the commitments made at his hiring in December 2008, and the accomplishments achieved during 2009.
Remuneration for members of the Group Executive Board who
stepped down during 2009
Base salary
Benefits
è | Refer to “Note 30 Pension and other post-retirement benefit plans” in the “Financial information” section of this report for details on the various retirement benefit plans established in Switzerland and other major markets | |
è | Refer to the “2009 performance” and “Variable compensation funding framework” sections for information concerning the committee’s determination of variable incentive awards for 2009, and to the “Cash and equity incentives” section for details of the compensation plans awarded to GEB members |
Compensation to former members of the Board of
Directors and Group Executive Board
Compensation and benefits in kind paid to former members of the BoD and the GEB reflect legacy agreements still honored by UBS. These benefits have been discontinued for any member of the BoD and the GEB who stepped down after 1 January 2008.
Explanation of the tables outlining compensation details of executive members of the BoD and members of the GEB: | ||||
a. | Local currencies are converted into CHF using the exchange rates as detailed in “Note 39 Currency translation rates” in the “Financial information” section of this report. | |||
b. | The entire cash incentive is only paid out over a three-year period and is subject to forfeiture. | |||
c. | Values per performance share at grant: CHF 16.30 for PEP awards and CHF 22.20 for IPP awards granted in 2010 related to the performance year 2009. These are based on the performance share valuation which will be used for accounting purposes under IFRS 2. The valuation was carried out by PricewaterhouseCoopers and takes into account the relevant performance conditions, targets set, and the range of possible outcomes for these. | |||
d. | No options were granted in 2010 for the performance year 2009. | |||
e. | Benefits in kind – car leasing, company car allowance, staff discount on banking products and services, health and welfare benefits and general expense allowances – are all valued at market price. | |||
f. | Swiss executives participate in the same pension plan as all other employees. Under this plan, employees receive a company contribution to the plan which covers compensation up to CHF 820,800. The retirement benefits consist of a pension, a bridging pension and a one-off payout of accumulated capital. Employees must also contribute to the plan. This figure excludes the mandatory employer’s social security contributions (AHV, ALV) but includes the portion attributed to the employer’s portion of the legal BVG requirement. The employee contribution is included in the base salary and annual incentive award components. | |||
In both the US and the UK, executives participate in the same plans as all other employees. In the US the plans differ between the two business divisions. For each business division there are two different plans. The grandfathered plans, which are no longer open to new hires, operate, depending on the business division, either on a cash balance basis or a career average salary basis and participants accrue a pension based on their annual compensation limited to USD 250,000 (or USD 150,000 for Wealth Management Americas employees). In the defined contribution plan, participants receive company contributions to the plan based on compensation limited to USD 245,000. US management may also participate in a 401(k) defined contribution plan (open to all employees), which provides a company matching contribution for employee contributions. In the UK, management participates in either the principal pension plan, which operates on a defined contribution basis and is limited to an earnings cap of GBP 100,000, or a grandfathered defined benefit plan which provides a pension on retirement based on career average base salary (uncapped). |
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Remuneration details and additional information for independent members of the BoD | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CHF, except where indicateda | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HR & | Governance & | Corporate | period | Share | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Audit | Compensation | Nominating | Responsibility | Risk | Strategy | AGM to | Committee | Benefits | Additional | percent- | Number of | ||||||||||||||||||||||||||||||||||||||||||||||
Name, function1 | Committee | Committee | Committee | Committee | Committee | Committee | AGM | Base fee | retainer(s) | in kind | payments | Total | age3 | shares4,5 | |||||||||||||||||||||||||||||||||||||||||||
Sergio Marchionne, | M | 2009/2010 | 325,000 | 100,000 | 0 | 250,000 | 6 | 675,000 | 100 | 51,845 | |||||||||||||||||||||||||||||||||||||||||||||||
Senior Independent Director, Vice Chairman | M | M | 2008/2009 | 325,000 | 200,000 | 0 | 250,000 | 6 | 775,000 | 100 | 76,228 | ||||||||||||||||||||||||||||||||||||||||||||||
Ernesto Bertarelli, | 2009/2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
former member | M | M | 2008/2009 | 325,000 | 200,000 | 0 | 0 | 525,000 | 100 | 51,596 | |||||||||||||||||||||||||||||||||||||||||||||||
Sally Bott, | C | M | 2009/2010 | 325,000 | 350,000 | 0 | 0 | 675,000 | 50 | 27,261 | |||||||||||||||||||||||||||||||||||||||||||||||
member2 | M | M | 2008/2009 | 162,500 | 75,000 | 0 | 0 | 237,500 | 50 | 12,280 | |||||||||||||||||||||||||||||||||||||||||||||||
Michel Demaré, | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 50 | 21,203 | ||||||||||||||||||||||||||||||||||||||||||||||||
member | 2008/2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rainer-Marc Frey, | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 100 | 40,301 | ||||||||||||||||||||||||||||||||||||||||||||||||
member2 | M | M | 2008/2009 | 162,500 | 150,000 | 0 | 0 | 312,500 | 50 | 16,158 | |||||||||||||||||||||||||||||||||||||||||||||||
Bruno Gehrig, | M | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 50 | 21,203 | |||||||||||||||||||||||||||||||||||||||||||||||
member2 | M | 2008/2009 | 162,500 | 100,000 | 0 | 0 | 262,500 | 50 | 13,572 | ||||||||||||||||||||||||||||||||||||||||||||||||
Ann F. Godbehere, | M | M | 2009/2010 | 325,000 | 250,000 | 0 | 0 | 575,000 | 50 | 23,222 | |||||||||||||||||||||||||||||||||||||||||||||||
member | 2008/2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gabrielle Kaufmann- | 2009/2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kohler, former member | C | M | 2008/2009 | 325,000 | 250,000 | 0 | 0 | 575,000 | 50 | 29,731 | |||||||||||||||||||||||||||||||||||||||||||||||
Axel P. Lehmann, | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 100 | 40,301 | ||||||||||||||||||||||||||||||||||||||||||||||||
member | 2008/2009 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rolf A. Meyer, | 2009/2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
former member2 | M | M | 2008/2009 | 162,500 | 150,000 | 0 | 0 | 312,500 | 50 | 16,158 | |||||||||||||||||||||||||||||||||||||||||||||||
Helmut Panke, | M | M | 2009/2010 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 25,242 | |||||||||||||||||||||||||||||||||||||||||||||||
member | M | M | 2008/2009 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 32,316 | |||||||||||||||||||||||||||||||||||||||||||||||
William G. Parrett, | C | 2009/2010 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 25,242 | ||||||||||||||||||||||||||||||||||||||||||||||||
member2 | M | 2008/2009 | 162,500 | 100,000 | 0 | 0 | 262,500 | 50 | 13,572 | ||||||||||||||||||||||||||||||||||||||||||||||||
David Sidwell, | C | 2009/2010 | 325,000 | 400,000 | 0 | 0 | 725,000 | 50 | 29,281 | ||||||||||||||||||||||||||||||||||||||||||||||||
member | M | C | 2008/2009 | 325,000 | 450,000 | 0 | 0 | 775,000 | 50 | 40,072 | |||||||||||||||||||||||||||||||||||||||||||||||
Peter Spuhler, former | 2009/2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
member2 | 2008/2009 | 162,500 | 0 | 0 | 0 | 162,500 | 100 | 15,945 | |||||||||||||||||||||||||||||||||||||||||||||||||
Peter R.Voser, | M | 2009/2010 | 325,000 | 100,000 | 0 | 0 | 425,000 | 50 | 17,164 | ||||||||||||||||||||||||||||||||||||||||||||||||
member | C | M | 2008/2009 | 325,000 | 400,000 | 0 | 0 | 725,000 | 50 | 37,487 | |||||||||||||||||||||||||||||||||||||||||||||||
Lawrence A. Weinbach, | 2009/2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
former member2 | M | 2008/2009 | 162,500 | 100,000 | 0 | 0 | 262,500 | 50 | 13,572 | ||||||||||||||||||||||||||||||||||||||||||||||||
Joerg Wolle, | 2009/2010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
former member | C | M | 2008/2009 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 32,316 | |||||||||||||||||||||||||||||||||||||||||||||||
Total 2009 | 6,425,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total 2008 | 6,437,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Legend: C = Chairperson of the respective committee; M = Member of the respective committee | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 There were 11 independent BoD members in office on 31 December 2009. Michel Demaré, Ann F. Godbehere and Axel P. Lehmann were appointed at the AGM on 15 April 2009 and Ernesto Bertarelli, Gabrielle Kaufmann-Kohler and Joerg Wolle stepped down from the BoD at the AGM on 15 April 2009. There were 11 independent BoD members in office on 31 December 2008. David Sidwell was appointed at the AGM on 23 April 2008, and Rolf A. Meyer, Peter Spuhler and Lawrence A. Weinbach stepped down from the BoD at the EGM on 2 October 2008. Sally Bott, Rainer-Marc Frey, Bruno Gehrig and William G. Parrett were appointed at the EGM on 2 October 2008. 2 Remuneration for 2008/2009 is for six months only, as such members either stepped down or were appointed on 2 October 2008. 3 Fees are paid 50% in cash and 50% in restricted UBS shares. However, independent BoD members can elect to have 100% of their remuneration paid in restricted UBS shares. 4 For 2009, shares valued at CHF 14.57 (average price of UBS shares at SIX Swiss Exchange over the last 10 trading days of February 2010) included a price discount of 15%, for a new value of discount price CHF 12.38. These shares are blocked for four years. For 2008, shares valued at CHF 11.38 (average price of UBS shares at virt-x, now SIX Swiss Exchange, over the last 10 trading days of February 2009) included a price discount of 15%, discount price for a new value of CHF 9.67. These shares are blocked for four years. 5 Number of shares is reduced in case of the 100% election to deduct social I security contribution. All remuneration payments are submitted to social security contribution/withholding tax. 6 This payment is associated with the Senior Independent Director function. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In addition, for 2008/2009 only, one-off cash payments were made to the Chairmen of the RC (CHF 500,000), the GNC (CHF 300,000) and the HRCC (CHF 200,000). These payments reflect the substantial workload of setting up the new RC, and expanding the mandate of the GNC and the HRCC. |
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Compensation and shareholdings
Total payments to all members of the BoD | ||||||||
For the | ||||||||
CHF, except where indicateda | year ended | Total | ||||||
Aggregate of all members of the BoD | 2009 | 7,895,579 | ||||||
Aggregate of all members of the BoD | 2008 | 10,267,240 | ||||||
Total compensation for all members of the GEB | ||||||||||||||||||||||||||||||||
CHF, except where indicateda | ||||||||||||||||||||||||||||||||
Annual | Contributions | |||||||||||||||||||||||||||||||
incentive | Annual | Annual | to retirement | |||||||||||||||||||||||||||||
For the | award CBP | incentive | incentive | Benefits | benefits | |||||||||||||||||||||||||||
Name, function | year ended | Base salary | and cashb | award PEPc | award IPPc | in kinde | plansf | Total | ||||||||||||||||||||||||
Carsten Kengeter, co-CEO Investment Bank (highest-paid) | 2009 | 669,092 | 5,003,470 | 6,155,869 | 1,349,336 | 0 | 12,545 | 13,190,312 | ||||||||||||||||||||||||
Marcel Rohner, Group Chief Executive Officer (highest-paid) | 2008 | 1,500,000 | 0 | 0 | 0 | 161,768 | 152,934 | 1,814,702 | ||||||||||||||||||||||||
Aggregate of all members of the GEB who were in office on 31 December 20091 | 2009 | 12,000,055 | 25,734,711 | 13,453,424 | 3 | 15,696,333 | 270,971 | 1,551,068 | 68,706,562 | |||||||||||||||||||||||
Aggregate of all members of the GEB who were in office on 31 December 20081 | 2008 | 7,815,943 | 0 | 0 | 0 | 457,652 | 817,315 | 9,090,911 | ||||||||||||||||||||||||
Aggregate of all members of the GEB who stepped down during 20092 | 2009 | 2,447,544 | 38,443,097 | 0 | 0 | 215,151 | 171,122 | 41,276,914 | ||||||||||||||||||||||||
Aggregate of all members of the GEB who stepped down during 20082 | 2008 | 1,614,871 | 0 | 0 | 0 | 234,838 | 258,423 | 2,108,132 | ||||||||||||||||||||||||
1 Numbers and distribution of GEB members in 2009: 13 GEB members in office on 31 December. 2008: 12 GEB members in office on 31 December. 2 Number and distribution of GEB members in 2009: includes two months in office as a GEB member for Marcel Rohner, three months in office for Walter H. Stürzinger and Raoul Weil, four months in office for Jerker Johansson, six months in office for Rory Tapner and ten for Marten Hoekstra. 2008: includes four months in office as a GEB member for Peter Kurer, eight months in office for Marco Suter and ten months for Joe Scoby. 3 Included in the share awards are SEEOP awards at a fair value of GBP 4,655,950 and EOP awards at a fair value of GBP 1,594,250. |
Compensation paid to former members of the BoD and GEB1 | ||||||||||||||||
CHF, except where indicateda | ||||||||||||||||
For the | Benefits | |||||||||||||||
Name, function | year ended | Compensation | in kind | Total | ||||||||||||
Georges Blum, former member of the BoD | 2009 | 92,399 | 92,399 | |||||||||||||
(Swiss Bank Corporation) | 2008 | 101,579 | 101,579 | |||||||||||||
Franz Galliker, former member of the BoD | 2009 | 10,659 | 10,659 | |||||||||||||
(Swiss Bank Corporation) | 2008 | 69,596 | 69,596 | |||||||||||||
Walter G. Frehner, former member of the BoD | 2009 | 25,371 | 25,371 | |||||||||||||
(Swiss Bank Corporation) | 2008 | 74,663 | 74,663 | |||||||||||||
Hans (Liliane) Strasser, former member of the BoD | 2009 | 9,758 | 9,758 | |||||||||||||
(Swiss Bank Corporation) | 2008 | 32,673 | 32,673 | |||||||||||||
Robert Studer, former member of the BoD | 2009 | 18,751 | 18,751 | |||||||||||||
(Union Bank of Switzerland) | 2008 | 126,208 | 126,208 | |||||||||||||
Alberto Togni, former member of the BoD | 2009 | 320,136 | 355,983 | 676,119 | ||||||||||||
(UBS) | 2008 | 318,461 | 427,949 | 746,410 | ||||||||||||
Philippe (Alix) de Weck, former member of the BoD | 2009 | 93,135 | 93,135 | |||||||||||||
(Union Bank of Switzerland) | 2008 | 109,703 | 109,703 | |||||||||||||
Aggregate of all former members of the GEB2 | 2009 | 0 | 18,293 | 18,293 | ||||||||||||
2008 | 0 | 171,180 | 171,180 | |||||||||||||
Aggregate of all former members of the BoD and GEB | 2009 | 320,136 | 624,349 | 944,485 | ||||||||||||
2008 | 318,461 | 1,113,551 | 1,432,012 | |||||||||||||
1 Compensation or remuneration that is connected with the former members’ activity on the BoD or GEB, or that is not at market conditions. 2 Includes two former GEB members. |
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Shares and options held by the Board of Directors and Group Executive
Board (at end of 2009)
Share and option ownership of members of the BoD on 31 December 2008/2009 | ||||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | Type and quantity | |||||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | of options3 | ||||||||||||||||||||
Kaspar Villiger, Chairman | 2009 | 22,500 | 0.001 | 0 | 0.000 | |||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||||
Sergio Marchionne, | 2009 | 164,154 | 0.009 | 0 | 0.000 | |||||||||||||||||||||
Senior Independent Director, Vice Chairman | 2008 | 87,926 | 0.005 | 0 | 0 000 | |||||||||||||||||||||
Ernesto Bertarelli, former member4 | 2009 | – | – | |||||||||||||||||||||||
2008 | 89,434 | 0.005 | 0 | 0.000 | ||||||||||||||||||||||
Sally Bott, member | 2009 | 12,281 | 0.001 | 0 | 0.000 | |||||||||||||||||||||
2008 | 1 | 0.000 | 0 | 0.000 | ||||||||||||||||||||||
Michel Demaré, member | 2009 | 2,500 | 0.000 | 0 | 0.000 | |||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||||
Rainer-Marc Frey, member | 2009 | 16,158 | 0.001 | 0 | 0.000 | |||||||||||||||||||||
2008 | 0 | 0.000 | 0 | 0.000 | ||||||||||||||||||||||
Bruno Gehrig, member | 2009 | 16,572 | 0.001 | 0 | 0.000 | |||||||||||||||||||||
2008 | 3,000 | 0.000 | 0 | 0.000 | ||||||||||||||||||||||
Ann F. Godbehere, member | 2009 | 0 | 0.000 | 0 | 0.000 | |||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||||
Gabrielle Kaufmann-Kohler, former member4 | 2009 | – | – | |||||||||||||||||||||||
2008 | 18,713 | 0.001 | 0 | 0.000 | ||||||||||||||||||||||
Peter Kurer, former Chairman4 | 2009 | – | – | |||||||||||||||||||||||
2008 | 416,088 | 0.025 | 372,995 | 0.022 | xli: | 85,256 | ||||||||||||||||||||
xlvii: | 95,913 | |||||||||||||||||||||||||
lvi: | 95,913 | |||||||||||||||||||||||||
lxiv: | 95,913 | |||||||||||||||||||||||||
Axel P. Lehmann, member | 2009 | 18,151 | 0.001 | 0 | 0.000 | |||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||||
Helmut Panke, member | 2009 | 64,287 | 0.003 | 0 | 0.000 | |||||||||||||||||||||
2008 | 31,971 | 0.002 | 0 | 0.000 | ||||||||||||||||||||||
William G. Parrett, member | 2009 | 17,573 | 0.001 | 0 | 0.000 | |||||||||||||||||||||
2008 | 4,000 | 0.000 | 0 | 0.000 | ||||||||||||||||||||||
David Sidwell, member | 2009 | 40,073 | 0.002 | 0 | 0.000 | |||||||||||||||||||||
2008 | 1 | 0.000 | 0 | 0.000 | ||||||||||||||||||||||
Peter R. Voser, member | 2009 | 68,310 | 0.004 | 0 | 0.000 | |||||||||||||||||||||
2008 | 30,823 | 0.002 | 0 | 0.000 | ||||||||||||||||||||||
Joerg Wolle, former member4 | 2009 | – | – | |||||||||||||||||||||||
2008 | 41,509 | 0.002 | 0 | 0.000 | ||||||||||||||||||||||
1 This table includes vested, unvested, blocked and unblocked shares and options held by members of the BoD including related parties. 2 No conversion rights are outstanding. 3 Refer to “Note 31 Equity participation and other compensation plans” in the “Financial information” section of this report for more information on stock option plans. 4 Members of the BoD who stepped down at the AGM 2009. |
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Compensation and shareholdings
Share and option ownership of members of the GEB on 31 December 2008/2009 | ||||||||||||||||||||||||||
Type and | ||||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | quantity of | |||||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | ||||||||||||||||||||
Oswald J. Grübel, | 2009 | 0 | 0.000 | 4,000,000 | 0.217 | lxx: | 4,000,000 | |||||||||||||||||||
Group Chief Executive Officer | 2008 | – | – | |||||||||||||||||||||||
Marcel Rohner, | 2009 | – | – | |||||||||||||||||||||||
former Group Chief Executive Officer4 | 2008 | 711,366 | 0.042 | 1,055,043 | 0.063 | xxxii: | 31,971 | |||||||||||||||||||
xli: | 213,140 | |||||||||||||||||||||||||
xlvii: | 277,082 | |||||||||||||||||||||||||
lvi: | 319,710 | |||||||||||||||||||||||||
lxiv: | 213,140 | |||||||||||||||||||||||||
John Cryan, | 2009 | 235,929 | 0.013 | 382,673 | 0.021 | iii: | 21,362 | |||||||||||||||||||
Group Chief Financial Officer | iv: | 20,731 | ||||||||||||||||||||||||
vii: | 20,725 | |||||||||||||||||||||||||
xii: | 5,454 | |||||||||||||||||||||||||
xiii: | 5,294 | |||||||||||||||||||||||||
xvi: | 5,292 | |||||||||||||||||||||||||
xxi: | 23,626 | |||||||||||||||||||||||||
xxiii: | 23,620 | |||||||||||||||||||||||||
xxvi: | 23,612 | |||||||||||||||||||||||||
xxviii | 5,526 | |||||||||||||||||||||||||
xxix: | 5,524 | |||||||||||||||||||||||||
xxx: | 5,524 | |||||||||||||||||||||||||
xxxviii: | 17,072 | |||||||||||||||||||||||||
xl: | 17,068 | |||||||||||||||||||||||||
xlii: | 17,063 | |||||||||||||||||||||||||
xliv: | 14,210 | |||||||||||||||||||||||||
xlv: | 14,210 | |||||||||||||||||||||||||
xlvi: | 14,207 | |||||||||||||||||||||||||
liii: | 5,330 | |||||||||||||||||||||||||
liv: | 5,328 | |||||||||||||||||||||||||
lv: | 5,326 | |||||||||||||||||||||||||
lxi: | 17,762 | |||||||||||||||||||||||||
lxii: | 17,762 | |||||||||||||||||||||||||
lxiii: | 17,760 | |||||||||||||||||||||||||
lxvi: | 53,285 | |||||||||||||||||||||||||
2008 | 235,929 | 0.014 | 382,673 | 0.023 | iii: | 21,362 | ||||||||||||||||||||
iv: | 20,731 | |||||||||||||||||||||||||
vii: | 20,725 | |||||||||||||||||||||||||
xii: | 5,454 | |||||||||||||||||||||||||
xiii: | 5,294 | |||||||||||||||||||||||||
xvi: | 5,292 | |||||||||||||||||||||||||
xxi: | 23,626 | |||||||||||||||||||||||||
xxiii: | 23,620 | |||||||||||||||||||||||||
xxvi: | 23,612 | |||||||||||||||||||||||||
xxviii | 5,526 | |||||||||||||||||||||||||
xxix: | 5,524 | |||||||||||||||||||||||||
xxx: | 5,524 | |||||||||||||||||||||||||
xxxviii: | 17,072 | |||||||||||||||||||||||||
xl: | 17,068 | |||||||||||||||||||||||||
xlii: | 17,063 | |||||||||||||||||||||||||
xliv: | 14,210 | |||||||||||||||||||||||||
xlv: | 14,210 | |||||||||||||||||||||||||
xlvi: | 14,207 | |||||||||||||||||||||||||
liii: | 5,330 | |||||||||||||||||||||||||
liv: | 5,328 | |||||||||||||||||||||||||
lv: | 5,326 | |||||||||||||||||||||||||
lxi: | 17,762 | |||||||||||||||||||||||||
lxii: | 17,762 | |||||||||||||||||||||||||
lxiii: | 17,760 | |||||||||||||||||||||||||
lxvi: | 53,285 | |||||||||||||||||||||||||
Markus U. Diethelm, | 2009 | 112,245 | 0.006 | 0 | 0.000 | |||||||||||||||||||||
Group General Counsel | 2008 | 112,245 | 0.007 | 0 | 0.000 | |||||||||||||||||||||
John A. Fraser, | 2009 | 480,464 | 0.027 | 1,088,795 | 0.059 | viii: | 76,380 | |||||||||||||||||||
Chairman and CEO Global Asset Management | xix: | 127,884 | ||||||||||||||||||||||||
xxv: | 127,884 | |||||||||||||||||||||||||
xliii: | 170,512 | |||||||||||||||||||||||||
xlviii: | 202,483 | |||||||||||||||||||||||||
lvi: | 213,140 | |||||||||||||||||||||||||
lxiv: | 170,512 | |||||||||||||||||||||||||
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Share and option ownership of members of the GEB on 31 December 2008/2009 (continued) | ||||||||||||||||||||||||||
Type and | ||||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | quantity of | |||||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | ||||||||||||||||||||
John A. Fraser, | 2008 | 561,216 | 0.035 | 1,144,808 | 0.068 | i: | 56,013 | |||||||||||||||||||
Chairman and CEO Global Asset Management | viii: | 76,380 | ||||||||||||||||||||||||
xix: | 127,884 | |||||||||||||||||||||||||
xxv: | 127,884 | |||||||||||||||||||||||||
xliii: | 170,512 | |||||||||||||||||||||||||
xlviii: | 202,483 | |||||||||||||||||||||||||
lvi: | 213,140 | |||||||||||||||||||||||||
lxiv: | 170,512 | |||||||||||||||||||||||||
Marten Hoekstra, | 2009 | – | – | |||||||||||||||||||||||
former CEO Wealth Management US4 | 2008 | 245,397 | 0.015 | 684,168 | 0.041 | ii: | 8,679 | |||||||||||||||||||
vi: | 8,421 | |||||||||||||||||||||||||
ix: | 8,421 | |||||||||||||||||||||||||
xi: | 8,823 | |||||||||||||||||||||||||
xiv: | 4,262 | |||||||||||||||||||||||||
xv: | 8,563 | |||||||||||||||||||||||||
xviii: | 8,561 | |||||||||||||||||||||||||
xxxiii: | 42,628 | |||||||||||||||||||||||||
xliii: | 53,285 | |||||||||||||||||||||||||
xlviii: | 53,285 | |||||||||||||||||||||||||
lvi: | 85,256 | |||||||||||||||||||||||||
lxiv: | 154,931 | |||||||||||||||||||||||||
lxvii: | 239,053 | |||||||||||||||||||||||||
Jerker Johansson, | 2009 | – | – | |||||||||||||||||||||||
former Chairman and CEO Investment Bank4 | 2008 | 521,544 | 0.031 | 753,410 | 0.045 | lxviii: | 745,990 | |||||||||||||||||||
lxix: | 7,420 | |||||||||||||||||||||||||
Carsten Kengeter, | 2009 | 516,909 | 0.028 | 905,000 | 0.049 | lxxi: | 905,000 | |||||||||||||||||||
co-CEO Investment Bank | 2008 | – | – | |||||||||||||||||||||||
Ulrich Körner, | 2009 | 0 | 0.000 | 0 | 0.000 | |||||||||||||||||||||
Group Chief Operating Officer | 2008 | – | – | |||||||||||||||||||||||
Philip J. Lofts, | 2009 | 179,234 | 0.010 | 577,723 | 0.031 | iii: | 11,445 | |||||||||||||||||||
Group Chief Risk Officer | iv: | 11,104 | ||||||||||||||||||||||||
vii: | 11,098 | |||||||||||||||||||||||||
xii: | 1,240 | |||||||||||||||||||||||||
xiii: | 5,464 | |||||||||||||||||||||||||
xvi: | 1,199 | |||||||||||||||||||||||||
xxi: | 9,985 | |||||||||||||||||||||||||
xxiii: | 9,980 | |||||||||||||||||||||||||
xxvi: | 9,974 | |||||||||||||||||||||||||
xxviii: | 1,833 | |||||||||||||||||||||||||
xxix: | 1,830 | |||||||||||||||||||||||||
xxx: | 1,830 | |||||||||||||||||||||||||
xxxviii: | 35,524 | |||||||||||||||||||||||||
xl: | 35,524 | |||||||||||||||||||||||||
xlii: | 35,521 | |||||||||||||||||||||||||
xlvii: | 117,090 | |||||||||||||||||||||||||
lvi: | 117,227 | |||||||||||||||||||||||||
lxiv: | 85,256 | |||||||||||||||||||||||||
lxvii: | 74,599 | |||||||||||||||||||||||||
2008 | 186,434 | 0.011 | 577,723 | 0.034 | iii: | 11,445 | ||||||||||||||||||||
iv: | 11,104 | |||||||||||||||||||||||||
vii: | 11,098 | |||||||||||||||||||||||||
xii: | 1,240 | |||||||||||||||||||||||||
xiii: | 5,464 | |||||||||||||||||||||||||
xvi: | 1,199 | |||||||||||||||||||||||||
xxi: | 9,985 | |||||||||||||||||||||||||
xxiii: | 9,980 | |||||||||||||||||||||||||
xxvi: | 9,974 | |||||||||||||||||||||||||
xxviii: | 1,833 | |||||||||||||||||||||||||
xxix: | 1,830 | |||||||||||||||||||||||||
xxx: | 1,830 | |||||||||||||||||||||||||
xxxviii: | 35,524 | |||||||||||||||||||||||||
xl: | 35,524 | |||||||||||||||||||||||||
xlii: | 35,521 | |||||||||||||||||||||||||
xlvii: | 117,090 | |||||||||||||||||||||||||
lvi: | 117,227 | |||||||||||||||||||||||||
lxiv: | 85,256 | |||||||||||||||||||||||||
lxvii: | 74,599 | |||||||||||||||||||||||||
233
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Compensation and shareholdings
Share and option ownership of members of the GEB on 31 December 2008/2009 (continued) | ||||||||||||||||||||||||||
Type and | ||||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | quantity of | |||||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | ||||||||||||||||||||
Robert J. McCann, | 2009 | 602,481 | 0.033 | 0 | 0.000 | |||||||||||||||||||||
CEO Wealth Management Americas | 2008 | – | – | |||||||||||||||||||||||
Franco Morra, | 2009 | 153,860 | 0.008 | 325,086 | 0.018 | lvi: | 43,911 | |||||||||||||||||||
CEO UBS Switzerland | lxiv: | 66,866 | ||||||||||||||||||||||||
lxvii: | 114,309 | |||||||||||||||||||||||||
lxxii: | 100,000 | |||||||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||||
Walter H. Stürzinger, | 2009 | – | – | |||||||||||||||||||||||
former Chief Operating Officer, Corporate Center4 | 2008 | 296,886 | 0.018 | 372,995 | 0.022 | xx: | 31,971 | |||||||||||||||||||
xli: | 63,942 | |||||||||||||||||||||||||
xlvii: | 85,256 | |||||||||||||||||||||||||
lvi: | 95,913 | |||||||||||||||||||||||||
lxiv: | 95,913 | |||||||||||||||||||||||||
Rory Tapner, | 2009 | – | – | |||||||||||||||||||||||
former Chairman and CEO Asia Pacific4 | 2008 | 827,809 | 0.049 | 1,379,533 | 0.082 | vii: | 281,862 | |||||||||||||||||||
xix: | 213,140 | |||||||||||||||||||||||||
xxxi: | 213,140 | |||||||||||||||||||||||||
xli: | 170,512 | |||||||||||||||||||||||||
xlvii: | 159,855 | |||||||||||||||||||||||||
lvi: | 170,512 | |||||||||||||||||||||||||
lxiv: | 170,512 | |||||||||||||||||||||||||
Raoul Weil, | 2009 | – | – | |||||||||||||||||||||||
former Chairman and CEO Global Wealth | 2008 | 315,698 | 0.019 | 432,409 | 0.026 | xix: | 53,285 | |||||||||||||||||||
Management & Business Banking4 | xlvii: | 102,281 | ||||||||||||||||||||||||
lvi: | 127,884 | |||||||||||||||||||||||||
lxiv: | 148,959 | |||||||||||||||||||||||||
Alexander Wilmot-Sitwell, | 2009 | 286,767 | 0.016 | 353,807 | 0.019 | xlvi: | 53,282 | |||||||||||||||||||
co-CEO Investment Bank | xlix: | 2,130 | ||||||||||||||||||||||||
liii: | 35,524 | |||||||||||||||||||||||||
liv: | 35,524 | |||||||||||||||||||||||||
lv: | 35,521 | |||||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||||
lxvii: | 85,256 | |||||||||||||||||||||||||
2008 | 304,655 | 0.018 | 353,807 | 0.021 | xlvi: | 53,282 | ||||||||||||||||||||
xlix: | 2,130 | |||||||||||||||||||||||||
liii: | 35,524 | |||||||||||||||||||||||||
liv: | 35,524 | |||||||||||||||||||||||||
lv: | 35,521 | |||||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||||
lxvii: | 85,256 | |||||||||||||||||||||||||
Robert Wolf, | 2009 | 785,631 | 0.043 | 948,473 | 0.051 | xxv: | 287,739 | |||||||||||||||||||
Chairman and CEO, UBS Group Americas/ | xliii: | 213,140 | ||||||||||||||||||||||||
President Investment Bank | xlviii: | 127,884 | ||||||||||||||||||||||||
lvi: | 106,570 | |||||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||||
lxvii: | 106,570 | |||||||||||||||||||||||||
2008 | 827,307 | 0.049 | 948,473 | 0.056 | xxv: | 287,739 | ||||||||||||||||||||
xliii: | 213,140 | |||||||||||||||||||||||||
xlviii: | 127,884 | |||||||||||||||||||||||||
lvi: | 106,570 | |||||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||||
lxvii: | 106,570 | |||||||||||||||||||||||||
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Share and option ownership of members of the GEB on 31 December 2008/2009 (continued) | ||||||||||||||||||||||||||
Type and | ||||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | quantity of | |||||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | ||||||||||||||||||||
Chi-Won Yoon, | 2009 | 367,573 | 0.020 | 623,253 | 0.034 | i: | 11,577 | |||||||||||||||||||
Chairman and CEO Asia Pacific | v: | 11,229 | ||||||||||||||||||||||||
viii: | 11,227 | |||||||||||||||||||||||||
x: | 2,252 | |||||||||||||||||||||||||
xiv: | 6,446 | |||||||||||||||||||||||||
xvii: | 2,184 | |||||||||||||||||||||||||
xxii: | 8,648 | |||||||||||||||||||||||||
xxiv: | 8,642 | |||||||||||||||||||||||||
xxvii: | 8,635 | |||||||||||||||||||||||||
xxxiv: | 4,262 | |||||||||||||||||||||||||
xxxv: | 3,374 | |||||||||||||||||||||||||
xxxvi: | 3,371 | |||||||||||||||||||||||||
xxxvii: | 3,371 | |||||||||||||||||||||||||
xxxvii: | 6,200 | |||||||||||||||||||||||||
xxxix: | 4,262 | |||||||||||||||||||||||||
xl: | 6,198 | |||||||||||||||||||||||||
xlii: | 6,195 | |||||||||||||||||||||||||
xliv: | 10,659 | |||||||||||||||||||||||||
xlv: | 10,657 | |||||||||||||||||||||||||
xlvi: | 10,654 | |||||||||||||||||||||||||
liii: | 21,316 | |||||||||||||||||||||||||
liv: | 21,314 | |||||||||||||||||||||||||
lv: | 21,311 | |||||||||||||||||||||||||
lxi: | 8,881 | |||||||||||||||||||||||||
lxii: | 8,880 | |||||||||||||||||||||||||
lxiii: | 8,880 | |||||||||||||||||||||||||
lxvi: | 42,628 | |||||||||||||||||||||||||
lxxii: | 350,000 | |||||||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||||
Jürg Zeltner, | 2009 | 16,502 | 0.001 | 205,470 | 0.011 | iii: | 809 | |||||||||||||||||||
CEO Wealth Management | iv: | 784 | ||||||||||||||||||||||||
vii: | 784 | |||||||||||||||||||||||||
xlii: | 4,972 | |||||||||||||||||||||||||
xliv: | 7,106 | |||||||||||||||||||||||||
xlv: | 7,103 | |||||||||||||||||||||||||
xlvi: | 7,103 | |||||||||||||||||||||||||
xlix: | 93 | |||||||||||||||||||||||||
l: | 161 | |||||||||||||||||||||||||
li: | 149 | |||||||||||||||||||||||||
lii: | 127 | |||||||||||||||||||||||||
liii: | 7,106 | |||||||||||||||||||||||||
liv: | 7,103 | |||||||||||||||||||||||||
lv: | 7,103 | |||||||||||||||||||||||||
lvii: | 110 | |||||||||||||||||||||||||
lviii: | 242 | |||||||||||||||||||||||||
lix: | 230 | |||||||||||||||||||||||||
lx: | 221 | |||||||||||||||||||||||||
lxi: | 7,105 | |||||||||||||||||||||||||
lxii: | 7,105 | |||||||||||||||||||||||||
lxiii: | 7,103 | |||||||||||||||||||||||||
lxv: | 223 | |||||||||||||||||||||||||
lxvii: | 42,628 | |||||||||||||||||||||||||
lxxii: | 90,000 | |||||||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||||
1 This table includes vested and unvested shares and options held by members of the GEB, including related parties. 2 No conversion rights are outstanding. 3 Refer to “Note 31 Equity participation and other compensation plans” in the “Financial information” section of this report for more information. 4 GEB members who stepped down during 2009. |
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Compensation and shareholdings
Vested and unvested options held by independent members of the BoD and | ||||||||||||||||||||||||||
by members of the GEB on 31 December 2008/2009 | ||||||||||||||||||||||||||
Type | Number of options | Year of grant | Vesting date | Expiry date | Subscription ratio | Strike price | ||||||||||||||||||||
i | 11,577 | 2002 | 31.01.2002 | 31.01.2012 | 1:1 | USD 21.24 | ||||||||||||||||||||
ii | 8,679 | 2002 | 31.01.2002 | 31.07.2012 | 1:1 | USD 21.24 | ||||||||||||||||||||
iii | 33,616 | 2002 | 31.01.2003 | 31.01.2012 | 1:1 | CHF 36.49 | ||||||||||||||||||||
iv | 32,619 | 2002 | 31.01.2004 | 31.01.2012 | 1:1 | CHF 36.49 | ||||||||||||||||||||
v | 11,229 | 2002 | 31.01.2004 | 31.01.2012 | 1:1 | USD 21.24 | ||||||||||||||||||||
vi | 8,421 | 2002 | 31.01.2004 | 31.07.2012 | 1:1 | USD 21.24 | ||||||||||||||||||||
vii | 314,469 | 2002 | 31.01.2005 | 31.01.2012 | 1:1 | CHF 36.49 | ||||||||||||||||||||
viii | 87,607 | 2002 | 31.01.2005 | 31.01.2012 | 1:1 | USD 21.24 | ||||||||||||||||||||
ix | 8,421 | 2002 | 31.01.2005 | 31.07.2012 | 1:1 | USD 21.24 | ||||||||||||||||||||
x | 2,252 | 2002 | 28.02.2002 | 28.02.2012 | 1:1 | USD 21.70 | ||||||||||||||||||||
xi | 8,823 | 2002 | 28.02.2002 | 28.08.2012 | 1:1 | USD 21.70 | ||||||||||||||||||||
xii | 6,694 | 2002 | 28.02.2003 | 28.02.2012 | 1:1 | CHF 36.65 | ||||||||||||||||||||
xiii | 10,758 | 2002 | 28.02.2004 | 28.02.2012 | 1:1 | CHF 36.65 | ||||||||||||||||||||
xiv | 10,708 | 2002 | 29.02.2004 | 28.02.2012 | 1:1 | USD 21.70 | ||||||||||||||||||||
xv | 8,563 | 2002 | 29.02.2004 | 28.08.2012 | 1:1 | USD 21.70 | ||||||||||||||||||||
xvi | 6,491 | 2002 | 28.02.2005 | 28.02.2012 | 1:1 | CHF 36.65 | ||||||||||||||||||||
xvii | 2,184 | 2002 | 28.02.2005 | 28.02.2012 | 1:1 | USD 21.70 | ||||||||||||||||||||
xviii | 8,561 | 2002 | 28.02.2005 | 28.08.2012 | 1:1 | USD 21.70 | ||||||||||||||||||||
xix | 394,309 | 2002 | 28.06.2005 | 28.06.2012 | 1:1 | CHF 37.90 | ||||||||||||||||||||
xx | 31,971 | 2002 | 28.06.2005 | 28.12.2012 | 1:1 | CHF 37.90 | ||||||||||||||||||||
xxi | 33,611 | 2003 | 01.03.2004 | 31.01.2013 | 1:1 | CHF 27.81 | ||||||||||||||||||||
xxii | 8,648 | 2003 | 01.03.2004 | 31.01.2013 | 1:1 | USD 20.49 | ||||||||||||||||||||
xxiii | 33,600 | 2003 | 01.03.2005 | 31.01.2013 | 1:1 | CHF 27.81 | ||||||||||||||||||||
xxiv | 8,642 | 2003 | 01.03.2005 | 31.01.2013 | 1:1 | USD 20.49 | ||||||||||||||||||||
xxv | 415,623 | 2003 | 31.01.2006 | 31.01.2013 | 1:1 | USD 22.53 | ||||||||||||||||||||
xxvi | 33,586 | 2003 | 01.03.2006 | 31.01.2013 | 1:1 | CHF 27.81 | ||||||||||||||||||||
xxvii | 8,635 | 2003 | 01.03.2006 | 31.01.2013 | 1:1 | USD 20.49 | ||||||||||||||||||||
xxviii | 7,359 | 2003 | 01.03.2004 | 28.02.2013 | 1:1 | CHF 26.39 | ||||||||||||||||||||
xxix | 7,354 | 2003 | 01.03.2005 | 28.02.2013 | 1:1 | CHF 26.39 | ||||||||||||||||||||
xxx | 7,354 | 2003 | 01.03.2006 | 28.02.2013 | 1:1 | CHF 26.39 | ||||||||||||||||||||
xxxi | 213,140 | 2003 | 31.01.2006 | 31.01.2013 | 1:1 | CHF 30.50 | ||||||||||||||||||||
xxxii | 31,971 | 2003 | 31.01.2006 | 31.07.2013 | 1:1 | CHF 30.50 | ||||||||||||||||||||
xxxiii | 42,628 | 2003 | 31.01.2006 | 31.07.2013 | 1:1 | USD 22.53 | ||||||||||||||||||||
xxxiv | 4,262 | 2003 | 28.02.2005 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||||
xxxv | 3,374 | 2003 | 01.03.2004 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||||
xxxvi | 3,371 | 2003 | 01.03.2005 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||||
xxxvii | 3,371 | 2003 | 01.03.2006 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||||
xxxviii | 58,796 | 2004 | 01.03.2005 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||||
xxxix | 4,262 | 2004 | 27.02.2006 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||||
xl | 58,790 | 2004 | 01.03.2006 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||||
xli | 532,850 | 2004 | 28.02.2007 | 27.02.2014 | 1:1 | CHF 48.69 | ||||||||||||||||||||
xlii | 63,751 | 2004 | 01.03.2007 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||||
xliii | 436,937 | 2004 | 01.03.2007 | 27.02.2014 | 1:1 | USD 38.13 | ||||||||||||||||||||
xliv | 31,975 | 2005 | 01.03.2006 | 28.02.2015 | 1:1 | CHF 47.58 | ||||||||||||||||||||
xlv | 31,970 | 2005 | 01.03.2007 | 28.02.2015 | 1:1 | CHF 47.58 | ||||||||||||||||||||
xlvi | 85,246 | 2005 | 01.03.2008 | 28.02.2015 | 1:1 | CHF 47.58 | ||||||||||||||||||||
xlvii | 837,477 | 2005 | 01.03.2008 | 28.02.2015 | 1:1 | CHF 52.32 | ||||||||||||||||||||
xlviii | 383,652 | 2005 | 01.03.2008 | 28.02.2015 | 1:1 | USD 44.81 | ||||||||||||||||||||
xlix | 2,223 | 2005 | 04.03.2007 | 04.03.2015 | 1:1 | CHF 47.89 | ||||||||||||||||||||
l | 161 | 2005 | 06.06.2007 | 06.06.2015 | 1:1 | CHF 45.97 | ||||||||||||||||||||
li | 149 | 2005 | 09.09.2007 | 09.09.2015 | 1:1 | CHF 50.47 | ||||||||||||||||||||
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Vested and unvested options held by independent members of the BoD and | ||||||||||||||||||||||||||
by members of the GEB on 31 December 2008/2009 (continued) | ||||||||||||||||||||||||||
Type | Number of options | Year of grant | Vesting date | Expiry date | Subscription ratio | Strike price | ||||||||||||||||||||
lii | 127 | 2005 | 05.12.2007 | 05.12.2015 | 1:1 | CHF 59.03 | ||||||||||||||||||||
liii | 69,276 | 2006 | 01.03.2007 | 28.02.2016 | 1:1 | CHF 65.97 | ||||||||||||||||||||
liv | 69,269 | 2006 | 01.03.2008 | 28.02.2016 | 1:1 | CHF 65.97 | ||||||||||||||||||||
lv | 69,261 | 2006 | 01.03.2009 | 28.02.2016 | 1:1 | CHF 65.97 | ||||||||||||||||||||
lvi | 1,376,036 | 2006 | 01.03.2009 | 28.02.2016 | 1:1 | CHF 72.57 | ||||||||||||||||||||
lvii | 110 | 2006 | 03.03.2008 | 03.03.2016 | 1:1 | CHF 65.91 | ||||||||||||||||||||
lviii | 242 | 2006 | 09.06.2008 | 09.06.2016 | 1:1 | CHF 61.84 | ||||||||||||||||||||
lix | 230 | 2006 | 08.09.2008 | 08.09.2016 | 1:1 | CHF 65.76 | ||||||||||||||||||||
lx | 221 | 2006 | 08.12.2008 | 08.12.2016 | 1:1 | CHF 67.63 | ||||||||||||||||||||
lxi | 33,748 | 2007 | 01.03.2008 | 28.02.2017 | 1:1 | CHF 67.00 | ||||||||||||||||||||
lxii | 33,747 | 2007 | 01.03.2009 | 28.02.2017 | 1:1 | CHF 67.00 | ||||||||||||||||||||
lxiii | 33,743 | 2007 | 01.03.2010 | 28.02.2017 | 1:1 | CHF 67.00 | ||||||||||||||||||||
lxiv | 1,415,142 | 2007 | 01.03.2010 | 28.02.2017 | 1:1 | CHF 73.67 | ||||||||||||||||||||
lxv | 223 | 2007 | 02.03.2009 | 02.03.2017 | 1:1 | CHF 67.08 | ||||||||||||||||||||
lxvi | 95,913 | 2008 | 01.03.2011 | 28.02.2018 | 1:1 | CHF 32.45 | ||||||||||||||||||||
lxvii | 662,415 | 2008 | 01.03.2011 | 28.02.2018 | 1:1 | CHF 35.66 | ||||||||||||||||||||
lxviii | 745,990 | 2008 | 01.03.2011 | 07.04.2018 | 1:1 | CHF 36.46 | ||||||||||||||||||||
lxix | 7,420 | 2008 | 01.03.2011 | 06.06.2018 | 1:1 | CHF 28.10 | ||||||||||||||||||||
lxx | 4,000,000 | 2009 | 26.02.2009 | 25.02.2014 | 1:1 | CHF 10.10 | ||||||||||||||||||||
lxxi | 905,000 | 2009 | 01.03.2012 | 27.12.2019 | 1:1 | CHF 40.00 | ||||||||||||||||||||
lxxii | 540,000 | 2009 | 01.03.2012 | 27.02.2019 | 1:1 | CHF 11.35 | ||||||||||||||||||||
Total of all blocked and unblocked shares held by independent members of the BoD1 | ||||||||||||||||||||||||||
Total | Of which unblocked | Of which blocked until | ||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | |||||||||||||||||||||||
Shares held on 31 December 2009 | 420,059 | 123,053 | 6,232 | 13,352 | 35,737 | 241,685 | ||||||||||||||||||||
2009 | 2102 | 2011 | 2012 | |||||||||||||||||||||||
Shares held on 31 December 2008 | 307,378 | 177,027 | 12,126 | 13,592 | 30,193 | 74,440 | ||||||||||||||||||||
1 Includes related parties. |
No individual BoD member holds 1% or more of all shares issued.
Total of all vested and unvested shares held by the non-independent members of the BoD | ||||||||||||||||||||||||||||||
and members of the GEB1 | ||||||||||||||||||||||||||||||
Total | Of which vested | Of which vesting | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||
Shares held on 31 December 2009 | 3,760,095 | 1,971,557 | 1,078,664 | 397,046 | 222,601 | 90,227 | 0 | |||||||||||||||||||||||
Total | Of which vested | Of which vesting | ||||||||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | ||||||||||||||||||||||||||
Shares held on 31 December 2008 | 5,562,574 | 2,955,211 | 1,058,881 | 595,638 | 461,376 | 319,776 | 171,692 | |||||||||||||||||||||||
1 Includes related parties. |
No individual BoD or GEB member holds 1% or more of all shares issued.
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Compensation and shareholdings
Group Executive Board
Replacement of forfeited awards for former employer compensation
Transactions in 2009
In accordance with applicable rules and regulations, management transactions in UBS shares by members of the BoD and the GEB are publicly disclosed. Transactions which require reporting are those involving all types of financial instruments whose price is primarily influenced by UBS shares.
applicable, while up to that date the EU requirements (paragraph 15a of the German Securities Trading Act) regarding the reporting of management transactions, were applicable.
Loans
The members of the BoD and GEB are granted loans, fixed advances and mortgages at arm’s length market terms.
è | Refer to “Note 32 Related parties” in the “Financial information” section of this report for information concerning loans granted to current and former executives |
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Total Reward Principles
Total Reward Principles
The Total Reward Principles summarize the compensation structure for all UBS employees. While they reflect recent regulatory developments, they also focus on long-standing drivers including reward for performance, sustainable profitability, strong management of risk and capital, understanding client focus and teamwork, and sound governance. They also build on the UBS strategy of enhancing reputation, integration and execution. These Principles have been reviewed by the Group Executive Board and by the Board of Directors’ Human Resources and Compensation Committee and were approved by the UBS Board of Directors on 28 September 2009. |
Overview
Reward is a key driver of behavior, motivation and culture, and can materially impact both reputation and financial results.
Within UBS our reward structure is aligned with our strategic priorities which bind the interests of employees with those of our shareholders. Employees are encouraged to identify and create sustainable value and profitability, and to build a strong client franchise both for their business and for UBS as a whole.
At UBS we reward behavior that helps to build and protect the firm’s reputation by focusing on sound risk and management practices. We believe in strong integration and excellence of execution, within an environment where all employees are able to achieve the highest standards of performance.
All UBS employees will be rewarded on the basis of their individual and team performance, and that of their business division, within the context of UBS as a whole and the markets in which we operate. UBS’s reward structure aims to:
Align reward with sustainable performance by encouraging a culture of integration and collaboration, a sense of engagement and long-term alignment with clients and shareholders, and quality execution of their orders.
Support appropriate and controlled risk taking consistent with UBS’s risk tolerance thereby protecting our capital, investors and reputation, and enhancing the quality of our financial results.
Foster effective individual performance management and communication by rigorously evaluating performance and ensuring the appropriate use of reward.
Attract and engage a diverse, talented workforce by providing attractive career opportunities underpinned by reward that is competitive in the market.
Align reward with sustainable performance
Within the context of UBS as a whole and the markets in which we operate, the sustainable performance of an employee’s business division is a key component of reward.
In considering UBS and business division performance, a range of factors will be taken into account including risk, capital usage, and market positioning. Assessment will focus on both current key performance indicators and the long-term actions that preserve and improve UBS’s ability to deliver future value.
Reward funding is not purely formulaic; discretion and judgment will be applied to ensure all relevant factors including market conditions are taken into account.
– | Business division reward recommendations are determined in consultation between the UBS Group CEO and the CEO(s) of each division as advised by the Group CFO, Group Head HR and, where appropriate, Group Risk. | |
– | Proposals recommended by the Group CEO are reviewed by the independent Human Resources and Compensation Committee of the Board of Directors. | |
– | Final approval is provided by the UBS Board of Directors. | |
– | The UBS Group CEO and Board of Directors take into account the Group and business division financial results as well as the views of shareholders and other stakeholders. |
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Total Rewards Principles
Support appropriate and controlled risk taking
Reward will be consistent with UBS’s risk framework and tolerance.
Performance reviews recognize the different risk profile and nature of each business including additional factors such as the quality and time horizon of earnings, the nature of the relevant industry segment, and competitive trends.
– | Employees are rewarded for achievement against a range of financial and non-financial objectives and not only on the basis of individual revenues. | |||
– | Extraordinary profits, as well as losses, are examined in the context of the track record of an employee’s performance, risk management and market conditions. | |||
– | Measurement of performance will be adjusted for activities and future risks that are not adequately reflected in annual profits. | |||
– | Reward for risk, compliance and control functions is determined independently from the revenue producers they supervise and support. |
Faster effective individual performance management and communication
Rigorous evaluation of individual performance combined with effective communication ensures a link between achievement of business objectives and reward across UBS.
Beyond contribution to business results and achievement of individual performance objectives, rewards will also take into account:
– | observing UBS’s corporate values and principles; | |||
– | implementing UBS’s strategy of enhancing reputation, integration and execution; | |||
– | demonstrating leadership of our clients, business, people and change; | |||
– | leading or supporting effective collaboration and teamwork; | |||
– | operating with strong integrity and complying with UBS policies; | |||
– | actively managing risk and professional behavior; and | |||
– | finding the appropriate balance between risk and reward. |
Attract and engage a diverse, talented workforce
The UBS reward structure is designed to provide talented employees with reward that is appropriately balanced between fixed and variable elements, competitive in the market, and paid out over an appropriate period.
In general, total compensation comprises an annual base salary, reflecting the individual’s role, skills and knowledge, local market-based benefits and, where applicable, a discretionary incentive award.
– | Base salary levels should be sufficient to allow a flexible discretionary incentive policy. | |||
– | Discretionary annual incentives can be highly variable from year to year particularly for senior revenue producers and more highly paid employees. |
Discretionary incentive awards may be split between immediate cash and long-term awards that can be granted in the form of either deferred UBS equity or deferred cash.
– | The proportion of deferred incentive generally increases with total compensation in order to maintain focus on long-term profitability of the firm and continued responsible behavior. | |||
– | Deferred awards generally vest over at least three years. | |||
– | Deferred awards are subject to forfeiture under certain circumstances, including if an employee’s conduct or judgment results in material financial loss or restatement of results, breach of risk or compliance policies, or significant harm to the firm’s business or reputation. |
Stock options and/or stock appreciation rights may be awarded as part of total reward, to recognize the potential of key employees who are expected to drive the achievement of our strategic objectives.
Other reward programs may also be considered to further support the needs of our diverse global business, subject to considerations such as cost, risk and prevailing market and regulatory requirements. As such:
– | For senior leaders, our reward focus is founded on sustainable long-term profitability that may require the application of multi-year performance conditions to recognize outstanding performance. | |||
– | Guaranteed incentive awards are used only exceptionally and are generally limited to one-year duration. |
This document provides a summary only and may be supplemented by more detailed global or local policies. At UBS we are committed to full and proper disclosure of our remuneration policies, of which these Principles form a part, and we provide an annual advisory vote to shareholders at our AGM.
UBS AG
P.O. Box
CH-8098 Zurich
www.ubs.com
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Financial information
Introduction and accounting principles
The financial information section of UBS’s Annual Report 2009 comprises: a) the critical accounting policies applied when preparing the consolidated financial statements of UBS Group, b) audited consolidated financial statements of UBS Group for 2009, 2008 and 2007, prepared according to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), c) audited financial statements of UBS AG, the Parent Bank, for 2009 and 2008, prepared in order to meet Swiss regulatory requirements and in compliance with Swiss Federal Banking Law, and d) additional disclosures required under SEC regulations.
The basis of accounting of UBS’s Group financial statements is described in Note 1 to the financial statements. Except where otherwise explicitly stated, all financial data are in Swiss francs (CHF), all financial information is presented on a consolidated basis under IFRS, and all references to “UBS” refer to the UBS Group and not to the Parent Bank. UBS AG, the Swiss Parent Bank, includes branches worldwide and owns all the UBS companies, directly or indirectly. All references to 2009, 2008 and 2007 refer to UBS Group and the Parent Bank’s fiscal years ended 31 December 2009, 2008 and 2007, respectively. The financial statements for UBS Group and the Parent Bank have been audited by Ernst & Young Ltd.
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Critical accounting policies
Basis of preparation and selection of policies
UBS prepares its Financial Statements in accordance with IFRS as issued by the International Accounting Standards Board. The application of certain of these accounting principles requires considerable judgment based upon estimates and assumptions that involve significant uncertainty at the time they are made. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in assumptions may have a significant impact on the Financial Statements in the periods where assumptions are changed. Accounting policies that are deemed critical to UBS’s results and financial position, in terms of materiality of the items to which the policy is applied, and which involve significant assumptions and estimates are discussed in this section. A broader and more detailed description of the accounting policies UBS employs is shown in Note 1 to the Financial Statements.
Fair value of financial instruments
The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. In these cases, the fair values are estimated from observable data in respect of similar financial instruments or using models. Where market observable inputs are not available, inputs are estimated based on appropriate assumptions. Where valuation techniques or models are used to determine fair values, they are periodically reviewed and validated by qualified person-
nel independent of those that sourced them. Models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data; however, areas such as default rates, volatilities and correlations require management to make estimates.
Goodwill impairment test
The situation in the financial markets made it necessary during 2009 to monitor closely whether there was indication
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Financial information
that goodwill allocated to its cash-generating units was impaired. At 31 December 2009, equity attributable to UBS shareholders stood at CHF 41 billion. UBS’s market capitalization, excluding the shares to be issued upon conversion of the MCNs, amounted to CHF 57 billion at 31 December 2009. On the basis of the impairment testing methodology described in Note 16 and Note 1a) 20), UBS concluded that the year-end 2009 balances of goodwill allocated to all its segments remain recoverable. Goodwill allocated to the Investment Bank at 31 December 2009 amounted to CHF 3.3 billion (CHF 4.3 billion at 31 December 2008), to Wealth Management Americas CHF 3.7 billion (CHF 3.8 billion at 31 December 2008), to Wealth Management & Swiss Bank CHF 1.5 billion (CHF 1.5 billion at 31 December 2008) and to Global Asset Management CHF 1.6 billion (CHF 2.0 billion at 31 December 2008).
Management believes that reasonable changes in key assumptions used to determine the recoverable amounts of all segments will not result in an impairment situation.
Impairment of loans and receivables measured at amortized cost
Loan impairment allowances represent management’s best estimate of losses incurred in the lending portfolio at the balance sheet date. The lending portfolio, which is measured at amortized cost less impairment, is comprised of financial assets presented on the balance sheet line itemsDue from banks and Loans,including reclassified securities. In addition, irrevocable loan commitments are also tested for impairment as described below.
Reclassification of financial assets
The International Accounting Standards Board published an amendment to International Accounting Standard 39 (IAS 39Financial Instruments: Recognition and Measurement)on 13
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October 2008, under which eligible financial assets, subject to certain conditions being met, may be reclassified out of the“Held for trading”category if the firm has the intent and ability to hold them for the foreseeable future or until maturity.
Consolidation of Special Purpose Entities
UBS sponsors the formation of Special Purpose Entities (SPEs) primarily to allow clients to hold investments in separate legal entities, to allow clients to jointly invest in alternative assets, for asset securitization transactions and for buying or selling credit protection. In accordance with IFRS, UBS does not consolidate SPEs that it does not control. In order to determine whether UBS controls an SPE or not, UBS has to make judgments about risks and rewards and assess the ability to make operational decisions for the SPE in question. In many instances, elements are present that, considered in isolation, indicate control or lack of control over an SPE, but when considered together make it difficult to reach a clear conclusion. When assessing whether UBS has to consolidate an SPE it evaluates a range of factors, including whether (a) the activities of the SPE are being conducted on UBS’s behalf according to its specific business needs so that UBS obtains the benefits from the SPE’s operations, or (b) UBS has decision-making powers to obtain the majority of the benefits of the activities of the SPE, or UBS has delegated these decision-making powers by setting up an autopilot mechanism, or (c) UBS has the rights to obtain the majority of the benefits of the activities of an SPE and therefore may be exposed to risks arising from the activities of the SPE, or (d) UBS retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain the benefits from its activities. UBS consolidates an SPE if its assessment of the relevant factors indicates that UBS controls the SPE.
others allow a broad number of investors to invest in a diversified asset base through a single share or certificate. These latter SPEs range from mutual funds to trusts investing in real estate. The majority of UBS’s SPEs are created for client investment purposes and are not consolidated. However, UBS consolidates investment funds in certain cases where it provides financial support to a fund. In these instances UBS generally assumes the majority or a significant portion of the risks of the fund, which, combined with UBS’s role as investment manager, makes it the party that can exercise control over the entity.
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Financial information
Equity compensation
UBS recognizes options and share-settled stock appreciation rights (SARs) awarded to employees as compensation expense based on their fair value at grant date. The options and SARs UBS issues to its employees have features that make them incomparable to options and SARs on UBS’s shares traded in active markets. Accordingly, UBS cannot determine fair value by reference to a quoted market price, but UBS rather estimates it using an option valuation model. The model, a Monte Carlo simulation, requires inputs such as interest rates, expected dividends, volatility measures and specific employee exercise behavior patterns based on statistical data.
Deferred taxes
Deferred tax assets arise from a variety of sources, the most significant being: a) tax losses that can be carried forward to be utilized against profits in future years; and b) expenses recognized in UBS’s income statement but disallowed in the tax return until the associated cash flow occurs.
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Financial information
Consolidated financial statements
Consolidated financial statements
Management’s report on internal control over financial reporting
The Board of Directors and management of UBS AG (UBS) are responsible for establishing and maintaining adequate internal control over financial reporting. UBS’s internal control over financial reporting is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
– | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; | |
– | Provide reasonable assurance that transactions are recorded as necessary to permit preparation and fair presentation of financial statements, and that receipts and expenditures of the company are being made only in accordance with authorizations of UBS management; and | |
– | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
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Consolidated financial statements
Income statement | ||||||||||||||||||||
For the year ended | % change from | |||||||||||||||||||
CHF million, except per share data | Note | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||||
Continuing operations | ||||||||||||||||||||
Interest income | 3 | 23,461 | 65,679 | 109,112 | (64 | ) | ||||||||||||||
Interest expense | 3 | (17,016 | ) | (59,687 | ) | (103,775 | ) | (71 | ) | |||||||||||
Net interest income | 3 | 6,446 | 5,992 | 5,337 | 8 | |||||||||||||||
Credit loss (expense)/recovery | (1,832 | ) | (2,996 | ) | (238 | ) | (39 | ) | ||||||||||||
Net interest income after credit loss expense | 4,614 | 2,996 | 5,099 | 54 | ||||||||||||||||
Net fee and commission income | 4 | 17,712 | 22,929 | 30,634 | (23 | ) | ||||||||||||||
Net trading income | 3 | (324 | ) | (25,820 | ) | (8,353 | ) | 99 | ||||||||||||
Other income | 5 | 599 | 692 | 4,341 | (13 | ) | ||||||||||||||
Total operating income | 22,601 | 796 | 31,721 | |||||||||||||||||
Personnel expenses | 6 | 16,543 | 16,262 | 25,515 | 2 | |||||||||||||||
General and administrative expenses | 7 | 6,248 | 10,498 | 8,429 | (40 | ) | ||||||||||||||
Depreciation of property and equipment | 15 | 1,048 | 1,241 | 1,243 | (16 | ) | ||||||||||||||
Impairment of goodwill | 16, 38 | 1,123 | 341 | 0 | 229 | |||||||||||||||
Amortization of intangible assets | 200 | 213 | 276 | (6 | ) | |||||||||||||||
Total operating expenses | 25,162 | 28,555 | 35,463 | (12 | ) | |||||||||||||||
Operating profit from continuing operations before tax | (2,561 | ) | (27,758 | ) | (3,742 | ) | 91 | |||||||||||||
Tax expense | 22 | (443 | ) | (6,837 | ) | 1,369 | 94 | |||||||||||||
Net profit from continuing operations | (2,118 | ) | (20,922 | ) | (5,111 | ) | 90 | |||||||||||||
Discontinued operations | ||||||||||||||||||||
Profit from discontinued operations before tax | 37 | (7 | ) | 198 | 145 | |||||||||||||||
Tax expense | 22 | 0 | 1 | (258 | ) | (100 | ) | |||||||||||||
Net profit from discontinued operations | (7 | ) | 198 | 403 | ||||||||||||||||
Net profit | (2,125 | ) | (20,724 | ) | (4,708 | ) | 90 | |||||||||||||
Net profit attributable to minority interests | 610 | 568 | 539 | 7 | ||||||||||||||||
from continuing operations | 600 | 520 | 539 | 15 | ||||||||||||||||
from discontinued operations | 10 | 48 | 0 | (79 | ) | |||||||||||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (21,292 | ) | (5,247 | ) | 87 | |||||||||||||
from continuing operations | (2,719 | ) | (21,442 | ) | (5,650 | ) | 87 | |||||||||||||
from discontinued operations | (17 | ) | 150 | 403 | ||||||||||||||||
Earnings per share (CHF) | ||||||||||||||||||||
Basic earnings per share | 8 | (0.75 | ) | (7.63 | ) | (2.40 | ) | 90 | ||||||||||||
from continuing operations | (0.74 | ) | (7.68 | ) | (2.59 | ) | 90 | |||||||||||||
from discontinued operations | 0.00 | 0.05 | 0.18 | (100 | ) | |||||||||||||||
Diluted earnings per share | 8 | (0.75 | ) | (7.63 | ) | (2.41 | ) | 90 | ||||||||||||
from continuing operations | (0.74 | ) | (7.69 | ) | (2.59 | ) | 90 | |||||||||||||
from discontinued operations | 0.00 | 0.05 | 0.18 | (100 | ) | |||||||||||||||
255
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Financial information
Consolidated financial statements
Statement of comprehensive income | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Net profit | (2,125 | ) | (20,724 | ) | (4,708 | ) | ||||||
Other comprehensive income | ||||||||||||
Foreign currency translation | ||||||||||||
Foreign currency translation movements, before tax | (35 | ) | (4,509 | ) | (1,405 | ) | ||||||
Foreign exchange amounts reclassified to the income statement from equity | (259 | ) | 202 | 108 | ||||||||
Income tax relating to foreign currency translation movements | 22 | (17 | ) | 39 | ||||||||
Subtotal foreign currency translation movements, net of tax | (272 | ) | (4,324 | ) | (1,258 | ) | ||||||
Financial investments available-for-sale | ||||||||||||
Net unrealized gains/(losses) on financial investments available-for-sale, before tax | 157 | (903 | ) | 1,578 | ||||||||
Impairment charges reclassified to the income statement from equity | 70 | 47 | 14 | |||||||||
Realized gains reclassified to the income statement from equity | (147 | ) | (645 | ) | (3,423 | ) | ||||||
Realized losses reclassified to the income statement from equity | 1 | 6 | 7 | |||||||||
Income tax relating to net unrealized gains/(losses) on financial investments available-for-sale | (54 | ) | 341 | 421 | ||||||||
Subtotal net unrealized gains/(losses) on financial investments available-for-sale, net of tax | 27 | (1,154 | ) | (1,403 | ) | |||||||
Cash flow hedges | ||||||||||||
Effective portion of changes in fair value of derivative instruments designated as cash flow hedges, before tax | 78 | 2,001 | 369 | |||||||||
Net unrealized (gains)/losses reclassified to the income statement from equity | (756 | ) | 178 | 172 | ||||||||
Income tax effects relating to cash flow hedges | 257 | (520 | ) | (130 | ) | |||||||
Subtotal changes in fair value of derivative instruments designated as cash flow hedges | (421 | ) | 1,659 | 411 | ||||||||
Total other comprehensive income | (667 | ) | (3,818 | ) | (2,250 | ) | ||||||
Total comprehensive income | (2,792 | ) | (24,542 | ) | (6,958 | ) | ||||||
Total comprehensive income attributable to minority interests | 484 | (77 | ) | 269 | ||||||||
Total comprehensive income attributable to UBS shareholders | (3,276 | ) | (24,465 | ) | (7,227 | ) | ||||||
256
Table of Contents
Balance sheet | ||||||||||||||||
% change from | ||||||||||||||||
CHF million | Note | 31.12.09 | 31.12.08 | 31.12.08 | ||||||||||||
Assets | ||||||||||||||||
Cash and balances with central banks | 20,899 | 32,744 | (36 | ) | ||||||||||||
Due from banks | 9 | 46,574 | 64,451 | (28 | ) | |||||||||||
Cash collateral on securities borrowed | 10 | 63,507 | 122,897 | (48 | ) | |||||||||||
Reverse repurchase agreements | �� | 10 | 116,689 | 224,648 | (48 | ) | ||||||||||
Trading portfolio assets | 11 | 188,037 | 271,838 | (31 | ) | |||||||||||
Trading portfolio assets pledged as collateral | 11 | 44,221 | 40,216 | 10 | ||||||||||||
Positive replacement values | 23 | 421,694 | 854,100 | (51 | ) | |||||||||||
Financial assets designated at fair value | 12 | 10,223 | 12,882 | (21 | ) | |||||||||||
Loans | 9 | 306,828 | 340,308 | (10 | ) | |||||||||||
Financial investments available-for-sale | 13 | 81,757 | 5,248 | |||||||||||||
Accrued income and prepaid expenses | 5,816 | 6,141 | (5 | ) | ||||||||||||
Investments in associates | 14 | 870 | 892 | (2 | ) | |||||||||||
Property and equipment | 15 | 6,212 | 6,706 | (7 | ) | |||||||||||
Goodwill and intangible assets | 16 | 11,008 | 12,935 | (15 | ) | |||||||||||
Deferred tax assets | 22 | 8,868 | 8,880 | 0 | ||||||||||||
Other assets | 17 | 7,336 | 9,931 | (26 | ) | |||||||||||
Total assets | 1,340,538 | 2,014,815 | (33 | ) | ||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 18 | 65,166 | 125,628 | (48 | ) | |||||||||||
Cash collateral on securities lent | 10 | 7,995 | 14,063 | (43 | ) | |||||||||||
Repurchase agreements | 10 | 64,175 | 102,561 | (37 | ) | |||||||||||
Trading portfolio liabilities | 11 | 47,469 | 62,431 | (24 | ) | |||||||||||
Negative replacement values | 23 | 409,943 | 851,864 | (52 | ) | |||||||||||
Financial liabilities designated at fair value | 19 | 112,653 | 101,546 | 11 | ||||||||||||
Due to customers | 18 | 410,475 | 465,741 | (12 | ) | |||||||||||
Accrued expenses and deferred income | 8,689 | 10,196 | (15 | ) | ||||||||||||
Debt issued | 19 | 131,352 | 197,254 | (33 | ) | |||||||||||
Other liabilities | 20, 21, 22 | 33,986 | 42,998 | (21 | ) | |||||||||||
Total liabilities | 1,291,905 | 1,974,282 | (35 | ) | ||||||||||||
Equity | ||||||||||||||||
Share capital | 356 | 293 | 22 | |||||||||||||
Share premium | 34,786 | 25,250 | 38 | |||||||||||||
Net income recognized directly in equity, net of tax | (4,875 | ) | (4,335 | ) | (12 | ) | ||||||||||
Revaluation reserve from step acquisitions, net of tax | 38 | 38 | 0 | |||||||||||||
Retained earnings | 11,751 | 14,487 | (19 | ) | ||||||||||||
Equity classified as obligation to purchase own shares | (2 | ) | (46 | ) | 96 | |||||||||||
Treasury shares | (1,040 | ) | (3,156 | ) | 67 | |||||||||||
Equity attributable to UBS shareholders | 41,013 | 32,531 | 26 | |||||||||||||
Equity attributable to minority interests | 7,620 | 8,002 | (5 | ) | ||||||||||||
Total equity | 48,633 | 40,533 | 20 | |||||||||||||
Total liabilities and equity | 1,340,538 | 2,014,815 | (33 | ) | ||||||||||||
257
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Financial information
Consolidated financial statements
Statement of changes in equity | ||||||||||||||||
Equity classified | ||||||||||||||||
as obligation | ||||||||||||||||
Share | Share | Treasury | to purchase | |||||||||||||
CHF million | capital | premium | shares | own shares | ||||||||||||
Balance at 1 January 2007 | 211 | 12,640 | (10,214 | ) | (185 | ) | ||||||||||
Issuance of share capital | ||||||||||||||||
Acquisition of treasury shares | (7,169 | ) | ||||||||||||||
Disposition of treasury shares | 4,605 | |||||||||||||||
Cancellation of second trading line treasury shares | (4 | ) | 2,415 | |||||||||||||
Net premium/(discount) on treasury share and own equity derivative activity | (560 | ) | ||||||||||||||
Premium on shares issued and warrants exercised | 12 | |||||||||||||||
Employee share and share option plans | 898 | |||||||||||||||
Tax benefits from deferred compensation awards | (557 | ) | ||||||||||||||
Dividends | ||||||||||||||||
Equity classified as obligation to purchase own shares – movements | 111 | |||||||||||||||
Preferred securities | ||||||||||||||||
New consolidations and other increases | ||||||||||||||||
Deconsolidations and other decreases | ||||||||||||||||
Total comprehensive income for the year recognized in equity | ||||||||||||||||
Balance at 31 December 2007 | 207 | 12,433 | (10,363 | ) | (74 | ) | ||||||||||
Issuance of share capital | 86 | |||||||||||||||
Acquisition of treasury shares | (367 | ) | ||||||||||||||
Disposition of treasury shares | 7,574 | |||||||||||||||
Net premium/(discount) on treasury share and own equity derivative activity | (4,626 | ) | ||||||||||||||
Premium on shares issued and warrants exercised | 20,003 | |||||||||||||||
Employee share and share option plans | (1,961 | ) | ||||||||||||||
Tax benefits from deferred compensation awards | (176 | ) | ||||||||||||||
Transaction costs related to share issuances, net of tax | (423 | ) | ||||||||||||||
Dividends | ||||||||||||||||
Equity classified as obligation to purchase own shares – movements | 28 | |||||||||||||||
Preferred securities | ||||||||||||||||
New consolidations and other increases | ||||||||||||||||
Deconsolidations and other decreases | ||||||||||||||||
Total comprehensive income for the year recognized in equity | ||||||||||||||||
Balance at 31 December 2008 | 293 | 25,250 | (3,156 | ) | (46 | ) | ||||||||||
Issuance of share capital | 63 | |||||||||||||||
Acquisition of treasury shares | (476 | ) | ||||||||||||||
Disposition of treasury shares | 2,592 | |||||||||||||||
Net premium/(discount) on treasury share and own equity derivative activity | (1,268 | ) | ||||||||||||||
Premium on shares issued and warrants exercised | 10,599 | |||||||||||||||
Employee share and share option plans | 291 | |||||||||||||||
Tax benefits from deferred compensation awards | 1 | |||||||||||||||
Transaction costs related to share issuances, net of tax | (87 | ) | ||||||||||||||
Dividends1 | ||||||||||||||||
Equity classified as obligation to purchase own shares – movements | 44 | |||||||||||||||
Preferred securities | ||||||||||||||||
New consolidations and other increases | ||||||||||||||||
Deconsolidations and other decreases | ||||||||||||||||
Total comprehensive income for the year recognized in equity | ||||||||||||||||
Balance at 31 December 2009 | 356 | 34,786 | (1,040 | ) | (2 | ) | ||||||||||
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Financial | Revaluation | Total equity | ||||||||||||||||||||||||||||||
investments | reserve | attributable | ||||||||||||||||||||||||||||||
Retained | Foreign currency | available- | Cash flow | from step | to UBS | Minority | ||||||||||||||||||||||||||
earnings | translation | for-sale | hedges | acquisitions | shareholders | interests | Total equity | |||||||||||||||||||||||||
47,728 | (1,614 | ) | 2,876 | (443 | ) | 38 | 51,037 | 6,089 | 57,126 | |||||||||||||||||||||||
0 | 0 | |||||||||||||||||||||||||||||||
(7,169 | ) | (7,169 | ) | |||||||||||||||||||||||||||||
4,605 | 4,605 | |||||||||||||||||||||||||||||||
(2,411 | ) | 0 | 0 | |||||||||||||||||||||||||||||
(560 | ) | (560 | ) | |||||||||||||||||||||||||||||
12 | 12 | |||||||||||||||||||||||||||||||
898 | 898 | |||||||||||||||||||||||||||||||
(557 | ) | (557 | ) | |||||||||||||||||||||||||||||
(4,275 | ) | (4,275 | ) | (400 | ) | (4,675 | ) | |||||||||||||||||||||||||
111 | 111 | |||||||||||||||||||||||||||||||
0 | 996 | 996 | ||||||||||||||||||||||||||||||
0 | 101 | 101 | ||||||||||||||||||||||||||||||
0 | (104 | ) | (104 | ) | ||||||||||||||||||||||||||||
(5,247 | ) | (986 | ) | (1,405 | ) | 411 | (7,227 | ) | 269 | (6,958 | ) | |||||||||||||||||||||
35,795 | (2,600 | ) | 1,471 | (32 | ) | 38 | 36,875 | 6,951 | 43,826 | |||||||||||||||||||||||
86 | 86 | |||||||||||||||||||||||||||||||
(367 | ) | (367 | ) | |||||||||||||||||||||||||||||
7,574 | 7,574 | |||||||||||||||||||||||||||||||
(4,626 | ) | (4,626 | ) | |||||||||||||||||||||||||||||
20,003 | 20,003 | |||||||||||||||||||||||||||||||
(1,961 | ) | (1,961 | ) | |||||||||||||||||||||||||||||
(176 | ) | (176 | ) | |||||||||||||||||||||||||||||
(423 | ) | (423 | ) | |||||||||||||||||||||||||||||
(16 | ) | (16 | ) | (361 | ) | (377 | ) | |||||||||||||||||||||||||
28 | 28 | |||||||||||||||||||||||||||||||
0 | 1,618 | 1,618 | ||||||||||||||||||||||||||||||
0 | 12 | 12 | ||||||||||||||||||||||||||||||
0 | (141 | ) | (141 | ) | ||||||||||||||||||||||||||||
(21,292 | ) | (3,709 | ) | (1,124 | ) | 1,659 | (24,465 | ) | (77 | ) | (24,542 | ) | ||||||||||||||||||||
14,487 | (6,309 | ) | 347 | 1,627 | 38 | 32,531 | 8,002 | 40,533 | ||||||||||||||||||||||||
63 | 63 | |||||||||||||||||||||||||||||||
(476 | ) | (476 | ) | |||||||||||||||||||||||||||||
2,592 | 2,592 | |||||||||||||||||||||||||||||||
(1,268 | ) | (1,268 | ) | |||||||||||||||||||||||||||||
10,599 | 10,599 | |||||||||||||||||||||||||||||||
291 | 291 | |||||||||||||||||||||||||||||||
1 | 1 | |||||||||||||||||||||||||||||||
(87 | ) | (87 | ) | |||||||||||||||||||||||||||||
0 | (849 | ) | (849 | ) | ||||||||||||||||||||||||||||
44 | 44 | |||||||||||||||||||||||||||||||
0 | (7 | ) | (7 | ) | ||||||||||||||||||||||||||||
0 | 3 | 3 | ||||||||||||||||||||||||||||||
0 | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||
(2,736 | ) | (136 | ) | 17 | (421 | ) | (3,276 | ) | 484 | (2,792 | ) | |||||||||||||||||||||
11,751 | (6,445 | ) | 364 | 1,206 | 38 | 41,013 | 7,620 | 48,633 | ||||||||||||||||||||||||
259
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Financial information
Consolidated financial statements
Statement of changes in equity (continued) | ||||||||||||
Preferred securities1 | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Balance at the beginning of the year | 7,381 | 6,381 | 5,633 | |||||||||
Issuances | 1,618 | 996 | ||||||||||
Redemptions | (7 | ) | ||||||||||
Foreign currency translation | (120 | ) | (618 | ) | (248 | ) | ||||||
Balance at the end of the year | 7,254 | 7,381 | 6,381 | |||||||||
For the year ended | % change from | |||||||||||||||
Number of shares | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||
Shares issued | ||||||||||||||||
Balance at the beginning of the year | 2,932,580,549 | 2,073,547,344 | 2,105,273,286 | 41 | ||||||||||||
Issuance of share capital | 625,532,204 | 859,033,205 | 1,294,058 | (27 | ) | |||||||||||
Cancellation of second trading line treasury shares | (33,020,000 | ) | ||||||||||||||
Balance at the end of the year | 3,558,112,753 | 2,932,580,549 | 2,073,547,344 | 21 | ||||||||||||
Treasury shares | ||||||||||||||||
Balance at the beginning of the year | 61,903,121 | 158,105,524 | 164,475,699 | (61 | ) | |||||||||||
Acquisitions | 33,566,097 | 13,398,118 | 102,074,942 | 151 | ||||||||||||
Disposals | (57,915,346 | ) | (109,600,521 | ) | (75,425,117 | ) | 47 | |||||||||
Cancellation of second trading line treasury shares | (33,020,000 | ) | ||||||||||||||
Balance at the end of the year | 37,553,872 | 61,903,121 | 158,105,524 | (39 | ) | |||||||||||
Shares issued
On 25 June 2009, UBS increased its share capital by issuing 293,258,050 new registered shares. The shares were placed with a small number of large institutional investors. The shares were issued out of authorized capital which had been approved at the Annual General Meeting of shareholders (AGM) on 15 April 2009.
Conditional share capital
On 31 December 2009, a maximum of 29,350 shares could have been issued against the future exercise of options from former PaineWebber employee option plans and 149,994,296 shares could have been issued to fund UBS’s employee share option programs. In addition, conditional capital of up to 277,750,000 shares was available for the UBS share delivery obligation due to the issuance of the March 2008 mandatory convertible notes (MCNs) and conditional capital of up to 100,000,000 shares is available in connection with the transaction with the Swiss National Bank (SNB). These shares are shown as conditional share capital in the UBS AG (Parent Bank) disclosure.
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Statement of cash flows | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Cash flow from/(used in) operating activities | ||||||||||||
Net profit | (2,125 | ) | (20,724 | ) | (4,708 | ) | ||||||
Adjustments to reconcile net profit to cash flow from/(used in) operating activities | ||||||||||||
Non-cash items included in net profit and other adjustments: | ||||||||||||
Depredation of property and equipment | 1,048 | 1,241 | 1,253 | |||||||||
Impairment of goodwill/amortization of intangible assets | 1,323 | 554 | 282 | |||||||||
Credit loss expense/(recovery) | 1,832 | 2,996 | 238 | |||||||||
Share of net profits of associates | (37 | ) | 6 | (120 | ) | |||||||
Deferred tax expense/(benefit) | (960 | ) | (7,020 | ) | (371 | ) | ||||||
Net loss/(gain) from investing activities | 425 | (797 | ) | (4,085 | ) | |||||||
Net loss/(gain) from financing activities | 8,355 | (47,906 | ) | 3,779 | ||||||||
Net (increase)/decrease in operating assets: | ||||||||||||
Net due from/to banks | (57,328 | ) | (16,561 | ) | (60,762 | ) | ||||||
Reverse repurchase agreements and cash collateral on securities borrowed | 162,822 | 236,497 | 173,433 | |||||||||
Trading portfolio, net replacement values and financial assets designated at fair value | 11,118 | 350,099 | 60,729 | |||||||||
Loans/due to customers | (23,705 | ) | (183,476 | ) | 36,168 | |||||||
Accrued income, prepaid expenses and other assets | 2,214 | 7,512 | (2,408 | ) | ||||||||
Net increase/(decrease) in operating liabilities: | ||||||||||||
Repurchase agreements, cash collateral on securities lent | (41,351 | ) | (220,935 | ) | (271,060 | ) | ||||||
Accrued expenses, deferred income and other liabilities | (8,629 | ) | (23,592 | ) | 19,217 | |||||||
Income taxes paid | (505 | ) | (887 | ) | (3,663 | ) | ||||||
Net cash flow from/fused in) operating activities | 54,497 | 77,007 | (52,078 | ) | ||||||||
Cash flow from/(used in) investing activities | ||||||||||||
Purchase of subsidiaries and associates | (42 | ) | (1,502 | ) | (2,337 | ) | ||||||
Disposal of subsidiaries and associates | 296 | 1,686 | 885 | |||||||||
Purchase of property and equipment | (854 | ) | (1,217 | ) | (1,910 | ) | ||||||
Disposal of property and equipment | 163 | 69 | 134 | |||||||||
Net (investment in)/divestment of financial investments available-for-sale | (20,127 | ) | (712 | ) | 5,981 | |||||||
Net cash flow from/(used in) investing activities | (20,563 | ) | (1,676 | ) | 2,753 | |||||||
Cash flow from/(used in) financing activities | ||||||||||||
Net money market papers issued/(repaid) | (60,040 | ) | (40,637 | ) | 32,672 | |||||||
Net movements in treasury shares and own equity derivative activity | 673 | 623 | (2,771 | ) | ||||||||
Capital issuance | 3,726 | 23,135 | 0 | |||||||||
Dividends paid | 0 | 0 | (4,275 | ) | ||||||||
Issuance of long-term debt, including financial liabilities designated at fair value | 67,062 | 103,087 | 110,874 | |||||||||
Repayment of long-term debt, including financial liabilities designated at fair value | (65,024 | ) | (92,894 | ) | (62,407 | ) | ||||||
Increase in minority interests1 | 3 | 1,661 | 1,094 | |||||||||
Dividends paid to/decrease in minority interests | (583 | ) | (532 | ) | (619 | ) | ||||||
Net cash flow from/(used in) financing activities | (54,183 | ) | (5,557 | ) | 74,568 | |||||||
Effects of exchange rate differences | 5,529 | (39,186 | ) | (12,228 | ) | |||||||
Net increase/(decrease) in cash and cash equivalents | (14,721 | ) | 30,588 | 13,015 | ||||||||
Cash and cash equivalents at the beginning of the year | 179,693 | 149,105 | 136,090 | |||||||||
Cash and cash equivalents at the end of the year | 164,973 | 179,693 | 149,105 | |||||||||
Cash and cash equivalents comprise: | ||||||||||||
Cash and balances with central banks | 20,899 | 32,744 | 18,793 | |||||||||
Money market papers2 | 98,432 | 86,732 | 77,215 | |||||||||
Due from banks with original maturity of less than three months | 45,642 | 60,217 | 53,097 | |||||||||
Total | 164,973 | 179,693 | 149,105 | |||||||||
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Financial information
Consolidated financial statements
Statement of cash flows (continued) | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Additional information | ||||||||||||
Cash received as interest | 23,844 | 68,232 | 103,828 | |||||||||
Cash paid as interest | 19,597 | 62,284 | 97,489 | |||||||||
Cash received as dividends on equities (incl. associates) | 1,090 | 2,779 | 5,313 | |||||||||
Significant non-cash investing and financing activities | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Deconsolidation of UBS Pactual | ||||||||||||
Financial investments available -for-sale | 14 | |||||||||||
Property and equipment | 31 | |||||||||||
Goodwill and intangible assets | 731 | |||||||||||
Debt issued | 1,393 | |||||||||||
Deconsolidation of private equity investments | ||||||||||||
Property and equipment | 33 | 24 | ||||||||||
Goodwill and intangible assets | 22 | |||||||||||
Acquisition of Caisse Centrale de Réescompte Group (CCR) | ||||||||||||
Property and equipment | 5 | |||||||||||
Goodwill and intangible assets | 405 | |||||||||||
Debt issued | 114 | |||||||||||
Acquisition of VermogensGroep | ||||||||||||
Property and equipment | 2 | |||||||||||
Goodwill and intangible assets | 173 | |||||||||||
Acquisition of McDonald Investments branch network | ||||||||||||
Property and equipment | 3 | |||||||||||
Goodwill and intangible assets | 262 | |||||||||||
Acquisition of Daehan Investment Trust Management Company | ||||||||||||
Property and equipment | 2 | |||||||||||
Goodwill and intangible assets | 224 | |||||||||||
Minority interests | 60 | |||||||||||
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Financial information
Notes to the consolidated financial statements
Notes to the consolidated financial statements
Note 1 Summary of significant accounting policies
a) Significant accounting policies
The principal accounting policies applied in preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
1) Basis of accounting
UBS AG and subsidiaries (“UBS” or the “Group”) provide a broad range of financial services including advisory services, underwriting, financing, market making, asset management and brokerage on a global level, and retail banking in Switzerland. The Group was formed on 29 June 1998 when Swiss Bank Corporation and Union Bank of Switzerland merged. The merger was accounted for using the uniting of interests method of accounting.
2) Use of estimates in the preparation of Financial Statements
In preparing the Financial Statements in conformity with IFRS, management is required to make estimates and assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of available information and application of judgment are inherent in the formation of estimates. Actual results in the future could differ from such estimates, and the differences may be material to the Financial Statements.
3) Subsidiaries
The Financial Statements comprise those of the parent company (UBS AG) and its subsidiaries, including special purpose entities (SPEs), presented as a single economic entity. UBS controls an entity if it has the power to govern the financial and
operating policies generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries, including special purpose entities, that are directly or indirectly controlled by the Group are consolidated from the date on which control is transferred to the Group. Subsidiaries to be divested are consolidated up to the date of disposal (i.e. loss of control).
– | the activities of the SPE are being conducted on behalf of UBS according to its specific business needs so that UBS obtains benefits from the SPE’s operations; |
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Notes to the consolidated financial statements
– | UBS has the decision-making powers to obtain the majority of the benefits of the activities of the SPE or, by setting up an “autopilot” mechanism, UBS has delegated these decision making powers; | |
– | UBS has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks incident to the activities of the SPE; or | |
– | UBS retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain benefits from its activities. |
4) Associates and jointly controlled entities
Investments in associates in which UBS has a significant influence are accounted for under the equity method of accounting. Significant influence is normally evidenced when UBS owns between 20% to 50% of a company’s voting rights. Investments in associates are initially recorded at cost, and the carrying amount is increased or decreased to recognize the Group’s share of the investee’s net profit or loss (including net profit or loss recognized directly in equity) after the date of acquisition.
Investments in associates and interests in jointly controlled entities are classified as “held for sale” if their carrying amount will be recovered principally through a sale transaction rather than through continuing use – see parts 19) and 28).
5) Recognition and derecognition of financial instruments
UBS recognizes financial instruments on its balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
UBS enters into transactions where it transfers financial assets recognized on its balance sheet but retains either all risks and rewards of the transferred financial assets or a portion of them. If all or substantially all risks and rewards are retained, the transferred financial assets are not derecognized from the balance sheet. Transfers of financial assets with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions described in this Note under parts 13) and 14). They further include transactions where financial assets are sold to a third party with a concurrent total rate of return swap on the transferred assets to retain all their risks and rewards. These types of transactions are accounted for as secured financing transactions.
Financial liabilities
UBS removes a financial liability from its balance sheet when it is extinguished, i.e. when the obligation specified in the contract is discharged or cancelled or expires. Where an existing financial liability is exchanged for a new one from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and recognition of a new liability. The difference in the respective carrying amounts is recognized in profit or loss.
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tions. These assets and income arising therefrom are excluded from UBS’s financial statements, as they are not assets of UBS, provided the recognition criteria are not satisfied.
6) Determination of fair value
The fair value principles applied when determining fair value are considered significant accounting policies. Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. Details of the determination of fair value of financial instruments, fair value hierarchy, valuation techniques and inputs by products, day 1 profit or loss and other related fair value disclosures are disclosed in Note 27.
7) Trading portfolio assets and liabilities
Trading portfolio assets consist of debt instruments (including those in the form of securities, money market paper, traded corporate and bank loans), equity instruments (including those in the form of securities), assets held under unit-linked contracts and precious metals and other commodities owned by the Group (“long” positions). Trading portfolio liabilities consist of obligations to deliver financial instruments such as debt and equity instruments which the Group has sold to third parties but does not own (“short” positions). The trading portfolio includes non-derivative financial instruments (including those with embedded derivatives) and commodities. Financial instruments which are considered derivatives in their entirety are generally presented on the balance sheet asPositive and Negative replacement values,refer to part 15). UBS’s trading portfolio assets and liabilities (refer to Note 11) include proprietary positions, hedge positions and client business-related positions (provided the recognition criteria mentioned in part 5) are satisfied).
transaction is consummated (settlement date), a resulting financial asset is recognized on the balance sheet at the fair value of the consideration given or received plus or minus the change in fair value of the contract since the trade date. When the Group becomes party to a sales contract of a financial asset classified in its trading portfolio, unrealized profits and losses are no longer recognized from the date the sales transaction is entered into (trade date) and it derecognizes the asset on the day of its transfer (settlement date).
8) Financial assets and Financial liabilities designated at fair value through profit or loss (“Fair Value Option”)
A financial instrument may only be designated at fair value through profit or loss at inception and this designation cannot subsequently be changed. Financial assets (refer to Note 12) and financial liabilities (refer to Note 19) designated at fair value are presented in separate lines on the face of the balance sheet.
a) | they are hybrid instruments which consist of a debt host and an embedded derivative component, or | |
b) | they are items that are part of a portfolio which is risk managed on a fair value basis and reported to senior management on that basis, or | |
c) | the application of the fair value option reduces or eliminates an accounting mismatch that would otherwise arise. |
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Financial information
Notes to the consolidated financial statements
– | Credit-linked:bonds, notes linked to the performance (coupon and/or redemption amount) of single names (such as a company or a country) or a basket of reference entities. | |
– | Equity-linked:bonds, notes that are linked to a single stock, a basket of stocks or an equity index. | |
– | Rates-linked:bonds, notes linked to a reference interest rate, interest rate spread or formula. |
9) Financial investments available-for-sale
Financial investments available-for-saleare non-derivative financial assets that are not classified as held for trading, designated at fair value through profit or loss, or loans and receivables. They are recognized on a settlement date basis. Financial investments available-for-sale include highly liquid short term debt securities, strategic equity investments, certain investments in real estate funds as well as instruments that, in management’s opinion, may be sold in response to or in anticipation of needs for liquidity or changes in interest rates, foreign exchange rates or equity prices.Financial investments available-for-saleconsist mainly of highly liquid short term debt securities issued by government and government-controlled institutions, generally with residual maturities of less than three months. In addition, certain equity instruments, including private equity investments as well as debt instruments and non-performing loans acquired in the secondary market are classified as financial investments available-for-sale.
10) Loans and receivables
For an overview of financial assets and financial liabilities accounted for as“Loans and receivables”,refer to the measurement categories presented in Note 29.
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– | originated loans where money is provided directly to the borrower, participation in a loan from another lender and purchased loans (certain purchased non-performing loans are also classified as financial investment available-for-sale at inception) initially classified as “loans and receivables”; | |
– | securities initially classified as“Loans and receivables”due to illiquid markets such as Auction Rate Securities; | |
– | reclassified securities previously“Held-for-trading”(refer to Note 29b; and | |
– | reclassified loans such as leverage finance loans previously “held-for-trading” (refer to Note 29b). |
Renegotiated loans
Subject to assessment on a case by case basis, UBS may either restructure a loan or take possession of collateral. Restructuring may involve extending the payment arrange-
ments and agreeing to new loan conditions. Once the terms have been renegotiated any impairment is measured using the effective interest rate (EIR) as calculated before the modification of terms and the loan is not considered as past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to impairment assessment, calculated using the loan’s original EIR.
Commitments
Letters of credit, guarantees and similar instruments commit UBS to make payments on behalf of third parties under specific circumstances. These instruments, as well as undrawn irrevocable credit facilities, carry credit risk and are included in the exposure to credit risk table in Note 29c, with their gross maximum exposure to credit risk less provisions.
11) Allowance and provision for credit losses
An allowance or provision for credit losses (refer to Note 9b) is established if there is objective evidence that the Group will be unable to collect all amounts due on a claim according to the original contractual terms or the equivalent value. A “claim” means a loan or receivable carried at amortized cost, or a commitment such as a letter of credit, a guarantee, a commitment to extend credit or other credit products.
– | significant financial difficulty of the issuer or counterparty; or | |
– | default or delinquency in interest or principal payments; or | |
– | probability that the borrower will enter bankruptcy or financial re-organization. |
An allowance for credit losses is reported as a reduction of the carrying value of a claim on the balance sheet. For an off-balance sheet item, such as a commitment, a provision for credit loss is reported inOther liabilities.Additions to allowances and provisions for credit losses are made throughCredit loss expense.
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Financial information
Notes to the consolidated financial statements
future cash flows, including amounts that may result from restructuring or the liquidation of collateral. Impairment is measured and allowances for credit losses are established for the difference between the carrying amount and the estimated recoverable amount.
future cash receipts as a result of increased recoverability are recognized as an adjustment to the effective interest rate on the loan from the date of change.
12) Securitization structures set up by UBS
UBS securitizes various financial assets, which generally results in the sale of these assets to special purpose entities, which in turn issue securities to investors. UBS’s involvement in securitization structures significantly declined in 2008 and remained low in 2009. UBS applies the policies set out in part 3) in determining whether the respective special purpose entity must be consolidated and those set out in part 5) in determining whether derecognition of transferred financial assets is appropriate. The following statements mainly apply to financial asset transfers which are considered true sales to non-consolidated entities.
13) Securities borrowing and lending
Securities borrowing and securities lending transactions are generally entered into on a collateralized basis. In such transactions, UBS typically lends or borrows securities in exchange for securities or cash collateral. Additionally, UBS borrows securities from its clients’ custody accounts in exchange for a fee. The majority of securities lending and borrowing agreements involve shares, and the remainder typically involve bonds and notes. The transactions are conducted un-
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der standard agreements employed by financial market participants and are undertaken with counterparties subject to UBS’s normal credit risk control processes. UBS monitors the market value of the securities received or delivered on a daily basis and requests or provides additional collateral or returns or recalls surplus collateral in accordance with the underlying agreements.
14) Repurchase and reverse repurchase transactions
Securities purchased under agreements to resell (Reverse repurchase agreements) and securities sold under agreements to repurchase (Repurchase agreements) are generally treated as collateralized financing transactions. Nearly all repurchase and reverse repurchase agreements involve debt instruments, such as bonds, notes or money market paper. The transactions are conducted under standard agreements employed by financial market participants and are undertaken with counterparties subject to UBS’s normal credit risk control processes. UBS monitors the market value of the securities received or delivered on a daily basis and requests or provides additional collateral or returns or recalls surplus collateral in accordance with the underlying agreements.
ments are not recognized on or derecognized from the balance sheet, unless the risks and rewards of ownership are obtained or relinquished. In repurchase agreements where UBS transfers owned securities and where the recipient is granted the right to resell or repledge them, the securities are reclassified in the balance sheet fromTrading portfolio assetstoTrading portfolio assets pledged as collateral.Securities received in a reverse repurchase agreement are disclosed as off-balance sheet items if UBS has the right to resell or repledge them, with securities that UBS has actually resold or repledged also disclosed separately (see Note 24). Additionally, the sale of securities received in reverse repurchase transactions triggers the recognition of a trading liability (short sale).
15) Derivative instruments and hedge accounting
Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are subsequently remeasured to fair value. The resulting gain or loss is recognized in profit or loss unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
Hedge accounting
The Group also uses derivative instruments as part of its asset and liability management activities to manage exposures
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Notes to the consolidated financial statements
to interest rate, foreign currency and credit risks, including exposures arising from forecast transactions. The Group applies either fair value or cash flow hedge accounting when transactions meet the specified criteria to obtain hedge accounting treatment.
Fair value hedges
For qualifying fair value hedges, the change in fair value of the hedging derivative is recognized in the income statement. Those changes in fair value of the hedged item that are attributable to the risks hedged with the derivative instrument are reflected in an adjustment to the carrying value of the hedged item, which is also recognized in the income statement. The fair value change of the hedged item in a portfolio hedge of interest rate risks is reported separately from the hedged portfolio inOther assets or Other liabilities as appropriate.If the hedge relationship is terminated for reasons other than the derecognition of the hedged item, the difference between the carrying value of the hedged item at that point and the value at which it would have been carried had the hedge never existed (the “unamortized fair
value adjustment”) is, in the case of interest-bearing instruments, amortized to the income statement over the remaining term of the original hedge, while for non-interest-bearing instruments that amount is immediately recognized in earnings. If the hedged item is derecognized, e.g. due to sale or repayment, the unamortized fair value adjustment is recognized immediately in profit or loss.
Cash flow hedges
A fair value gain or loss associated with the effective portion of a derivative designated as a cash flow hedge is recognized initially inEquity.When the cash flows that the derivative is hedging materialize, resulting in income or expense, then the associated gain or loss on the hedging derivative is simultaneously transferred fromEquity tothe corresponding income or expense line item.
Hedges of net investments in foreign operations
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly inEquity (andpresented in the statement of equity and statement of comprehensive income under Foreign currency translation), while any gains or losses relating to the ineffective portion are recognized in the income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly inEquityis reclassified to the income statement.
Economic hedges which do not qualify for hedge accounting
Derivative instruments which are transacted as economic hedges but do not qualify for hedge accounting are treated in the same way as derivative instruments used for trading purposes, i.e. realized and unrealized gains and losses are recognized inNet trading incomeexcept that, in certain cases, the forward points on short duration foreign exchange contracts are reported in Net interest income. Refer to Note 23 for more information on “economic hedges”.
Embedded derivatives
A derivative may be embedded in a “host contract”. Such combinations are known as hybrid instruments and arise predominantly from the issuance of certain structured debt instruments. If the host contract is not carried at fair value with changes in fair value reported in the income statement, the embedded derivative is generally required to be separated from the host contract and accounted for as a standalone derivative instrument at fair value through profit or
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loss if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract, and the embedded derivative actually meets the definition of a derivative. Bifurcated embedded derivatives are presented on the same balance sheet line as the host contract, and are shown in Note 29 in the“Held for trading”category, reflecting the measurement and recognition principles applied.
16) Loan commitments
Loan commitments are defined amounts (unutilized credit lines or undrawn portions of credit lines) against which customers can borrow money at defined terms and conditions.
– | Derivative loan commitments(loan commitments that can be settled net in cash or by delivering or issuing an other financial instrument) or if there is evidence that UBS is selling similar loans resulting from its loan commitments before or shortly after origination (refer to part 15). | |
– | Loan commitments designated at fair value through profit and loss (“Fair value option”)(refer to part 8). | |
– | Below market loan commitments.Below market loan commitments are recognized at fair value and subsequently measured at the higher of the initially recognized liability at fair value less cumulative amortization and a provision (refer to part 26). UBS uses them only in specific situations (e.g. restructuring, insolvency). | |
– | Other loan commitments.Other loan commitments are not recorded in the balance sheet. However, a provision is recognized if it is probable that a loss has been incurred and a reliable estimate of the amount of the obligation can be made (refer to part 26). |
17) Cash and cash equivalents
For purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition including cash and non-restricted balances with central banks, treasury bills, balances included inDue from banks,as well as money market paper included inTrading portfolio assetsandFinancial investments available-for-sale.
18) Physical commodities
Physical commodities (precious metals, base metals, energy and other commodities) held by UBS as a result of its broker-trader activities are accounted for at fair value less costs to sell and recognized within theTrading portfolio.Changes in fair value less costs to sell are recorded inNet trading income.
19) Property and equipment
Property and equipment includes own-used properties, investment properties, leasehold improvements, IT, software and communication and other machines and equipment.
Classification for own-used property
Own-used property is defined as property held by the Group for use in the supply of services or for administrative purposes, whereas investment property is defined as property held to earn rental income and/or for capital appreciation. If a property of the Group includes a portion that is own-used and another portion that is held to earn rental income or for capital appreciation, the classification is based on whether or not these portions can be sold separately. If the portions of the property can be sold separately, they are separately accounted for as own-used property and investment property. If the portions cannot be sold separately, the whole property is classified as own-used property unless the portion used by the Group is minor. The classification of property is reviewed on a regular basis to account for major changes in its usage.
Leasehold improvements
Leasehold improvements are investments made to customize buildings and offices occupied under operating lease contracts to make them suitable for the intended purpose. The present value of estimated reinstatement costs to bring a leased property into its original condition at the end of the lease, if required, is capitalized as part of the total leasehold improvements costs. At the same time, a corresponding liability is recognized to reflect the obligation incurred. Reinstatement costs are recognized in profit and loss through depreciation of the capitalized leasehold improvements over their estimated useful lives.
Software
Software development costs are capitalized when they meet certain criteria relating to identifiability, it is probable that future economic benefits will flow to the enterprise, and the cost can be measured reliably. Internally developed software meeting these criteria and purchased software are classified within IT, software and communication.
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Financial information
Notes to the consolidated financial statements
Property held for sale
Non-current property formerly own-used or leased to third parties under an operating lease and equipment the Group has decided to sell and for which sale within 12 months is highly probable are classified as non-current assets held for sale and recorded in Other assets. Upon classification as held for sale, they are no longer depreciated and are carried at the lower of book value or net realizable value. Foreclosed properties and other properties classified as current assets are included in Properties held for sale and recorded in Other assets. They are carried at the lower of book value and net realizable value.
Investment property
Investment property is carried at fair value with changes in fair value recognized in the income statement in the period of change. UBS employs internal real estate experts to determine the fair value of investment property by applying recognized valuation techniques. In cases where prices of recent market transactions of comparable properties are available, fair value is determined by reference to these transactions.
Estimated useful life of property and equipment
Property and equipment is depreciated on a straight-line basis over its estimated useful life as follows:
Properties, excluding land | Not exceeding 50 years | |
Leasehold improvements | Residual lease term, | |
but not exceeding 10 years | ||
Other machines and equipment | Not exceeding 10 years | |
IT, software and communication | Not exceeding 5 years | |
20) Goodwill and intangible assets
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable assets of the acquired entity at the date of acquisition. Goodwill is not amortized; it is tested yearly for impairment, and, additionally, when a reasonable indication of impairment exists. The impairment test is conducted at the segment level as reported in Note 2a. The segment has been determined as the cash-generating unit for impairment testing purposes as this is the level at which the performance of investments is reviewed and assessed by management. Refer to Note 16 for details.
ally, all identified intangible assets of UBS have a definite useful life. At each balance sheet date, intangible assets are reviewed for indications of impairment or changes in estimated future benefits. If such indications exist, the intangible assets are analyzed to assess whether their carrying amount is fully recoverable. An impairment loss is recognized if the carrying amount exceeds the recoverable amount.
21) Income taxes
Income tax payable on profits is recognized as an expense based on the applicable tax laws in each jurisdiction in the period in which profits arise. The tax effects of income tax losses available for carry forward are recognized as a deferred tax asset if it is probable that future taxable profit will be available against which those losses can be utilized.
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22) Debt issued
Money Market paper
Money market paper issued is initially measured at fair value, which is the consideration received, net of transaction costs incurred. Subsequent measurement is at amortized cost, using the effective interest rate method to amortize cost at inception to the redemption value over the life of the debt.
Debt without embedded derivative
Issued debt instruments without embedded derivatives are accounted for at amortized cost. However, it is the Group’s policy to apply fair value hedge accounting to its fixed-rate debt instruments when the interest rate risk is managed on a mark-to-market basis. When fair value hedge accounting is applied to fixed-rate debt instruments, the carrying values of debt issued are adjusted for changes in fair value related to the hedged exposure rather than carried at amortized cost - - refer to part 15) for further discussion.
Debt with embedded derivatives (related to UBS AG shares)
Debt instruments issued with embedded derivatives that are related to UBS AG shares (e.g. mandatory convertible notes) are separated into a liability and an equity component at issue date if the derivative is settled by UBS receiving or delivering a fixed number of its own shares in exchange for a fixed amount of cash or another financial asset. When a hybrid debt instrument is issued, a portion of the net proceeds is allocated to the debt component based on its fair value. The determination of fair value is generally based on quoted market prices for UBS debt instruments with comparable terms. The debt component is subsequently measured at amortized cost or at fair value through profit or loss, if the fair value option is applied. The remaining amount of the net proceeds is allocated to the equity component and reported inShare premium.Subsequent changes in fair value of the separated equity component are not recognized. However, if the hybrid debt instrument or the embedded derivative related to UBS AG shares is to be cash settled or if it contains a cash or net share settlement alternative, then the separated derivative is accounted for as a freestanding derivative, with changes in fair value recorded inNet trading incomeunless the entire hybrid debt instrument is designated at fair value through profit or loss (“Fair Value Option”) - refer to part 8).
Debt with embedded derivatives
(not related to UBS AG shares)
Debt instruments issued with embedded derivatives that are related to non-UBS AG equity instruments, foreign exchange, interest rate, credit instruments or indices are considered structured debt instruments. UBS has designated most of its structured debt instruments at fair value through profit or loss (“Fair Value Option”) – see part 8). If such instruments have not been designated at fair value through profit or loss, the embedded derivative is separated from the
host contract and accounted for as a standalone derivative if the criteria for separation are met. The host contract is subsequently measured at amortized cost. The fair value option is not applied to certain hybrid instruments which contain bifurcatable embedded derivatives with references to foreign exchange rates and precious metal prices and which are not hedged by derivative instruments. Those hybrids are still subject to bifurcation of the embedded derivative.
23) Post-employment benefits
UBS sponsors a number of post-employment benefit plans for its employees worldwide, which include defined benefit and defined contribution plans, and other post-retirement benefits such as medical and life insurance benefits.
Defined benefit plans
Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
a) 10% of the present value of the defined benefit obligation at that date (before deducting the fair value of plan assets); and | ||
b) 10% of the fair value of any plan assets at that date. | ||
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Financial information
Notes to the consolidated financial statements
The unrecognized actuarial gains and losses exceeding the greater of these two values are recognized in the income statement over the expected average remaining working lives of the employees participating in the plans.
Defined contribution plans
A defined contribution plan is a pension plan under which UBS pays fixed contributions into a separate entity. UBS has no legal or constructive obligation to pay further contributions if the plan does not hold sufficient assets to pay employees the benefits relating to employee service in the current and prior periods. UBS’s contributions are expensed when the employees have rendered services in exchange for such contributions; this is generally in the year of contribution. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Other post-retirement benefits
UBS also provides post-retirement medical and life insurance benefits to retirees in the US and the UK. The expected costs of these benefits are recognized over the period of employment using the same accounting methodology used for the defined benefit plans.
24) Equity participation and other compensation plans
Equity participation plans
UBS has established several equity participation plans in the form of share plans, option plans and share-settled stock appreciation right (SAR) plans. UBS’s equity participation plans are mandatory, discretionary, or voluntary plans. UBS recognizes the fair value of share, option and SAR awards, determined at the date of grant, as compensation expense over the period that the employee is required to provide active services in order to earn the award.
been received. Forfeiture events occurring before the grant date result in the reversal of compensation expense.
Other compensation plans
UBS has established other fixed and variable deferred cash compensation plans, the value of which is not linked to UBS’s own equity. UBS’s deferred cash compensation plans are mandatory or discretionary plans.
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25) Amounts due under unit-linked investment contracts
UBS’s financial liabilities from unit-linked contracts are presented asOther liabilities(refer to Note 20) on the balance sheet. These contracts allow investors to invest in a pool of assets through investment units issued by a UBS subsidiary. The unit holders receive all rewards and bear all risks associated with the reference asset pool. The financial liability represents the amount due to unit holders and is equal to the fair value of the reference asset pool.
26) Provisions
Provisions are recognized when UBS has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are reflected underOther liabilitieson the balance sheet. Refer to Note 21.
27) Equity, treasury shares and contracts on UBS shares
UBS AG shares held
UBS AG shares held by the Group are classified inEquity as Treasury sharesand accounted for at cost. Treasury shares are deducted from total shareholders’ equity until they are cancelled or reissued. The difference between the proceeds from sales ofTreasury sharesand their weighted average cost (net of tax, if any) is reported asShare premium.
Contracts with gross physical settlement
(except physically settled written put options and
forward share purchase contracts)
Contracts that require gross physical settlement in UBS AG shares are classified inEquityasShare premium(provided a fixed amount of shares are exchanged against a fixed amount of cash) and accounted for at cost. They are added to or deducted from equity until settlement of such contracts. Upon settlement of such contracts, the difference between the proceeds received and their cost (net of tax, if any) are reported asShare premium.
Transaction cost related to share issuance of equity instruments
Incremental costs directly attributable to the issue of new shares or contracts with physical settlement (classified as eq-
uity instruments) are shown in equity as “transaction cost related to share issuance” and are a deduction of equity, net of tax, from the proceeds.
Contracts with net cash settlement or net cash settlement option
Contracts on UBS AG shares that require net cash settlement, or provide the counterparty or UBS with a settlement option which includes a choice of settling net in cash are classified as trading instruments, with changes in fair value reported in the income statement as “net trading income”, except for written put options and forward share purchase contracts.
Physically settled written put options and forward share
purchase contracts
Physically settled written put options and forward share purchase contracts, including contracts where physical settlement is a settlement alternative, result in the recognition of a financial liability. At inception of the contract, the present value of the obligation to purchase own shares in exchange for cash is transferred out ofEquityand recognized as a liability. The liability is subsequently accreted, using the effective interest rate method, over the life of the contract to the nominal purchase obligation by recognizing interest expense. Upon settlement of the contract, the liability is derecognized, and the amount of equity originally recognized as a liability is reclassified withinEquity to Treasury shares.The premium received for writing put options is recognized directly inShare premium.
Minority interests
Net profit and Equity arepresented including minority interests.Net profitis split intoNet profitattributable to UBS shareholders andNet profit attributable to minority interests. Equity is split intoEquityattributable to UBS shareholders andEquityattributable to minority interests.
Trust preferred securities issued
UBS has issued trust preferred securities through consolidated preferred funding trusts which hold debt issued by UBS. UBS AG has fully and unconditionally guaranteed all of these securities. UBS’s obligations under these guarantees are subordinated to the prior payment in full of the deposit liabilities of UBS and all other liabilities of UBS. The trust preferred securities represent equity instruments which are held by third parties and treated as minority interests in UBS’s consolidated financial statements. The full dividend payment obligation on these trust preferred securities issued is reclassified fromEquityto a corresponding liability once a coupon payment becomes mandatory, i.e. when it is triggered by a contractually determined event. In the income statement the full dividend payment is reclassified fromNet profitattributable to UBS shareholders toNet profitattributable to minor-
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ity interests at that time. UBS bonds held by preferred funding trusts are eliminated in consolidation.
28) Discontinued operations and non-current assets held for sale
UBS classifies individual non-current non-financial assets and disposal groups as held for sale if such assets or disposal groups are available for immediate sale in their present condition subject to terms that are usual and customary for sales of such assets or disposal groups, management is committed to a plan to sell such assets and is actively looking for a buyer, the assets are being actively marketed at a reasonable sales price in relation to their fair value, the sale is expected to be completed within one year, and their sale is considered highly probable. These assets (and liabilities in the case of disposal groups) are measured at the lower of their carrying amount and fair value less costs to sell and presented inOther assets and Other liabilities(see Notes 17 and 20). Netting of assets and liabilities is not permitted.
29) Leasing
UBS enters into lease contracts, predominantly of premises and equipment, as a lessor and a lessee. The terms and conditions of these contracts are assessed and the leases are classified as operating leases or finance leases according to their economic substance. When making such an assessment, the Group focuses on the following aspects: a) transfer of ownership of the asset to the lessee at the end of the lease term; b) existence of a bargain purchase option held by the lessee; c) whether the lease term is for the major part of the economic life of the asset; d) whether the present value of the minimum lease payments is substantially equal to the fair value of the leased asset at inception of the lease term; and e) whether the asset is of a specialized nature that only the lessee can use without major modifications being made. If one or more of the conditions are met, the lease is generally classified as a
finance lease, while the non-existence of such conditions normally leads to a classification as an operating lease.
30) Fee income
UBS earns fee income from a diverse range of services it provides to its customers. Fee income can be divided into two broad categories: income earned from services that are provided over a certain period of time, for which customers are generally billed on an annual or semi-annual basis, and income earned from providing transaction-type services. Fees earned from services that are provided over a certain period of time are recognized ratably over the service period. Fees earned from providing transaction-type services are recognized when the service has been completed. Performance-linked fees or fee components are recognized when the recognition criteria are fulfilled. Loan commitment fees on lending arrangements where the initial expectation is that the loan will be drawn down at some point are deferred until the loan is drawn down, and then recognized as an adjustment to the effective yield over the life of the loan.
31) Foreign currency translation
Transactions denominated in foreign currency are translated into the functional currency of the reporting unit at the spot exchange rate on the date of the transaction. At the balance sheet date, all assets and liabilities denominated in foreign currency except non-monetary items are translated using the closing exchange rate. Non-monetary items measured in terms of historical cost are translated at the exchange rate at the date of the transaction. Resulting foreign exchange differences are recognized inNet trading income,except for non-monetary financial investments available-for-sale which are recorded directly inEquityuntil the asset is sold or becomes impaired.
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Upon consolidation, assets and liabilities of foreign operations are translated into Swiss francs (CHF) – UBS’s presentation currency – at the closing exchange rate at the balance sheet date, and income and expense items are translated at the average rate for the period. Differences resulting from the use of different exchange rates are recognized directly in Foreign currency translation withinEquity. Upon disposal of foreign operations the related foreign currency translation impact previously deferred in equity is reclassified toOther income.
32) Earnings per share (EPS)
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
33) Segment reporting
In 2009, UBS’s businesses, i.e. wealth management and Swiss banking business, asset management and investment banking were organized on a worldwide basis into four business divisions and the Corporate Center, taken into consideration the economic characteristics of the businesses. The four business divisions, also known as the operating segments or reportable segments, were Wealth Management & Swiss Bank, Wealth Management Americas, Global Asset Management and Investment Bank. In the internal management report to the Group Executive Board (GEB) or the chief operating decision maker, the financial information about the four reportable segments and Corporate Center was separately presented. This internal management view was the basis for the external segment reporting. Corporate Center predominantly includes certain costs relating to Group functions and elimination items and it is not considered an operating segment under IFRS 8. The costs of shared service functions like risk management and control, finance, legal and compliance, marketing and communications, human resources, information technology infrastructure and service centres are charged out to the business divisions based on internal accounting policies.
34) Netting
UBS nets assets and liabilities in its balance sheet if it has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. Netted positions include positive and negative replacement values of OTC interest rate swaps transacted with London Clearing House. The positions are netted by currency and across maturities. Furthermore, amounts included inLoans and Dueto customers related to UBS’s Prime Brokerage Business have been netted, where possible.
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b) Changes in accounting policies, comparability and other adjustments
Restatements made to the financial statements 2008
UBS has restated its 2008 financial statements to correct identified accounting errors related to the 2008 financial statements. These errors were not material to the annual or quarterly 2008 financial statements, but related corrections would have been material to first quarter 2009 financial statements. On 21 May 2009, UBS re-filed its US Form 20-F for the year 2008, which included the restated 2008 financial statements. The restatement comprises three items in excess of CHF 100 million as follows:
Effective 2009
IAS 1 (revised) Presentation of Financial Statements
Effective 1 January 2009, the revised International Accounting Standard (IAS) 1 affected the presentation of owner changes in equity and of comprehensive income. UBS continued to present owner changes in equity in the “statement of changes in equity”, but detailed information relating to non-owner changes in equity, such as foreign exchange translation, cash flow hedges and financial investments available-for-sale, were presented in the “Statement of comprehensive income”.
IAS 1 (revised) Presentation of Financial Statements, and
IAS 32 (revised) Financial Instruments: Presentation
The IASB issued a further amendment to IAS 1 and an amendment to IAS 32 regarding puttable financial instruments and obligations arising on liquidation. The IAS 32 amendment clarifies under which circumstances puttable financial instruments and obligations arising on liquidation have to be treated as equity instruments.
IFRS 8 Operating Segments
Effective as of 1 January 2009, UBS adopted IFRS 8Operating Segmentswhich replaced IAS 14Segment Reporting.Under the requirements of the new standard, UBS’s external segmental reporting is now based on the internal management reporting to the Group Executive Board (or the “chief operating decision maker”), which makes decisions on the allocation of resources and assesses the performance of the reportable segments.
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Asset Management and Investment Bank. While the Corporate Center does not meet the requirements of an operating segment, it is also shown separately. Segment information from prior periods in Note 2a has been restated to conform to the requirements of this new standard. In addition, goodwill and intangible assets presented in Note 16 have also been reallocated in order to reflect the revised segment reporting structure.
IFRS 7 (revised) Financial Instruments: Disclosures
This standard was revised in March 2009 when the International Accounting Standards Board (IASB) published the amendment “Improving Disclosures about Financial Instruments”. Effective 1 January 2009, the amendment requires enhanced disclosures about fair value measurements and liquidity risk.
Reassessment of Embedded Derivatives
The International Financial Reporting Interpretations Committee (IFRIC) issued in March 2009 the supplement Embedded Derivatives: Amendments to IFRIC 9 and IAS 39. This guidance amends IFRIC 9 Reassessment of Embedded Derivatives, and IAS 39 Financial Instruments: Recognition and Measurement. The amendments clarify that on reclassification of a financial asset out of the“Held for trading”category, all embedded derivatives have to be assessed and, if necessary, separately accounted for in the financial statements. The application of this guidance did not materially impact UBS’s financial statements.
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 15 was issued on 3 July 2008 and is effective for annual periods beginning on or after 1 January 2009. IFRIC 15 provides guidance on the accounting for agreements for the construction of real estate where entities enter into agreements with buyers before construction has been completed and the timing of revenue recognition. The application of this guidance did not materially impact UBS’s financial statements.
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 16 was issued on 1 October 2008 and became effective on 1 January 2009. IFRIC 16 provides guidance in identifying the foreign currency risks that qualify as a hedged risk in the hedge of a net investment in a foreign operation; where, within a group, hedging instruments that are hedges of a net investment in a foreign operation can be held to qualify for hedge accounting, and how an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item. The impact of this interpretation on UBS’s financial statements was immaterial.
IAS 24 Related Party Disclosures
In November 2009, the IASB amended IAS 24Related Party Disclosureswith latest possible effective date 1 January 2011. UBS has early adopted the revised requirements in its annual financial statements 2009. The revised standard amends the definition of related parties, in particular the relationship between UBS and associated companies of UBS’s key management personnel or their close family members. Transactions between UBS and associated companies of UBS key management personnel over which UBS key management personnel does not have control or joint control are no longer considered related party transactions. Due to the application of the revised guidance, related party transactions disclosed in Note 32e of the annual financial statements 2008 have been significantly reduced. Balances and movements of loans to related parties have been reduced by CHF 668 million at 31 December 2008 and CHF 530 million at 31 December 2007; and fees received for services provided by UBS have been reduced by CHF 11 million in 2008 and CHF 10 million in 2007.
Allocation of Shared Services Costs in Segment Disclosures
From 2009 onwards, ITI and Group Off-shoring costs managed by the Corporate Center are allocated to the direct cost lines personnel expenses, general and administrative expenses, and depreciation, in the respective business division income statements, based on appropriate internally determined allocation keys. In the Corporate Center income statement, costs allocated to the business divisions are deducted from the respective cost lines. In previous reports, these costs were presented as an expense on the line“Services (to)/from other business divisions”within each
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Impact on income statement lines
For the comparative 12-month period in 2008, the following allocations were made:
Wealth | Wealth | |||||||||||||||||||
Management & | Management | Global Asset | Investment | Corporate | ||||||||||||||||
CHF million | Swiss Bank | Americas | Management | Bank | Center | |||||||||||||||
Personnel expenses | 228 | 85 | 20 | 300 | (633 | ) | ||||||||||||||
General and administrative expenses | 328 | 121 | 28 | 431 | (909 | ) | ||||||||||||||
Depreciation of property and equipment | 163 | 60 | 15 | 216 | (455 | ) | ||||||||||||||
Services (to)/from other business divisions | (719 | ) | (267 | ) | (62 | ) | (949 | ) | 1,997 | |||||||||||
business division and an offsetting corresponding amount on that line in the Corporate Center. The new presentation format provides greater transparency by allocating shared service costs to direct cost lines in divisional income statements. Comparative periods have been adjusted.
Unit-linked Investment Contracts
In fourth quarter 2009, UBS decided to present Wealth Management & Swiss Banking’s obligations under unit-linked investment contracts underOther liabilitiesin order to align the treatment with similar contracts issued by Global Asset Management. In the past, the respective obligations of Wealth Management & Swiss Banking have been reported underDue to customers.UBS has retrospectively applied this change in presentation. The change in presentation resulted in the following effects on the balance sheet for 1 January 2008 and 31 December 2008: a decrease ofDue to customersand a corresponding increase in amounts due underOther liabilitieson the balance sheet (unit-linked investment contracts) of CHF 11,787 million and CHF 9,033 million, respectively. The change in presentation did not impact UBS’s total liabilities, income statements or earnings per share for these periods.
Effective in 2008 and earlier
IFRS 2 Share-based Payment:
Vesting Conditions and Cancellations
On 1 January 2008, UBS adopted an amendment to IFRS 2 Share-based Payment: Vesting Conditions and Cancellations and fully restated the two comparative prior years. The amended standard clarifies the definition of vesting conditions and the accounting treatment of cancellations. Under the amended standard, UBS is required to distinguish between vesting conditions (such as service and performance conditions) and non-vesting conditions.
Post-vesting sale and hedge restrictions and non-vesting conditions are considered when determining grant date fair value. The effect of the restatement on the opening balance sheet at 1 January 2006 was as follows: reduction of retained earnings by approximately CHF 2.3 billion, increase of share premium by approximately CHF 2.3 billion, increase of liabilities (including deferred tax liabilities) by approximately CHF 0.5 billion, and increase of deferred tax assets by approximately CHF 0.5 billion.Net profitattributable to UBS shareholders declined by CHF 863 million in 2007 and by CHF 730 million in 2006. Additional compensation expenses of CHF 797 million and CHF 516 million was recognized in 2007 and 2006, respectively. These additional compensation expenses include awards granted in 2008 for the performance year 2007. The impact of the restatement on total equity as of 31 December 2007 was a decrease of CHF 366 million. Retained earnings at 31 December 2007 decreased by approximately CHF 3.9 billion, share premium increased by approximately CHF 3.5 billion, liabilities (including deferred tax liabilities) increased by approximately CHF 0.6 billion and deferred tax assets increased by approximately CHF 0.2 billion. The restatement decreased basic and diluted earnings per share for the year ended 31 December 2007 by CHF 0.40 each and for the year ended 31 December 2006 by CHF 0.33 and CHF 0.31, respectively. In order to provide comparative information, these amounts also reflect the retrospective adjustments to shares outstanding in 2007 due to the capital increase and the share dividend paid in 2008.
Reclassifications of Financial Assets
The International Accounting Standards Board published an amendment to International Accounting Standard 39 (IAS 39Financial Instruments: Recognition and Measurement)on 13 October 2008, under which eligible financial assets, subject to certain conditions being met, may be reclassified out of the“Held for trading”category if the firm had the intent and ability to hold them for the foreseeable future or until maturity.
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Although the amendment could have been applied retrospectively from 1 July 2008, UBS decided at the end of October 2008 to apply the amendment with effect from 1 October 2008 following an assessment of the implications on its financial statements. Refer to Note 29b for further details on reclassification of financial assets.
Changes to segment reporting
UBS has continuously reduced its private equity business in Industrial Holdings over the last three years. The business no longer includes consolidated industrial private equity investments. Starting first quarter 2008, UBS presented the remaining activities from this business, mainly financial investments available-for-sale, under Corporate Center.
Effective in 2010
Improvements to IFRS 2009
The International Accounting Standards Board issued amendments to twelve IFRS standards as part of its annual improvements project in April 2009. The adoption of the amendments could result in accounting changes for presentation, recognition or measurement purposes. The improvements to IFRS 2009 will be adopted by UBS as of 1 January 2010. UBS does not expect these amendments to have a significant impact on UBS’s financial statements.
Amendments to IAS 39 Financial Instruments: Recognition
and Measurement – Eligible Hedged Items
The amendment to IAS 39 was issued in July 2008. The amendments provide additional guidance on the designation of a hedged item. The amendment clarifies how the existing principles underlying hedge accounting should be applied in two particular situations: a) a one-sided risk in a hedged item and b) inflation in a financial hedged item. The amendments to IAS 39 will be adopted by UBS as of 1 January 2010. UBS does not expect the amendments to have a significant impact on UBS’s financial statements.
IFRS 3 Business Combinations and IAS 27 Consolidated and
Separate Financial Statements
In January 2008, the IASB issued a revised Standard of IFRS 3Business Combinationsand amendments to IAS 27Consolidated and Separate Financial Statements.The most significant changes under revised IFRS 3 are as follows:
– | Contingent consideration will be recognized at fair value as part of the consideration transferred at the acquisition date. Currently contingent consideration is only recognized once it meets the probability and reliably measurable criteria. | |
– | Non-controlling interests in an acquiree will either be measured at fair value or as the non-controlling interest’s proportionate share of the fair value of net identifiable assets of the entity acquired. The option is available on a transaction-by-transaction basis. |
– | Transaction costs incurred by the acquirer will no longer be part of the acquisition cost but will have to be expensed as incurred. |
Effective in 2011 and later, if not adopted early
IFRS 9 Financial Instruments
In November 2009, the IASB issued IFRS 9Financial instruments,which includes revised guidance on the classification and measurement of financial assets. The publication of IFRS 9 represents the completion of the first part of a multi-stage project to replace IAS 39Financial instruments: recognition and measurement.Under the revised guidance, a financial asset is to be accounted for at amortized cost only if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Non-traded equity instruments may be accounted for at fair value through equity, but the subsequent release of amounts booked directly to equity into the income state-
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ment is no longer permitted. All other financial assets are measured at fair value through profit or loss. UBS is currently assessing the impact of the new standard on its financial statements. It is likely that a number of financial assets currently accounted for at amortized cost will be accounted for at fair value through profit or loss under the new standard because a) their contractual cash flows do not comprise solely payments of principal and interest on the principal, and/or b) UBS does not hold the assets with the intention to collect contractual cash flows they generate. Certain debt securities currently classified as available-for-sale may satisfy the criteria for “amortized cost” accounting; debt securities available-for-sale failing these criteria will be accounted for at fair value. The effective date for mandatory adoption is 1 January 2013, with early
adoption permitted. UBS did not adopt IFRS 9 for the year ended 31 December 2009.
IFRIC 14 Prepayments of a Minimum Funding Requirement
In November 2009, the IASB issued the amended IFRIC 14The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, which itself is an interpretation of IAS 19Employee Benefits.The amendment applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permits an entity to treat the benefit of such an early payment as an asset. The amendment is effective on 1 January 2011. Early application is permitted. UBS does not expect to have an impact from this interpretation on its financial statements.
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Note 2a Segment reporting
In 2009, UBS’s businesses were reorganized on a worldwide basis into four business divisions and the Corporate Center. The business divisions Wealth Management & Swiss Bank, Wealth Management Americas, Global Asset Management and the Investment Bank constitute one segment each. In total, UBS reports four business segments and the Corporate Center in 2009. The Corporate Center includes all corporate functions, elimination items as well as the remaining industrial holdings activities and is not considered a business segment.
Wealth Management & Swiss Bank
Wealth Management & Swiss Bank focuses on delivering comprehensive financial services to high net worth and ultra high net worth individuals around the world – except to those served by Wealth Management Americas – as well as private and corporate clients in Switzerland. UBS provides clients in over 40 countries, including Switzerland, with financial advice, products and tools to fit their individual needs. UBS has a leading position across all client segments in Switzerland.
Wealth Management Americas
Wealth Management Americas provides advice-based relationships through financial advisors who deliver a fully integrated set of products and services specifically designed to address the needs of ultra high net worth, high net worth and core affluent individuals and families. It includes the former Wealth Management US business unit, as well as the domestic Canadian business and the international business booked in the United States.
Global Asset Management
Global Asset Management is a large-scale asset manager with well diversified businesses across regions, capabilities and distribution channels. It offers investment capabilities and investment styles across all major traditional and alternative asset classes. These include equities, fixed income, currency, hedge fund, real estate, infrastructure and private equity investment capabilities that can also be combined in multi-asset strategies.
Investment Bank
The Investment Bank provides securities and other financial products and research in equities, fixed income, rates, foreign exchange and precious metals. It also provides advisory services and access to the world’s capital markets for corporate, institutional, intermediary and alternative asset management clients.
Corporate Center
The Corporate Center seeks to ensure that the business divisions operate as a coherent and effective whole by providing and managing support and control functions for the business divisions and the Group in such areas as risk control, finance, legal and compliance, funding, capital and balance sheet management, management of foreign currencies, communication and branding, human resources, information technology, real estate, procurement, corporate development and service centres.
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Note 2a Segment reporting (continued)
Internal charges and transfer pricing adjustments are reflected in the performance of each business. Revenue-sharing agreements are used to allocate external customer revenues to a business division on a reasonable basis. Transactions between business divisions are conducted at internally agreed transfer prices or at arm’s length.
Wealth | Wealth | |||||||||||||||||||||||
Management & | Management | Global Asset | Investment | Corporate | ||||||||||||||||||||
CHF million | Swiss Bank | Americas | Management | Bank | Center | UBS | ||||||||||||||||||
For the year ended 31 December 2009 | ||||||||||||||||||||||||
Net interest income1 | 4,533 | 800 | 2 | 2,339 | (1,229 | ) | 6,446 | |||||||||||||||||
Non-interest income | 6,989 | 4,746 | 2,134 | 2,494 | 1,623 | 17,987 | ||||||||||||||||||
Income2 | 11,523 | 5,546 | 2,137 | 4,833 | 394 | 24,433 | ||||||||||||||||||
Credit loss (expense)/recovery | (133 | ) | 3 | 0 | (1,698 | ) | (5 | ) | (1,832 | ) | ||||||||||||||
Total operating income | 11,390 | 5,550 | 2,137 | 3,135 | 389 | 22,601 | ||||||||||||||||||
Personnel expenses | 5,197 | 4,231 | 996 | 5,568 | 551 | 16,543 | ||||||||||||||||||
General and administrative expenses | 2,017 | 1,017 | 387 | 2,628 | 199 | 6,248 | ||||||||||||||||||
Services to/from other business divisions | (90 | ) | 4 | (74 | ) | (147 | ) | 306 | 0 | |||||||||||||||
Depreciation of property and equipment | 289 | 170 | 36 | 360 | 193 | 1,048 | ||||||||||||||||||
Impairment of goodwill3 | 0 | 34 | 340 | 749 | 0 | 1,123 | ||||||||||||||||||
Amortization of intangible assets3 | 67 | 62 | 13 | 59 | 0 | 200 | ||||||||||||||||||
Total operating expenses | 7,480 | 5,518 | 1,698 | 9,216 | 1,250 | 25,162 | ||||||||||||||||||
Performance from continuing operations before tax | 3,910 | 32 | 438 | (6,081 | ) | (860 | ) | (2,561 | ) | |||||||||||||||
Performance from discontinued operations before tax | 0 | 0 | 0 | 0 | (7 | ) | (7 | ) | ||||||||||||||||
Performance before tax4 | 3,910 | 32 | 438 | (6,081 | ) | (867 | ) | (2,569 | ) | |||||||||||||||
Tax expense on continuing operations | (443 | ) | ||||||||||||||||||||||
Tax expense on discontinued operations | 0 | |||||||||||||||||||||||
Net profit | (2,125 | ) | ||||||||||||||||||||||
Additional information5 | ||||||||||||||||||||||||
Total assets | 248,140 | 53,197 | 20,238 | 991,964 | 26,999 | 1,340,538 | ||||||||||||||||||
Additions to non-current assets | 43 | 59 | 11 | 81 | 745 | 939 | ||||||||||||||||||
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Note 2a Segment reporting (continued)
Internal charges and transfer pricing adjustments are reflected in the performance of each business. Revenue-sharing agreements are used to allocate external customer revenues to a business division on a reasonable basis. Transactions between business divisions are conducted at internally agreed transfer prices or at arm’s length.
Wealth | Wealth | |||||||||||||||||||||||
Management & | Management | Global Asset | Investment | Corporate | ||||||||||||||||||||
CHF million | Swiss Bank | Americas | Management | Bank | Center | UBS | ||||||||||||||||||
For the year ended 31 December 2008 | ||||||||||||||||||||||||
Net interest income | 5,424 | 938 | (2 | ) | 2,007 | (2,375 | ) | 5,992 | ||||||||||||||||
Non-interest income | 9,989 | 5,340 | 2,906 | (23,808 | ) | 3,373 | (2,200 | ) | ||||||||||||||||
Income1 | 15,413 | 6,278 | 2,905 | (21,800 | ) | 998 | 3,792 | |||||||||||||||||
Credit loss (expense)/recovery | (392 | ) | (29 | ) | 0 | (2,575 | ) | 0 | (2,996 | ) | ||||||||||||||
Total operating income | 15,021 | 6,249 | 2,904 | (24,375 | ) | 998 | 796 | |||||||||||||||||
Personnel expenses | 5,430 | 4,271 | 946 | 5,182 | 433 | 16,262 | ||||||||||||||||||
General and administrative expenses | 3,295 | 2,558 | 462 | 3,830 | 353 | 10,498 | ||||||||||||||||||
Services to/from other business divisions | (73 | ) | 16 | 88 | 41 | (73 | ) | 0 | ||||||||||||||||
Depreciation of property and equipment | 323 | 162 | 44 | 447 | 265 | 1,241 | ||||||||||||||||||
Impairment of goodwill2 | 0 | 0 | 0 | 341 | 0 | 341 | ||||||||||||||||||
Amortization of intangible assets2 | 33 | 65 | 33 | 83 | 0 | 213 | ||||||||||||||||||
Total operating expenses | 9,008 | 7,072 | 1,572 | 9,925 | 979 | 28,555 | ||||||||||||||||||
Performance from continuing operations before tax | 6,013 | (823 | ) | 1,333 | (34,300 | ) | 19 | (27,758 | ) | |||||||||||||||
Performance from discontinued operations before tax | 0 | 0 | 0 | 0 | 198 | 198 | ||||||||||||||||||
Performance before tax | 6,013 | (823 | ) | 1,333 | (34,300 | ) | 217 | (27,560 | ) | |||||||||||||||
Tax expense on continuing operations | (6,837 | ) | ||||||||||||||||||||||
Tax expense on discontinued operations | 1 | |||||||||||||||||||||||
Net profit | (20,724 | ) | ||||||||||||||||||||||
Additional information3 | ||||||||||||||||||||||||
Total assets | 251,487 | 39,039 | 24,640 | 1,680,257 | 19,392 | 2,014,815 | ||||||||||||||||||
Additions to non-current assets | 275 | 135 | 430 | 809 | 961 | 2,609 | ||||||||||||||||||
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Note 2a Segment reporting (continued)
Internal charges and transfer pricing adjustments are reflected in the performance of each business. Revenue-sharing agreements are used to allocate external customer revenues to a business division on a reasonable basis. Transactions between business divisions are conducted at internally agreed transfer prices or at arm’s length.
Wealth | Wealth | |||||||||||||||||||||||
Management & | Management | Global Asset | Investment | Corporate | ||||||||||||||||||||
CHF million | Swiss Bank | Americas | Management | Bank | Center1 | UBS | ||||||||||||||||||
For the year ended 31 December 2007 | ||||||||||||||||||||||||
Net interest income | 5,600 | 824 | (76 | ) | 209 | (1,220 | ) | 5,337 | ||||||||||||||||
Non-interest income | 12,089 | 6,329 | 4,170 | (747 | ) | 4,782 | 26,622 | |||||||||||||||||
Income2 | 17,689 | 7,153 | 4,094 | (538 | ) | 3,562 | 31,959 | |||||||||||||||||
Credit loss (expense)/recovery | 30 | (2 | ) | 0 | (266 | ) | (0 | ) | (238 | ) | ||||||||||||||
Total operating income | 17,718 | 7,151 | 4,094 | (804 | ) | 3,562 | 31,721 | |||||||||||||||||
Personnel expenses | 6,356 | 5,060 | 1,883 | 11,633 | 583 | 25,515 | ||||||||||||||||||
General and administrative expenses | 2,514 | 1,209 | 593 | 3,800 | 312 | 8,429 | ||||||||||||||||||
Services to/from other business divisions | (43 | ) | 28 | 73 | (171 | ) | 114 | 0 | ||||||||||||||||
Depreciation of property and equipment | 334 | 163 | 72 | 4313 | 243 | 1,243 | ||||||||||||||||||
Amortization of intangible assets4 | 15 | 70 | 19 | 172 | 0 | 276 | ||||||||||||||||||
Total operating expenses | 9,176 | 6,530 | 2,640 | 15,865 | 1,252 | 35,463 | ||||||||||||||||||
Performance from continuing operations before tax | 8,543 | 621 | 1,454 | (16,669 | ) | 2,310 | (3,742 | ) | ||||||||||||||||
Performance from discontinued operations before tax | 0 | 0 | 0 | 0 | 145 | 145 | ||||||||||||||||||
Performance before tax | 8,543 | 621 | 1,454 | (16,669 | ) | 2,455 | (3,597 | ) | ||||||||||||||||
Tax expense on continuing operations | 1,369 | |||||||||||||||||||||||
Tax expense on discontinued operations | (258 | ) | ||||||||||||||||||||||
Net profit | (4,708 | ) | ||||||||||||||||||||||
Additional information5 | ||||||||||||||||||||||||
Total assets | 256,738 | 34,730 | 43,500 | 1,922,815 | 17,109 | 2,274,891 | ||||||||||||||||||
Additions to non-current assets | 223 | 416 | 553 | 1,111 | 1,927 | 4,230 | ||||||||||||||||||
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Financial information |
Note 2b Segment reporting by geographic location
The geographic analysis of operating income and non-current assets is based on the location of the entity in which the transactions and assets are recorded. The divisions of the Group are managed on an autonomous basis worldwide with a focus on cross-divisional collaboration and the interest of UBS’s clients to yield the maximum possible profitability by product line for the Group. The geographical analysis of operating income and non-current assets is provided in order to comply with IFRS.
For the year ended 31 December 2009 | ||||||||||||||||
Total operating income | Total non-current assets | |||||||||||||||
CHF million | Share % | CHF million | Share % | |||||||||||||
Switzerland | 11,939 | 53 | 5,137 | 28 | ||||||||||||
United Kingdom | (3,999 | ) | (18 | ) | 743 | 4 | ||||||||||
Rest of Europe | 1,264 | 6 | 1,266 | 7 | ||||||||||||
United States | 9,333 | 41 | 9,928 | 55 | ||||||||||||
Asia Pacific | 3,770 | 17 | 451 | 3 | ||||||||||||
Rest of the world | 294 | 1 | 565 | 3 | ||||||||||||
Total | 22,601 | 100 | 18,090 | 100 | ||||||||||||
For the year ended 31 December 2008 | ||||||||||||||||
Total operating income | Total non-current assets | |||||||||||||||
CHF million | Share % | CHF million | Share % | |||||||||||||
Switzerland | 11,564 | 1,453 | 5,207 | 25 | ||||||||||||
United Kingdom | (9,219 | ) | (1,158 | ) | 805 | 4 | ||||||||||
Rest of Europe | 6,132 | 770 | 1,337 | 7 | ||||||||||||
United States | (10,519 | ) | (1,321 | ) | 10,505 | 51 | ||||||||||
Asia Pacific | 3,122 | 392 | 495 | 2 | ||||||||||||
Rest of the world | (284 | ) | (36 | ) | 2,184 | 11 | ||||||||||
Total | 796 | 100 | 20,533 | 100 | ||||||||||||
For the year ended 31 December 2007 | ||||||||||||||||
Total operating income | Total non-current assets | |||||||||||||||
CHF million | Share % | CHF million | Share % | |||||||||||||
Switzerland | 18,787 | 59 | 5,355 | 22 | ||||||||||||
United Kingdom | (1,671 | ) | (5 | ) | 2,336 | 10 | ||||||||||
Rest of Europe | 2,541 | 8 | 1,006 | 4 | ||||||||||||
United States | 880 | 3 | 11,686 | 49 | ||||||||||||
Asia Pacific | 6,393 | 20 | 388 | 2 | ||||||||||||
Rest of the world | 4,791 | 15 | 2,980 | 13 | ||||||||||||
Total | 31,721 | 100 | 23,751 | 100 | ||||||||||||
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Financial information
Notes to the consolidated financial statements
Income statement notes
Note 3 Net interest and trading income
Accounting standards require separate disclosure of“Net interest income”and“Net trading income” (see the tables on this and the next page). This required disclosure, however, does not take into account that net interest and trading income are generated by a range of different businesses. In many cases, a particular business can generate both net interest and trading income. Fixed income trading activity, for example, generates both trading profits and coupon income. UBS considers it to be more meaningful to analyze net interest and trading income according to the businesses that drive it. The second table below (“Breakdown by busi-
nesses”) provides information that corresponds to this view: “Net income from trading businesses” includes both interest and trading income generated by the Investment Bank, including its lending activities, and trading income generated by the other business divisions; “Net income from interest margin businesses” comprises interest income from the loan portfolios of Wealth Management & Swiss Bank and Wealth Management Americas; “Net income from treasury activities and other” reflects all income from the Group’s centralized treasury function.
For the year ended | % change from | ||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||
Net interest and trading income | |||||||||||||||||
Net interest income | 6,446 | 5,992 | 5,337 | 8 | |||||||||||||
Net trading income | (324 | ) | (25,820 | ) | (8,353 | ) | 99 | ||||||||||
Total net interest and trading income | 6,122 | (19,828 | ) | (3,016 | ) | ||||||||||||
Breakdown by businesses | |||||||||||||||||
Net income from trading businesses1 | 382 | (27,203) | (10,658 | ) | |||||||||||||
Net income from interest margin businesses | 5,053 | 6,160 | 6,230 | (18 | ) | ||||||||||||
Net income from treasury activities and other | 687 | 1,214 | 1,412 | (43 | ) | ||||||||||||
Total net interest and trading income | 6,122 | (19,828 | ) | (3,016 | ) | ||||||||||||
Net interest income2 | |||||||||||||||||
Interest income | |||||||||||||||||
Interest earned on loans and advances3 | 13,202 | 20,213 | 21,263 | (35 | ) | ||||||||||||
Interest earned on securities borrowed and reverse repurchase agreements | 2,629 | 22,521 | 48,274 | (88 | ) | ||||||||||||
Interest and dividend income from trading portfolio | 7,150 | 22,397 | 39,101 | (68 | ) | ||||||||||||
Interest income on financial assets designated at fair value | 316 | 404 | 298 | (22 | ) | ||||||||||||
Interest and dividend income from financial investments available-for-sale | 164 | 145 | 176 | 13 | |||||||||||||
Total | 23,461 | 65,679 | 109,112 | (64 | ) | ||||||||||||
Interest expense | |||||||||||||||||
Interest on amounts due to banks and customers | 3,873 | 18,150 | 29,318 | (79 | ) | ||||||||||||
Interest on securities lent and repurchase agreements | 2,179 | 16,123 | 40,581 | (86 | ) | ||||||||||||
Interest and dividend expense from trading portfolio | 3,878 | 9,162 | 15,812 | (58 | ) | ||||||||||||
Interest on financial liabilities designated at fair value | 2,855 | 7,298 | 7,659 | (61 | ) | ||||||||||||
Interest on debt issued | 4,231 | 8,954 | 10,405 | (53 | ) | ||||||||||||
Total | 17,016 | 59,687 | 103,775 | (71 | ) | ||||||||||||
Net interest income | 6,446 | 5,992 | 5,337 | 8 | |||||||||||||
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Note 3 Net interest and trading income (continued) | ||||||||||||||||
Net trading income1 | ||||||||||||||||
For the year ended | % change from | |||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||
Investment Bank equities | 2,462 | 4,694 | 9,048 | (48 | ) | |||||||||||
Investment Bank fixed income, currencies and commodities | (5,455 | ) | (35,040 | ) | (21,424 | ) | 84 | |||||||||
Other business divisions | 2,668 | 4,525 | 4,023 | (41 | ) | |||||||||||
Net trading income | (324 | ) | (25,820 | ) | (8,353 | ) | 99 | |||||||||
of which: net gains/(losses) from financial assets designated at fair value | 678 | (974 | ) | (30 | ) | |||||||||||
of which: net gains/(losses) from financial liabilities designated at fair value2 | (6,741 | ) | 44,284 | (3,779 | ) | |||||||||||
Significant impacts on net trading income
Net trading income in 2009 includes a loss of CHF 0.8 billion from credit valuation adjustments for monoline credit protection (CHF 8.2 billion loss in 2008); refer to the “Risk management and control” section of this report for more information on exposure to monolines. Additional losses of CHF 23.7 billion related to positions previously considered risk concentrations were included in 2008.
The SNB transaction resulted in gains of CHF 0.1 billion from the valuation of UBS’s option to acquire the SNB StabFund’s equity and losses of CHF 0.2 billion due to price adjustments for positions transferred to the fund (losses of CHF 5.2 billion in 2008).
Note 4 Net fee and commission income
For the year ended | % change from | |||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||
Equity underwriting fees | 1,590 | 1,138 | 2,564 | 40 | ||||||||||||
Debt underwriting fees | 796 | 818 | 1,178 | (3 | ) | |||||||||||
Total underwriting fees | 2,386 | 1,957 | 3,742 | 22 | ||||||||||||
M&A and corporate finance fees | 881 | 1,662 | 2,768 | (47 | ) | |||||||||||
Brokerage fees1 | 6,217 | 8,209 | 10,211 | (24 | ) | |||||||||||
Investment fund fees | 4,000 | 5,583 | 7,422 | (28 | ) | |||||||||||
Portfolio management and advisory fees2 | 5,863 | 7,667 | 9,454 | (24 | ) | |||||||||||
Insurance-related and other fees | 264 | 317 | 423 | (17 | ) | |||||||||||
Total securities trading and investment activity fees | 19,611 | 25,394 | 34,020 | (23 | ) | |||||||||||
Credit-related fees and commissions | 339 | 273 | 279 | 24 | ||||||||||||
Commission income from other services | 878 | 1,010 | 1,017 | (13 | ) | |||||||||||
Total fee and commission income | 20,827 | 26,677 | 35,316 | (22 | ) | |||||||||||
Brokerage fees paid1 | 1,748 | 1,763 | 2,540 | (1 | ) | |||||||||||
Other | 1,368 | 1,984 | 2,142 | (31 | ) | |||||||||||
Total fee and commission expense | 3,116 | 3,748 | 4,682 | (17 | ) | |||||||||||
Net fee and commission income | 17,712 | 22,929 | 30,634 | (23 | ) | |||||||||||
of which: net brokerage fees | 4,469 | 6,445 | 7,671 | (31 | ) | |||||||||||
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Notes to the consolidated financial statements
Note 5 Other income
For the year ended | % change from | |||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||
Associates and subsidiaries | ||||||||||||||||
Net gains from disposals of consolidated subsidiaries1 | 96 | (184 | ) | (70 | ) | |||||||||||
Net gains from disposals of investments in associates | (1 | ) | 199 | 28 | ||||||||||||
Share of net profits of associates | 37 | (6 | ) | 145 | ||||||||||||
Total | 133 | 9 | 103 | |||||||||||||
Financial investments available-for-sale | ||||||||||||||||
Net gains from disposals | 110 | 615 | 2 | 3,338 | 3 | (82 | ) | |||||||||
Impairment charges | (349 | )4 | (202 | ) | (71 | ) | (73 | ) | ||||||||
Total | (239 | ) | 413 | 3,267 | ||||||||||||
Net income from investments in property5 | 72 | 88 | 108 | (18 | ) | |||||||||||
Net gains from investment properties6 | (39 | ) | 0 | 31 | ||||||||||||
Other income from Industrial Holdings | 0 | 0 | 689 | |||||||||||||
Other | 672 | 7 | 183 | 143 | 267 | |||||||||||
Total other income | 599 | 692 | 4,341 | (13 | ) | |||||||||||
Note 6 Personnel expenses
For the year ended | % change from | |||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||
Salaries and variable compensation | 12,801 | 12,207 | 20,715 | 5 | ||||||||||||
Contractors | 275 | 423 | 630 | (35 | ) | |||||||||||
Insurance and social security contributions | 851 | 706 | 1,290 | 21 | ||||||||||||
Contribution to retirement plans | 941 | 926 | 922 | 2 | ||||||||||||
Other personnel expenses | 1,675 | 2,000 | 1,958 | (16 | ) | |||||||||||
Total personnel expenses | 16,543 | 16,262 | 25,515 | 2 | ||||||||||||
of which: share-based personnel expense | 913 | (94 | ) | 3,173 | ||||||||||||
Note 7 General and administrative expenses
For the year ended | % change from | |||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | ||||||||||||
Occupancy | 1,420 | 1,516 | 1,569 | (6 | ) | |||||||||||
Rent and maintenance of IT and other equipment | 623 | 669 | 701 | (7 | ) | |||||||||||
Telecommunications and postage | 697 | 888 | 948 | (22 | ) | |||||||||||
Administration | 695 | 926 | 991 | (25 | ) | |||||||||||
Marketing and public relations | 225 | 408 | 585 | (45 | ) | |||||||||||
Travel and entertainment | 412 | 728 | 1,029 | (43 | ) | |||||||||||
Professional fees | 830 | 1,085 | 1,106 | (24 | ) | |||||||||||
Outsourcing of IT and other services | 836 | 1,029 | 1,233 | (19 | ) | |||||||||||
Other | 512 | 3,249 | 1 | 267 | (84 | ) | ||||||||||
Total general and administrative expenses | 6,248 | 10,498 | 8,429 | (40 | ) | |||||||||||
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Note 8 Earnings per share (EPS) and shares outstanding
As of or for the year ended | % change from | |||||||||||||||
31.12.09 | 31.12.08 | 31.12.07 | 31.12.08 | |||||||||||||
Basic earnings (CHF million) | ||||||||||||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (21,292 | ) | (5,247 | ) | 87 | |||||||||
from continuing operations | (2,719 | ) | (21,442 | ) | (5,650 | ) | 87 | |||||||||
from discontinued operations | (17 | ) | 150 | 403 | ||||||||||||
Diluted earnings (CHF million) | ||||||||||||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (21,292 | ) | (5,247 | ) | 87 | |||||||||
Less: (profit)/loss on equity derivative contracts | (5 | ) | (28 | ) | (16 | ) | 82 | |||||||||
Net profit attributable to UBS shareholders for diluted EPS | (2,741 | ) | (21,320 | ) | (5,263 | ) | 87 | |||||||||
from continuing operations | (2,724 | ) | (21,470 | ) | (5,666 | ) | 87 | |||||||||
from discontinued operations | (17 | ) | 150 | 403 | ||||||||||||
Weighted average shares outstanding | ||||||||||||||||
Weighted average shares outstanding for basic EPS | 3,661,086,266 | 2,792,023,098 | 2,182,836,078 | 31 | ||||||||||||
Potentially dilutive ordinary shares resulting from unvested exchangeable shares, in-the-money options and warrants outstanding1 | 754,948 | 1,151,556 | 1,467,326 | 2 | (34 | ) | ||||||||||
Weighted average shares outstanding for diluted EPS | 3,661,841,214 | 2,793,174,654 | 2,184,303,404 | 31 | ||||||||||||
Potential ordinary shares from unexercised employee shares and in-the-money options not considered due to the anti-dilutive effect | 20,166,373 | 27,909,964 | 53,668,047 | (28 | ) | |||||||||||
Earnings per share (CHF) | ||||||||||||||||
Basic | (0.75 | ) | (7.63 | ) | (2.40 | ) | 90 | |||||||||
from continuing operations | (0.74 | ) | (7.68 | ) | (2.59 | ) | 90 | |||||||||
from discontinued operations | 0.00 | 0.05 | 0.18 | (100 | ) | |||||||||||
Diluted | (0.75 | ) | (7.63 | ) | (2.41 | ) | 90 | |||||||||
from continuing operations | (0.74 | ) | (7.69 | ) | (2.59 | ) | 90 | |||||||||
from discontinued operations | 0.00 | 0.05 | 0.18 | (100 | ) | |||||||||||
Shares outstanding | ||||||||||||||||
Ordinary shares issued | 3,558,112,753 | 2,932,580,549 | 2,073,547,344 | 21 | ||||||||||||
Treasury shares | 37,553,872 | 61,903,121 | 158,105,524 | (39 | ) | |||||||||||
Shares outstanding | 3,520,558,881 | 2,870,677,428 | 1,915,441,820 | 23 | ||||||||||||
Retrospective adjustments for stock dividend3 | 95,772,091 | |||||||||||||||
Retrospective adjustments for rights issue2 | 141,850,917 | |||||||||||||||
Retrospective adjustment for capital increase4 | 23,252,487 | 17,439,825 | ||||||||||||||
Mandatory convertible notes and exchangeable shares5 | 273,264,461 | 605,547,748 | 518,711 | (55 | ) | |||||||||||
Shares outstanding for EPS | 3,793,823,342 | 3,499,477,663 | 2,171,023,364 | 8 | ||||||||||||
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Notes to the consolidated financial statements
Balance sheet notes: assets
Note 9a Due from banks and loans (held at amortized cost) | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
By type of exposure | ||||||||
Banks, gross | 46,606 | 64,473 | ||||||
Allowance for credit losses | (32 | ) | (22 | ) | ||||
Net due from banks | 46,574 | 64,451 | ||||||
Loans, gross | ||||||||
Residential mortgages | 121,031 | 121,811 | ||||||
Commercial mortgages | 19,970 | 21,270 | ||||||
Other loans1 | 141,237 | 173,812 | ||||||
Securities2 | 27,237 | 26,320 | ||||||
Subtotal | 309,475 | 343,213 | ||||||
Allowance for credit losses | (2,648 | ) | (2,905 | ) | ||||
of which: related to securities | (179 | ) | (126 | ) | ||||
Net loans | 306,828 | 340,308 | ||||||
Net due from banks and loans (held at amortized cost) | 353,402 | 404,759 | ||||||
By geographical region (based on the location of the borrower) | ||||||||
Switzerland | 163,397 | 166,798 | ||||||
United Kingdom | 24,038 | 30,540 | ||||||
Rest of Europe | 35,482 | 47,724 | ||||||
United States | 85,411 | 105,907 | ||||||
Asia Pacific | 19,531 | 23,279 | ||||||
Rest of the world | 32,231 | 38,590 | ||||||
Subtotal | 360,090 | 412,838 | ||||||
Allowance for credit losses | (2,680 | ) | (2,927 | ) | ||||
Net due from banks, loans (held at amortized cost) and loans designated at fair value3 | 357,410 | 409,911 | ||||||
By type of collateral | ||||||||
Secured by real estate | 142,617 | 145,491 | ||||||
Collateralized by securities | 56,783 | 56,312 | ||||||
Guarantees and other collateral | 75,589 | 113,032 | ||||||
Unsecured | 85,101 | 98,003 | ||||||
Subtotal | 360,090 | 412,838 | ||||||
Allowance for credit losses | (2,680 | ) | (2,927 | ) | ||||
Net due from banks, loans (held at amortized cost) and loans designated at fair value3 | 357,410 | 409,911 | ||||||
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Note 9b Allowances and provisions for credit losses | ||||||||||||||||
Specific | Collective loan | |||||||||||||||
allowances and | loss allowances | |||||||||||||||
CHF million | provisions | and provisions | Total 31.12.09 | Total 31.12.08 | ||||||||||||
Balance at the beginning of the year | 3,047 | 23 | 3,070 | 1,164 | ||||||||||||
Write-offs | (2,046 | ) | 0 | (2,046 | ) | (868 | ) | |||||||||
Recoveries | 52 | 0 | 52 | 44 | ||||||||||||
Increase/(decrease) in credit loss allowances and provisions recognized in the income statement | 1,806 | 26 | 1,832 | 2,996 | ||||||||||||
Disposals | (51 | ) | 0 | (51 | ) | (223 | ) | |||||||||
Foreign currency translation and other adjustments | (37 | ) | 0 | (37 | ) | (43 | ) | |||||||||
Balance at the end of the year | 2,771 | 1 | 49 | 2,820 | 3,070 | |||||||||||
Specific | Collective loan | |||||||||||||||
allowances and | loss allowances | |||||||||||||||
CHF million | provisions | and provisions | Total 31.12.09 | Total 31.12.08 | ||||||||||||
As a reduction of due from banks | 32 | 0 | 32 | 22 | ||||||||||||
As a reduction of loans1 | 2,598 | 49 | 2,648 | 2,905 | ||||||||||||
As a reduction of securities borrowed | 51 | 0 | 51 | 112 | ||||||||||||
Subtotal | 2,681 | 49 | 2,730 | 3,039 | ||||||||||||
Included in other liabilities related to provisions for contingent claims | 90 | 0 | 90 | 31 | ||||||||||||
Total allowances and provisions for credit losses | 2,771 | 49 | 2,820 | 3,070 | ||||||||||||
Note 10 Cash collateral on securities borrowed and lent, repurchase and reverse repurchase agreements
The Group enters into collateralized reverse repurchase and repurchase agreements and securities borrowing and securities lending transactions that may result in credit exposure in the event that the counterparty to the transaction is unable to fulfill its contractual obligations. The Group controls credit
risk associated with these activities by monitoring counterparty credit exposure and collateral values on a daily basis and requiring additional collateral to be deposited with or returned to the Group when deemed necessary.
Balance sheet assets | ||||||||||||
Cash collateral on | Reverse repurchase | Cash collateral on | Reverse repurchase | |||||||||
securities borrowed | agreements | securities borrowed | agreements | |||||||||
CHF million | 31.12.09 | 31.12.09 | 31.12.08 | 31.12.08 | ||||||||
By counterparty | ||||||||||||
Banks | 17,143 | 71,051 | 17,523 | 110,254 | ||||||||
Customers | 46,364 | 45,638 | 105,374 | 114,393 | ||||||||
Total | 63,507 | 116,689 | 122,897 | 224,648 | ||||||||
Balance sheet liabilities | ||||||||||||
Cash collateral on | Repurchase | Cash collateral on | Repurchase | |||||||||
securities lent | agreements | securities lent | agreements | |||||||||
CHF million | 31.12.09 | 31.12.09 | 31.12.08 | 31.12.08 | ||||||||
By counterparty | ||||||||||||
Banks | 7,268 | 26,167 | 12,181 | 36,088 | ||||||||
Customers | 727 | 38,008 | 1,881 | 66,473 | ||||||||
Total | 7,995 | 64,175 | 14,063 | 102,561 | ||||||||
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Notes to the consolidated financial statements
Note 11 Trading portfolio
The Group trades in debt instruments (including money market papers and tradeable loans), equity instruments, precious metals, other commodities and derivatives to meet the financial needs of its clients and to generate revenue. Non-derivative traded instruments are included in the table
below. For derivative instruments, refer to “Note 23 Derivative instruments and hedge accounting”. The table below represents an IFRS accounting view. It does not reflect hedges and other risk mitigating factors, and the amounts therefore may not be reflective for risk exposures.
31.12.09 | 31.12.08 | |||||||||||||||||||
CHF million | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Trading portfolio assets | ||||||||||||||||||||
Debt instruments | ||||||||||||||||||||
Government and government agencies | 59,731 | 21,656 | 742 | 82,129 | 115,696 | |||||||||||||||
of which: Switzerland | 155 | 121 | ||||||||||||||||||
of which: United States | 22,498 | 31,366 | ||||||||||||||||||
of which: Japan | 25,795 | 46,049 | ||||||||||||||||||
Banks | 578 | 13,768 | 678 | 15,024 | 23,175 | |||||||||||||||
Corporates and other | 3,293 | 28,123 | 10,462 | 41,878 | 85,991 | |||||||||||||||
Total debt instruments | 63,601 | 63,546 | 11,882 | 139,030 | 224,862 | |||||||||||||||
of which: pledged as collateral | 46,348 | 62,153 | ||||||||||||||||||
of which: pledged as collateral and can be repledged or resold by counterparty | 30,622 | 30,903 | ||||||||||||||||||
Equity instruments | 61,788 | 14,317 | 258 | 76,364 | 77,258 | |||||||||||||||
of which: pledged as collateral | 18,400 | 15,849 | ||||||||||||||||||
of which: pledged as collateral and can be repledged or resold by counterparty | 13,599 | 9,312 | ||||||||||||||||||
Subtotal | 125,389 | 77,864 | 12,141 | 215,393 | 302,120 | |||||||||||||||
Precious metals and other commodities | 16,864 | 9,934 | ||||||||||||||||||
Total trading portfolio assets | 232,258 | 312,054 | ||||||||||||||||||
Trading portfolio liabilities | ||||||||||||||||||||
Debt instruments | ||||||||||||||||||||
Government and government agencies | 20,389 | 5,917 | 0 | 26,306 | 34,043 | |||||||||||||||
of which: Switzerland | 85 | 129 | ||||||||||||||||||
of which: United States | 10,351 | 18,914 | ||||||||||||||||||
of which: Japan | 3,384 | 2,344 | ||||||||||||||||||
Banks | 753 | 2,617 | 102 | 3,472 | 4,354 | |||||||||||||||
Corporates and other | 298 | 4,989 | 161 | 5,447 | 10,945 | |||||||||||||||
Total debt instruments | 21,441 | 13,523 | 262 | 35,226 | 49,342 | |||||||||||||||
Equity instruments | 12,014 | 70 | 160 | 12,243 | 13,089 | |||||||||||||||
Total trading portfolio liabilities | 33,454 | 13,593 | 422 | 47,469 | 62,431 | |||||||||||||||
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Note 12 Financial assets designated at fair value | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
Loans | 3,052 | 4,500 | ||||||
Structured loans | 957 | 653 | ||||||
Reverse repurchase and securities borrowing agreements | ||||||||
Banks | 3,712 | 4,321 | ||||||
Customers | 1,662 | 2,329 | ||||||
Other financial assets | 840 | 1,079 | ||||||
Total financial assets designated at fair value | 10,223 | 12,882 | ||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
Notional amount of loans and structured loans | 4,224 | 6,186 | ||||||
Credit derivatives related to loans and structured loans – notional amounts1 | 2,699 | 4,314 | ||||||
Credit derivatives related to loans and structured loans – fair value1 | 90 | 547 | ||||||
Additional Information | ||||||||||||||||
Cumulative from inception | ||||||||||||||||
For the year ended | until the year ended | |||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | ||||||||||||
Change in fair value of loans and structured loans designated at fair value, attributable to changes in credit risk2 | 530 | (668 | ) | (128 | ) | (659 | ) | |||||||||
Change in fair value of credit derivatives and similar instruments which mitigate the maximum exposure to credit loss of loans and structured loans designated at fair value2 | (435 | ) | 486 | 90 | 547 | |||||||||||
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Notes to the consolidated financial statements
Note 13 Financial investments available-for-sale | |||||||||||||||||||||
31.12.09 | 31.12.08 | ||||||||||||||||||||
CHF million | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||
Debt instruments | |||||||||||||||||||||
Government and government agencies | 72,510 | 3,591 | 41 | 76,142 | 2,349 | ||||||||||||||||
of which: Switzerland | 232 | 3 | |||||||||||||||||||
of which: United States | 46,906 | 281 | |||||||||||||||||||
of which: Germany | 7,958 | 0 | |||||||||||||||||||
of which: France | 7,936 | 0 | |||||||||||||||||||
of which: United Kingdom | 4,774 | 2,014 | |||||||||||||||||||
of which: Japan | 3,950 | 0 | |||||||||||||||||||
Banks | 1,748 | 1,981 | 4 | 3,732 | 180 | ||||||||||||||||
Corporates and other | 14 | 95 | 422 | 531 | 1,038 | ||||||||||||||||
Total debt instruments1 | 74,271 | 5,667 | 467 | 80,406 | 3,567 | ||||||||||||||||
Equity instruments | 35 | 405 | 910 | 1,351 | 1,681 | ||||||||||||||||
Total financial investments available-for-sale | 74,307 | 6,073 | 1,378 | 81,757 | 5,248 | ||||||||||||||||
Net unrealized gains (losses) – before tax | 500 | 403 | |||||||||||||||||||
Net unrealized gains (losses) – after tax | 391 | 349 | |||||||||||||||||||
Note 14 Investments in associates | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
Carrying amount at the beginning of the year | 892 | 1,979 | ||||||
Additions | 14 | 807 | ||||||
Disposals | (38 | ) | (1,307 | ) | ||||
Transfers | (1 | ) | (422 | ) | ||||
Income | 42 | 12 | ||||||
Impairments | (4 | ) | (18 | ) | ||||
Dividends paid | (30 | ) | (34 | ) | ||||
Foreign currency translation | (5 | ) | (125 | ) | ||||
Carrying amount at the end of the year | 870 | 892 | ||||||
Significant associated companies of the Group had the following balance sheet and income statement totals on an aggregated basis, not adjusted for the Group’s proportionate interest. Refer to “Note 34 Significant subsidiaries and associates”.
CHF million | 31.12.09 | 31.12.08 | ||||||
Assets | 5,155 | 4,272 | ||||||
Liabilities | 3,248 | 3,448 | ||||||
Revenues | 1,468 | 1,211 | ||||||
Net profit | 319 | 198 | ||||||
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Note 15 Property and equipment
At historical cost less accumulated depreciation | ||||||||||||||||||||||||||||
Leasehold | IT, software | Other | ||||||||||||||||||||||||||
Own-used | improve- | and com- | machines and | Projects in | ||||||||||||||||||||||||
CHF million | properties | ments | munication | equipment | progress | 31.12.09 | 31.12.08 | |||||||||||||||||||||
Historical cost | ||||||||||||||||||||||||||||
Balance at the beginning of the year | 9,289 | 3,393 | 4,086 | 867 | 317 | 17,952 | 18,723 | |||||||||||||||||||||
Additions | 259 | 77 | 265 | 24 | 229 | 854 | 1,181 | |||||||||||||||||||||
Additions from acquired companies | 0 | 0 | 0 | 0 | 0 | 0 | 7 | |||||||||||||||||||||
Disposals/write-offs1 | (15 | ) | (309 | ) | (346 | ) | (65 | ) | 0 | (736 | ) | (792 | ) | |||||||||||||||
Reclassifications | (78 | ) | 76 | 132 | (34 | ) | (323 | ) | (227 | ) | (222 | ) | ||||||||||||||||
Foreign currency translation | 13 | (10 | ) | 12 | (7 | ) | (6 | ) | 2 | (945 | ) | |||||||||||||||||
Balance at the end of the year | 9,468 | 3,227 | 4,150 | 784 | 217 | 17,846 | 17,952 | |||||||||||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||||||
Balance at the beginning of the year | 5,272 | 2,031 | 3,612 | 546 | 0 | 11,461 | 11,679 | |||||||||||||||||||||
Depreciation2 | 247 | 358 | 371 | 72 | 0 | 1,048 | 1,241 | |||||||||||||||||||||
Disposals/write-offs1 | (13 | ) | (263 | ) | (325 | ) | (42 | ) | 0 | (644 | ) | (697 | ) | |||||||||||||||
Reclassifications | (94 | ) | 3 | 2 | (14 | ) | 0 | (104 | ) | (164 | ) | |||||||||||||||||
Foreign currency translation | 6 | (20 | ) | 9 | (7 | ) | 0 | (12 | ) | (598 | ) | |||||||||||||||||
Balance at the end of the year | 5,417 | 2,109 | 3,669 | 555 | 0 | 11,750 | 11,461 | |||||||||||||||||||||
Net book value at the end of the year3 | 4,051 | 1,118 | 481 | 229 | 217 | 6,096 | 6,491 | |||||||||||||||||||||
Investment properties at fair value | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
Balance at the beginning of the year | 215 | 189 | ||||||
Additions | 0 | 37 | ||||||
Sales | (60 | ) | 0 | |||||
Revaluations | (37 | ) | (6 | ) | ||||
Foreign currency translation | (2 | ) | (5 | ) | ||||
Balance at the end of the year | 116 | 215 | ||||||
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Financial information
Notes to the consolidated financial statements
Note 16 Goodwill and intangible assets
Introduction
Methodology for goodwill impairment testing
Assumptions
Discount and growth rates | ||||||||||||||||
Discount rates | Growth rates | |||||||||||||||
ln % | 31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | ||||||||||||
Wealth Management & Swiss Bank | 9.0 | 9.5 | 1.2 | 1.3 | ||||||||||||
Wealth Management Americas | 9.0 | 11.5 | 2.4 | 2.6 | ||||||||||||
Global Asset Management | 9.0 | 11.0 | 2.4 | 2.6 | ||||||||||||
Investment Bank | 11.0 | 13.0 | 2.4 | 2.6 | ||||||||||||
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Note 16 Goodwill and intangible assets (continued)
Investment Bank/Wealth Management Americas
On 31 December 2009, the assessment of the goodwill of the Investment Bank and Wealth Management Americas continued to be a key focus. Goodwill allocated to the Investment Bank amounted to CHF 3.3 billion at 31 December 2009 (CHF 4.3 billion at 31 December 2008). The reduction is due to the derecognition of CHF 0.9 billion goodwill related to UBS Pactual, of which CHF 749 million was subject to an impairment (refer to Note 38 for details). Goodwill allocated to Wealth Management Americas amounted to CHF 3.7 billion at 31 December 2009 (CHF 3.8 billion at 31 December 2008). In 2009, CHF 40 million goodwill related to UBS Pactual was derecognized, of which CHF 34 million was subject to an impairment (refer to Note 38 for details).
In its review of the year-end 2009 goodwill balance, UBS considered the performance outlook of its Investment Bank and Wealth Management Americas business divisions and the underlying business operations to resolve whether the recoverable amounts for these units covers their carrying amounts, based on the methodology described above. On this basis, UBS concluded that goodwill allocated to the Investment Bank and Wealth Management Americas remained
recoverable at 31 December 2009. The conclusion was reached based on the current forecast results and the underlying assumption that the economic environment will gradually improve over the next three years and reach an average growth level thereafter. The fair value obtained from the model calculation was subject to a stress test by decreasing forecast cash flows by one-third and at the same time increasing the discount rate by 3.5 percentage points. The stress values so obtained covered the book values of the Investment Bank and Wealth Management Americas. However, if the regulatory pressure on the banking industry intensifies and conditions in the financial markets turn out to be worse than anticipated in UBS’s performance forecasts, the goodwill carried in the Investment Bank and Wealth Management Americas business divisions might need to be impaired in future quarters.
Recognition of any impairment of goodwill would reduce IFRS Equity attributable to UBS shareholders and net profit but it would not impact cash flows, as well as the BIS tier 1 capital, BIS total capital, and capital ratios of the UBS Group, as goodwill is required to be deducted from capital under the Basel II capital framework.
Goodwill | Intangible assets | |||||||||||||||||||||||
Customer | ||||||||||||||||||||||||
relationships, | ||||||||||||||||||||||||
contractual | ||||||||||||||||||||||||
CHF million | Total | Infrastructure | rights and other | Total | 31.12.09 | 31.12.08 | ||||||||||||||||||
Historical cost | ||||||||||||||||||||||||
Balance at the beginning of the year | 11,585 | 824 | 1,308 | 2,131 | 13,716 | 15,324 | ||||||||||||||||||
Additions and reallocations | 32 | 0 | 38 | 38 | 70 | 585 | ||||||||||||||||||
Disposals | (1,631 | ) | (13 | ) | (546 | ) | (559 | ) | (2,190 | ) | (33 | ) | ||||||||||||
Write-offs1 | 0 | 0 | 0 | 0 | 0 | (472 | ) | |||||||||||||||||
Foreign currency translation | 128 | (24 | ) | 95 | 71 | 199 | (1,688 | ) | ||||||||||||||||
Balance at the end of the year | 10,115 | 787 | 894 | 1,680 | 11,795 | 13,716 | ||||||||||||||||||
Accumulated amortization and impairment | ||||||||||||||||||||||||
Balance at the beginning of the year | 0 | 337 | 444 | 781 | 781 | 786 | ||||||||||||||||||
Amortization | 0 | 42 | 102 | 144 | 144 | 193 | ||||||||||||||||||
Impairment of goodwill and intangible assets | 1,1232 | 0 | 57 | 57 | 1,180 | 361 | ||||||||||||||||||
Disposals | (1,199 | ) | (6 | ) | (211 | ) | (217 | ) | (1,416 | ) | (7 | ) | ||||||||||||
Write-offs1 | 0 | 0 | 0 | 0 | 0 | (472 | ) | |||||||||||||||||
Foreign currency translation | 76 | (12 | ) | 34 | 23 | 99 | (80 | ) | ||||||||||||||||
Balance at the end of the year | 0 | 361 | 426 | 787 | 787 | 781 | ||||||||||||||||||
Net book value at the end of the year | 10,115 | 425 | 468 | 893 | 11,008 | 12,935 | ||||||||||||||||||
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Financial information
Notes to the consolidated financial statements
Note 16 Goodwill and intangible assets (continued)
The following table presents goodwill and intangible assets by business unit for the year ended 31 December 2009.
Balance at | Additions | Foreign | Balance at | |||||||||||||||||||||||||
the beginning | and | currency | the end of | |||||||||||||||||||||||||
CHF million | of the year | reallocations | Disposals | Amortization | Impairment | translation | the year | |||||||||||||||||||||
Goodwill | ||||||||||||||||||||||||||||
Wealth Management & Swiss Bank | 1,523 | 1 | (2 | ) | 0 | 0 | (11 | ) | 1,510 | |||||||||||||||||||
Wealth Management Americas | 3,803 | 1 | (1 | ) | (14 | ) | (34 | ) | (100 | ) | 3,655 | |||||||||||||||||
Global Asset Management | 1,982 | 4 | (130 | ) | (340 | ) | 94 | 1,610 | ||||||||||||||||||||
Investment Bank | 4,277 | 31 | (287 | ) | (749 | ) | 68 | 3,341 | ||||||||||||||||||||
UBS | 11,585 | 32 | (432 | ) | (1,123 | ) | 52 | 10,115 | ||||||||||||||||||||
Intangible assets | ||||||||||||||||||||||||||||
Wealth Management & Swiss Bank | 203 | 1 | 0 | 0 | (11 | ) | (56 | ) | 1 | 137 | ||||||||||||||||||
Wealth Management Americas | 674 | 1 | 0 | (83 | ) | (61 | ) | (1 | ) | (4 | ) | 526 | ||||||||||||||||
Global Asset Management | 186 | 0 | (160 | ) | (13 | ) | 0 | 36 | 49 | |||||||||||||||||||
Investment Bank | 286 | 38 | (99 | ) | (59 | ) | 0 | 15 | 182 | |||||||||||||||||||
UBS | 1,350 | 38 | (342 | ) | (144 | ) | (57 | ) | 48 | 893 | ||||||||||||||||||
The estimated, aggregated amortization expenses for intangible assets are as follows:
CHF million | Intangible assets | |||
Estimated, aggregated amortization expenses for: | ||||
2010 | 105 | |||
2011 | 103 | |||
2012 | 97 | |||
2013 | 89 | |||
2014 | 82 | |||
2015 and thereafter | 417 | |||
Total | 893 | |||
Note 17 Other assets
CHF million | 31.12.09 | 31.12.08 | ||||||
Settlement and clearing accounts | 915 | 1,203 | ||||||
VAT and other tax receivables | 209 | 330 | ||||||
Prepaid pension costs | 3,053 | 2,922 | ||||||
Properties held for sale | 568 | 981 | ||||||
Other receivables | 2,590 | 4,495 | ||||||
Total other assets | 7,336 | 9,931 | ||||||
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Balance sheet notes: liabilities
Note 18 Due to banks and customers
CHF million | 31.12.09 | 31.12.08 | ||||||
Due to banks | 65,166 | 125,628 | ||||||
Due to customers in savings and investment accounts | 101,573 | 91,614 | ||||||
Other amounts due to customers | 308,903 | 374,127 | ||||||
Total due to customers | 410,475 | 465,741 | ||||||
Total due to banks and customers | 475,641 | 591,369 | ||||||
Note 19 Financial liabilities designated at fair value and debt issued
Financial liabilities designated at fair value | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
Bonds and compound debt instruments issued | ||||||||
Equity linked | 54,856 | |||||||
Credit linked | 25,663 | |||||||
Rates linked | 16,367 | |||||||
Other | 2,286 | |||||||
Total | 99,173 | 92,446 | 1 | |||||
Compound debt instruments – OTC | 13,306 | 7,468 | ||||||
Loan commitments2 | 174 | 1,632 | ||||||
Total | 112,653 | 101,546 | ||||||
At 31 December 2009, the contractual redemption amount at maturity of Financial liabilities designated at fair value through profit or loss was CHF 7.6 billion higher than the carrying value. At 31 December 2008, the contractual re-
demption amount at maturity of such liabilities was CHF 12.2 billion higher than the carrying value. Refer to Note 1a) 8) for details.
Debt issued (held at amortized cost) | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
Money market papers | 51,579 | 111,619 | ||||||
Debt: | ||||||||
Senior bonds | 57,653 | 67,298 | ||||||
Subordinated bonds | 11,244 | 12,769 | ||||||
Bonds issued by the central bond institutions of the Swiss regional or cantonal banks | 7,909 | 2,418 | ||||||
Medium-term notes | 2,967 | 3,150 | ||||||
Total | 131,352 | 197,254 | ||||||
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Financial information
Notes to the consolidated financial statements
Note 19 Financial liabilities designated at fair value and debt issued (continued)
The Group uses interest rate and foreign exchange derivatives to manage the risks inherent in certain debt issues (held at amortized cost). In certain cases, the Group applies hedge accounting for interest rate risk as discussed in Note 1 a) 15) and “Note 23 Derivative Instruments and Hedge Accounting”. As a result of applying hedge accounting, at 31 December 2009 and 31 December 2008, the carrying value of debt issued was CHF 600 million higher and CHF 904 million higher, respectively, reflecting changes in fair value due to interest rate movements.
12,769 million, respectively, in subordinated debt. Subordinated debt usually pays fixed interest annually or floating rate interest based on three-month or six-month London Interbank Offered Rate (LIBOR) and provides for single principal payments upon maturity.
Contractual maturity dates | ||||||||||||||||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 2010 | 2011 | 2012 | 2013 | 2014 | 2015-2019 | Thereafter | 31.12.09 | 31.12.08 | |||||||||||||||||||||||||||
UBS AG (Parent Bank) | ||||||||||||||||||||||||||||||||||||
Senior debt | ||||||||||||||||||||||||||||||||||||
Fixed rate | 66,450 | 13,600 | 7,839 | 10,609 | 8,132 | 17,517 | 6,209 | 130,356 | 103,579 | |||||||||||||||||||||||||||
Interest rates (range in %)1 | 0 – 10.46 | 0 – 10.00 | 0 – 7.0 | 0 – 9.44 | 0 – 8.84 | 0 – 9.5 | 0 – 8.0 | |||||||||||||||||||||||||||||
Floating rate | 16,341 | 11,154 | 10,463 | 5,653 | 4,368 | 8,631 | 11,765 | 68,375 | 81,000 | |||||||||||||||||||||||||||
Subordinated debt | ||||||||||||||||||||||||||||||||||||
Fixed rate | 0 | 0 | 0 | 0 | 397 | 5,488 | 1,282 | 7,167 | 8,875 | |||||||||||||||||||||||||||
Interest rates (range in %) | 3.34 | 2.38 – 7.38 | 6.38 – 8.75 | |||||||||||||||||||||||||||||||||
Floating rate | 0 | 0 | 0 | 0 | 0 | 3,578 | 499 | 4,077 | 3,820 | |||||||||||||||||||||||||||
Subtotal | 82,792 | 24,754 | 18,303 | 16,262 | 12,897 | 35,214 | 19,754 | 209,975 | 197,274 | |||||||||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||||||||||||||
Senior debt | ||||||||||||||||||||||||||||||||||||
Fixed rate | 8,335 | 1,012 | 308 | 340 | 180 | 944 | 8,375 | 19,494 | 83,003 | |||||||||||||||||||||||||||
Interest rates (range in %)1 | 0 – 9.0 | 0 – 9.49 | 0 – 7.74 | 0 – 9.0 | 0 – 7.63 | 0 – 5.54 | 0 – 12.0 | |||||||||||||||||||||||||||||
Floating rate | 1,160 | 1,451 | 1,354 | 1,108 | 713 | 4,650 | 4,102 | 14,537 | 18,449 | |||||||||||||||||||||||||||
Subordinated debt | ||||||||||||||||||||||||||||||||||||
Fixed rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 74 | |||||||||||||||||||||||||||
Interest rates (range in %) | ||||||||||||||||||||||||||||||||||||
Floating rate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Subtotal | 9,495 | 2,463 | 1,661 | 1,448 | 893 | 5,594 | 12,476 | 34,030 | 101,526 | |||||||||||||||||||||||||||
Total | 92,287 | 27,217 | 19,964 | 17,710 | 13,789 | 40,808 | 32,230 | 244,005 | 298,800 | |||||||||||||||||||||||||||
The table above indicates fixed interest rate coupons on the Group’s bonds. The high or low coupons generally relate to structured debt issues prior to the separation of embedded derivatives. As a result, the stated interest rate on such debt
issues generally does not reflect the effective interest rate the Group is paying to service its debt after the embedded derivative has been separated and, where applicable, the application of hedge accounting.
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Note 20 Other liabilities
CHF million | Note | 31.12.09 | 31.12.08 | |||||||||
Provisions | 21 | 2,311 | 2,727 | |||||||||
Provisions for contingent claims | 9b | 90 | 31 | |||||||||
Current tax liabilities | 1,082 | 1,192 | ||||||||||
Deferred tax liabilities | 22 | 142 | 1,470 | |||||||||
VAT and other tax payables | 612 | 1,022 | ||||||||||
Settlement and clearing accounts | 1,430 | 3,089 | ||||||||||
Amounts due under unit-linked investment contracts | 21,740 | 22,084 | ||||||||||
Other payables1 | 6,579 | 11,384 | ||||||||||
Total other liabilities | 33,986 | 42,998 | ||||||||||
Note 21 Provisions and litigation
Total | Total | |||||||||||||||||||||||
CHF million | Operational1 | Litigation2 | Restructuring | Other4 | 31.12.09 | 31.12.083 | ||||||||||||||||||
Balance at the beginning of the year | 270 | 1,418 | 183 | 856 | 2,727 | 1,716 | ||||||||||||||||||
Additions from acquired companies | 0 | 0 | 0 | 0 | 0 | 1 | ||||||||||||||||||
Increase in provisions recognized in the income statement | 293 | 265 | 649 | 139 | 1,346 | 4,002 | ||||||||||||||||||
Release of provisions recognized in the income statement | (94 | ) | (22 | ) | (6 | ) | (187 | ) | (309 | ) | (528 | ) | ||||||||||||
Provisions used in conformity with designated purpose | (352 | ) | (516 | ) | (415 | ) | (92 | ) | (1,375 | ) | (1,381 | ) | ||||||||||||
Capitalized reinstatement costs | 0 | 0 | 0 | 3 | 3 | (21 | ) | |||||||||||||||||
Disposal of subsidiaries | (32 | ) | (3 | ) | 0 | 0 | (35 | ) | 0 | |||||||||||||||
Reclassifications | 0 | 0 | 92 | (1 | ) | 90 | (979 | ) | ||||||||||||||||
Foreign currency translation | (3 | ) | (113 | ) | (14 | ) | (5 | ) | (135 | ) | (83 | ) | ||||||||||||
Balance at the end of the year | 82 | 1,028 | 488 | 713 | 2,311 | 2,727 | ||||||||||||||||||
Litigation
a) | Municipal Bonds: In November 2006, UBS and others received subpoenas from the US Department of Justice, An- |
titrust Division, and the US Securities and Exchange Commission (SEC) seeking information relating to the investment of proceeds of municipal bond issuances and associated derivative transactions. Both investigations are ongoing, and UBS is cooperating. In addition, various state Attorneys General have issued subpoenas seeking similar information. In the SEC investigation, on 4 February 2008, UBS received a “Wells notice” advising that the SEC staff is considering recommending that the SEC bring a civil action against UBS AG in connection with the bidding of various financial instruments associated with municipal securities. The discussions with the SEC are ongoing. | ||
b) | Auction Rate Securities: UBS was the subject of an SEC investigation and state regulatory actions relating to the marketing and sale of auction rate securities (ARSs) to clients, and to UBS’s role and participation in ARS auctions and underwriting of ARSs. UBS was also named in several putative class actions and individual civil suits and |
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Financial information
Notes to the consolidated financial statements
Note 21 Provisions and litigation (continued)
arbitrations. The regulatory actions and investigations and the civil proceedings followed the disruption in the markets for these securities and related auction failures since mid-February 2008. At the end of 2008 UBS entered into settlements with the SEC, the New York Attorney General (NYAG) and the Massachusetts Securities Division whereby UBS agreed to offer to buy back ARSs from eligible customers within certain time periods, the last of which begins on 30 June 2010, and to pay penalties of USD 150 million (USD 75 million to the NYAG, USD 75 million to the other states). UBS’s settlement is largely in line with similar industry regulatory settlements. UBS is continuing to finalize agreements with other state regulators. The SEC continues to investigate individuals affiliated with UBS who traded in ARSs or who had responsibility for disclosures. | ||
c) | US Cross-Border: UBS AG has been the subject of a number of governmental inquiries and investigations relating to its cross-border private banking services to US private clients during the years 2000-2007. On 18 February 2009, UBS AG announced that it had entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice Tax Division (DOJ) and the United States Attorney’s Office for the Southern District of Florida, and a Consent Order with the SEC relating to these investigations. As part of the settlement agreements UBS agreed to, among other things, (i) pay a total of USD 780 million to the United States, (ii) complete the exit of the US cross-border business out of non-SEC registered entities, and (iii) implement and maintain an effective program of internal controls with respect to compliance with its obligations under the Qualified Intermediary (Ql) Agreement with the US Internal Revenue Service (IRS), as well as a revised legal and compliance governance structure in order to strengthen independent legal and compliance controls. Pursuant to the DPA, the DOJ agreed that any further prosecution of UBS will be deferred for a period of at least 18 months, subject to extension under certain circumstances such as UBS needing more time to complete the implementation of the exit of its US cross-border business. If UBS satisfies all of its obligations under the DPA, the DOJ will refrain permanently from pursuing charges against UBS relating to the investigation of its US cross-border business. As part of the resolution of an SEC claim that UBS acted as an unregulated broker dealer and investment advisor in connection with its US cross-border business, UBS consented to a settlement that provides, among other things, that: (i) UBS will pay USD 200 million to the SEC (included in the USD 780 million payment described above); and (ii) UBS will complete its exit of the US cross-border business and will be permanently enjoined from violating certain SEC registration requirements. |
The agreements with the DOJ and SEC did not resolve the “John Doe” summons which the IRS served on UBS in July 2008. In this regard, on 19 February 2009, the Civil Tax Division of the DOJ filed a civil petition for enforcement of this summons in the US Federal District Court for the Southern District of Florida, through which it sought an order directing UBS to produce information located in Switzerland regarding US clients who have maintained accounts with UBS in Switzerland without providing a Form W-9.
On 19 August 2009, UBS executed a settlement agreement with the IRS and the DOJ, to resolve the “John Doe” summons litigation (UBS-US Settlement Agreement). At the same time, the United States and Switzerland entered into a separate but related agreement (Swiss-US Agreement). Among other things, these agreements provide that: (i) UBS and the IRS would promptly file a stipulation dismissing the “John Doe” summons enforcement action then pending in federal court in Miami, which occurred the same day; (ii) the IRS would submit a request for information regarding accounts of US clients maintained at UBS in Switzerland, on the basis that such clients appear to have committed tax fraud or the like within the meaning of the existing 1996 Swiss-US Double Taxation Treaty, to the Swiss Federal Tax Administration (SFTA), which it did on 31 August 2009; (iii) UBS would send a notice to US accountholders that appear to be within the scope of the treaty request and produce to the SFTA information on the corresponding accounts both in accordance with a specified schedule, which UBS has done in compliance with an order issued by the SFTA on 1 September 2009; and (iv) UBS and the IRS would agree to amend UBS’s Ql Agreement, whereupon the IRS would withdraw the previously disclosed Ql Notice of Default dated 15 May 2008. The UBS-US Settlement Agreement does not call for any monetary payment by UBS.
Because UBS has complied with all of its obligations set forth in the UBS-US Settlement Agreement required to be completed by 31 December 2009, the IRS has withdrawn the summons with prejudice as to all accounts not covered by the treaty request.
Subject to UBS’s compliance with its further notification and information processing obligations set forth in the UBS-US Settlement Agreement, the IRS will withdraw the “John Doe” summons with prejudice as to the remaining accounts – i.e. those subject to the treaty request – no later than 24 August 2010 upon the actual or anticipated delivery to the IRS of information relating to accounts covered by the treaty request that does not differ significantly from the expected results. Alternatively, the summons will be withdrawn with prejudice as to the remaining accounts if at any time on or after 1 January 2010 the
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Note 21 Provisions and litigation (continued)
IRS has received information from any source relating to at least 10,000 accounts of US persons maintained at UBS in Switzerland. |
On 21 January 2010, the Swiss Federal Administrative Court ruled that the SFTA did not have a proper legal basis to grant the IRS request for information with respect to accounts of US persons who had failed to report substantial amounts of income over an extended period, but had not engaged in fraudulent activity within the meaning of Swiss law. The decision does not invalidate the UBS-US Settlement Agreement or the Swiss-US Agreement and it does not affect the treaty request to the extent it is directed at accounts in relation to which such fraudulent activity occurred. Following consultations with the US Government about measures to ensure the further implementation of the Swiss-US Settlement Agreement, the Swiss Government decided on 24 February 2010 that it will seek to amend the Swiss-US Agreement and submit it to Parliament for approval. | ||
UBS continues, as in the past, to fulfill all of its obligations under the settlements, including, among other things, the exit of the US cross-border business out of non-SEC registered entities and the provision of relevant account information to the SFTA under the treaty process. | ||
d) | Inquiries Regarding Non-US Cross-Border Businesses: Following the disclosure of the US cross-border matter and the settlements with the DOJ and the SEC, tax and regulatory authorities in a number of countries have requested information relating to the cross-border wealth management services provided by UBS and other financial institutions. In particular, the revenue services of Canada, the UK and Australia have served requests upon, or made inquiries of, UBS and other Swiss and non-Swiss financial institutions providing cross-border wealth management services for information relating to such services that is located in their respective jurisdictions. UBS is cooperating with these requests strictly within the limits of financial privacy obligations under Swiss and other applicable laws. It is premature to speculate on the outcome of any such inquiries. | |
e) | Matters Related to the Credit Crisis: UBS is responding to a number of governmental inquiries and investigations, and is involved in a number of litigations, arbitrations and disputes, related to the credit crisis and in particular mortgage-related securities and other structured transactions and derivatives. These matters concern, among other things, UBS’s valuations, accounting classifications, disclosures, writedowns, and contractual obligations, as well as its role as underwriter in securities offerings for other issuers. In particular, UBS has communicated with and has responded to inquiries by FINMA, its home country consolidated regulator, as well as the SEC, the Financial Industry Regulatory Authority and the United States Attor- |
ney’s Office for the Eastern District of New York, regarding some of these issues and others, including the role of internal control units, governance and processes around risk control and valuation of mortgage-related instruments, compliance with public disclosure rules, and the business rationales for the launching and the reintegration of Dillon Read Capital Management. FINMA concluded its investigation in October 2008. | ||
f) | Claims Related to UBS Disclosure: A putative consolidated class action has been filed against UBS and a number of current and former directors and senior officers in the Southern District of New York alleging securities fraud in connection with the firm’s disclosures relating to its losses in the subprime mortgage markets, its losses and positions in auction rate securities, and its US cross-border business. Defendants have moved to dismiss the complaint for lack of jurisdiction and for failure to state a claim. UBS and a number of senior officers and directors have also been sued in a putative consolidated class action brought on behalf of holders of UBS Employee Retirement Income Security Act (ERISA) retirement plans in which there were purchases of UBS stock. UBS has moved to dismiss the ERISA complaint for failure to state a claim. | |
g) | Madoff: In relation to the Madoff investment fraud, UBS, UBS (Luxembourg) SA and certain other UBS subsidiaries have been subject to inquiries by a number of regulators, including FINMA and the Luxembourg Commission de Surveillance du Secteur Financier (CSSF). Those inquiries concerned two third-party funds established under Luxembourg law substantially all assets of which were with Bernard L. Madoff Investment Securities LLC (BMIS), as well as certain funds established under offshore jurisdictions with either direct or indirect exposure to BMIS. These funds now face severe losses. The last reported net asset value of the two Luxembourg funds before the revelation of the Madoff scheme was approximately USD 1.7 billion in the aggregate. The documentation establishing both funds identifies UBS entities in various roles including custodian, administrator, manager, distributor and promoter, and indicates that UBS employees serve as board members. On 25 February 2009, the CSSF issued a communique with respect to the larger of the two funds, stating that UBS (Luxembourg) SA had failed to comply with its due diligence responsibilities as custodian bank. The CSSF ordered UBS (Luxembourg) SA to review its infrastructure and procedures relating to its supervisory obligations as custodian bank, but did not order it to compensate investors. On 25 May 2009, UBS (Luxembourg) SA submitted a comprehensive final report to the CSSF, which resulted in the CSSF publishing a new communique saying that UBS (Luxembourg) SA has provided evidence demonstrating that it has the infrastructure and |
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Note 21 Provisions and litigation (continued)
internal organization in place in accordance with professional standards applicable to custodian banks in Luxembourg. In addition, on 17 December 2009, a claim in the amount of EUR 890 million was filed on behalf of the larger of the two Luxembourg funds by the liquidators of that fund against 15 defendants, including UBS entities, Access Management Luxembourg SA, Ernst & Young, the CSSF and various individuals. A large number of alleged beneficiaries have filed claims against UBS entities (and non-UBS entities) for purported losses relating to the Madoff scheme. Further, certain clients of UBS in Germany are exposed to Madoff-managed positions through third-party funds and funds administered by UBS entities in Germany. | ||
h) | City of Milan Transactions: In January 2009, the City of Milan filed civil proceedings against UBS Limited, UBS Italia SIM Spa and three other international banks in relation to a 2005 bond issue and associated derivatives transactions entered into with the City of Milan between 2005 and 2007. The claim is to recover alleged damages in an amount which will compensate for terms of the related derivatives which the City claims to |
be objectionable. In the alternative, the City seeks to recover alleged hidden profits alleged to have been made by the banks in the amount of EUR 88 million (of which UBS Limited is alleged to have received EUR 16 million) together with further damages of not less than EUR 150 million. The claims are made against all of the banks on a joint and several basis. UBS is vigorously defending the claim. In addition, a criminal investigation by a Prosecutor in Milan has been ongoing in relation to the same transactions. In November 2009, the Prosecutor filed a request for committal for trial of two current UBS employees and one former UBS employee, together with employees from other banking institutions. The request alleges that the banks’ employees engaged in criminal conduct in order to allow the banks to earn allegedly concealed profits on the June 2005 bond issue and related derivative transactions. The Prosecutor also requested committal for trial of UBS Limited and the other banks in relation to the administrative charge of failing to have in place a business organization model to prevent crime. Preliminary court hearings are taking place through March 2010.
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Note 22 Income taxes | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Tax expense from continuing operations | ||||||||||||
Domestic | ||||||||||||
Current | 55 | (336 | ) | 409 | ||||||||
Deferred | 23 | (7,282 | ) | (25 | ) | |||||||
Foreign | ||||||||||||
Current | 462 | 519 | 1,061 | |||||||||
Deferred | (983 | ) | 262 | (76 | ) | |||||||
Total income tax expense from continuing operations | (443 | ) | (6,837 | ) | 1,369 | |||||||
Tax expense from discontinued operations | ||||||||||||
Domestic | 0 | 1 | (258 | ) | ||||||||
Total income tax expense from discontinued operations | 0 | 1 | (258 | ) | ||||||||
Total income tax expense | (443 | ) | (6,836 | ) | 1,111 | |||||||
The deferred tax benefit reflects the recognition of additional deferred tax assets in respect of tax losses and temporary differences in a number of locations including the US (CHF 373 million) and Japan (CHF 127 million), taking into account updated forecast profit assumptions over the five-year horizon used for recognition purposes. In addition, it reflects the release of a deferred tax liability of CHF 243 million relating to UBS Pactual prior to its sale during the year. The current tax charge mainly relates to tax expenses in respect of entities with taxable profits.
The current tax expense for 2009 includes tax costs related to prior years of CHF 50 million. In addition, there was
a tax benefit of CHF 116 million relating to prior years in respect of the release of a net deferred tax liability. The net tax benefits relating to prior years were therefore CHF 65 million.
The Group made net corporate income tax payments, including domestic and foreign taxes, of CHF 505 million, CHF 887 million and CHF 3,663 million in 2009, 2008 and 2007 respectively.
The components of operating profit before tax, and the differences between income tax expense reflected in the financial statements and the amounts calculated at the Swiss statutory rate are as follows:
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Operating profit from continuing operations before tax | (2,561 | ) | (27,758 | ) | (3,742 | ) | ||||||
Domestic | 4,871 | 3,269 | 10,337 | |||||||||
Foreign | (7,433 | ) | (31,027 | ) | (14,079 | ) | ||||||
Income taxes at Swiss statutory rate of 21.5% for 2009, 22% for 2008 and 2007 | (551 | ) | (6,107 | ) | (823 | ) | ||||||
Increase/(decrease) resulting from: | ||||||||||||
Applicable tax rates differing from Swiss statutory rate | (1,636 | ) | (7,056 | ) | (3,054 | ) | ||||||
Tax effects of losses not recognized | 1,188 | 7,412 | 6,327 | |||||||||
Previously unrecorded tax losses now utilized | (79 | ) | (10 | ) | (257 | ) | ||||||
Non-taxable and lower taxed income | (932 | ) | (773 | ) | (1,587 | ) | ||||||
Non-deductible goodwill and intangible asset amortization | 7 | 160 | 15 | |||||||||
Non-deductible expenses | 1,005 | 737 | 227 | |||||||||
Adjustments related to prior years | (65 | ) | (490 | ) | (72 | ) | ||||||
Change in deferred tax valuation allowance | 552 | (692 | ) | 279 | ||||||||
Other items | 69 | (17 | ) | 314 | ||||||||
Income tax expense from continuing operations | (443 | ) | (6,837 | ) | 1,369 | |||||||
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Note 22 Income taxes (continued) |
Significant components of the Group’s deferred income tax assets and liabilities are as follows:
CHF million | 31.12.09 | 31.12.08 | ||||||||||||||||||||||
Valuation | Valuation | |||||||||||||||||||||||
Deferred tax assets | Gross | allowance | Recognized | Gross | allowance | Recognized | ||||||||||||||||||
Compensation and benefits | 1,782 | (1,561 | ) | 221 | 1,534 | (1,213 | ) | 321 | ||||||||||||||||
Tax loss carry-forwards | 32,505 | (24,259 | ) | 8,246 | 32,834 | (24,708 | ) | 8,126 | ||||||||||||||||
Trading assets | 561 | (403 | ) | 158 | 608 | (365 | ) | 243 | ||||||||||||||||
Other | 2,458 | (2,215 | ) | 243 | 258 | (69 | ) | 190 | ||||||||||||||||
Total deferred tax assets | 37,305 | (28,437 | ) | 8,868 | 35,234 | (26,354 | ) | 8,880 | ||||||||||||||||
Deferred tax liabilities | ||||||||||||||||||||||||
Compensation and benefits | 5 | 111 | ||||||||||||||||||||||
Property and equipment | 1 | 29 | ||||||||||||||||||||||
Financial investments and associates | 60 | 206 | ||||||||||||||||||||||
Trading assets | 0 | 244 | ||||||||||||||||||||||
Goodwill and intangible assets | 61 | 289 | ||||||||||||||||||||||
Other | 15 | 591 | ||||||||||||||||||||||
Total deferred tax liabilities | 142 | 1,470 | ||||||||||||||||||||||
The change in the net of deferred tax assets and liabilities in 2009 and 2008 does not equal the deferred tax benefit in those years. This is because certain deferred tax asset and liability movements are recognized directly in the statement of changes in equity and also because of the effects of exchange rate changes on tax assets and liabilities denominated in currencies other than Swiss francs.
During the year, deferred tax liabilities of CHF 0.7 billion were offset against deferred tax assets in accordance with IAS 12.
In the table above, the valuation allowance represents amounts that are not expected to provide future benefits due to insufficiency of future taxable income (and at 31 December 2008, also amounts offset against potential tax adjustments).
UBS AG Switzerland and certain overseas branches and subsidiaries of the Group have deferred tax assets related to tax loss carry-forwards and other items. For entities that incurred losses in either the current or preceding year, an amount of CHF 8,773 million is recognized as deferred tax
assets at 31 December 2009 (CHF 8,463 million at 31 December 2008). These deferred tax assets mainly relate to Swiss tax losses (primarily due to the write-down of investments in US subsidiaries in 2007 and 2008) and US tax losses. Swiss tax losses can be carried forward for seven years and US federal tax losses for 20 years.
The deferred tax assets recognized at 31 December 2009 in respect of tax losses have been based on profitability assumptions over a five-year horizon. The expected future profitability is based on business plan assumptions, as adjusted to take into account the recognition criteria of IAS 12. If the business plan earnings and assumptions in following quarters substantially deviate from the current assumptions, the amount of deferred tax assets may need to be adjusted in the future.
At 31 December 2009, tax losses totaling CHF 72,313 million which are not recognized as deferred tax assets are available to be offset against potential tax adjustments or future taxable income.
The tax losses expire as follows:
CHF million | 31.12.09 | |||
Within 1 year | 1 | |||
From 2 to 4 years | 4 | |||
After 4 years | 72,308 | |||
Total | 72,313 | |||
The Group provides for deferred income taxes on undistributed earnings of subsidiaries except to the extent that those earnings are indefinitely invested. At 31 December 2009, no such earnings were treated as indefinitely invested.
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Note 23 Derivative instruments and hedge accounting
A derivative is a financial instrument, the value of which is derived from the value of another (“underlying”) financial instrument, an index or some other variable. Typically, the underlying is a share, commodity or bond price, an index value or an exchange or interest rate.
The majority of derivative contracts are negotiated as to amount (“notional”), tenor, price and how the trade is to be settled in the future between UBS and its counterparties, which may be other professionals or customers (over-the-counter (OTC) contracts).
OTC contracts are usually traded under an International Swaps and Derivatives Association (ISDA) master trading agreement (MTA) between UBS and its counterparties. Other derivative contracts are standardized in terms of their amounts and settlement dates and are bought and sold on organized exchanges (exchange-traded contracts (ETD)). With ETDs, the exchange also acts as a central counterparty. The notional amount of a derivative is generally the quantity of the underlying instrument on which the derivative contract is based and is the basis upon which changes in the value of the contract are measured. It provides an indication of the underlying volume of business transacted by the Group but does not provide necessarily any measure of risk.
Derivative instruments are carried at fair value (refer to Note 27 for fair value measurement of derivative instruments), shown in the balance sheet asSeparate totals of Positive replacement values(assets) andNegative replacement values (liabilities),except for futures, 100% daily margined exchange traded options and interest rate swaps with the London Clearing house (LCH) with daily margining, which are presented on the balance sheet asDue from banks, Loans and Due to banks and customers.
Positive replacement values represent the cost to the Group of replacing all transactions with a fair value in the Group’s favor, assuming transactions could be replaced instantaneously. Negative replacement values represent the cost to the Group’s counterparties of replacing all their transactions with the Group with a fair value in their favor.Positive and Negative replacement valueson different transactions are only netted if the transactions are with the same counterparty with a legally enforceable right to set off.Positive and Negative replacement values are denominated in the same currency, and the cash flows are intended to be settled on a net basis. Changes in replacement values of derivative instruments are recognized in the income statement unless they meet the criteria for certain hedge accounting relationships, as explained in Note 1a) 15)Derivative instruments and hedge accounting.
Types of derivative instruments
The Group uses the following derivative financial instruments for both trading and hedging purposes.
Forwards and futuresare contractual obligations to buy or sell financial instruments or commodities on a future date at a specified price. Forward contracts are tailor-made agreements that are transacted between counterparties on the OTC market, whereas futures are standardized contracts transacted on regulated exchanges.
Swapsare transactions in which two parties exchange cash flows on a specified notional amount for a predetermined period. Most swaps are traded OTC. The major types of swap transactions undertaken by the Group are as follows:
– | Interest rate swap contracts generally entail the contractual exchange of fixed-rate and floating-rate interest pay ments in a single currency, based on a notional amount and a reference interest rate, e.g. LIBOR. | |
– | Cross-currency swaps involve the exchange of interest payments based on two different currency principal balances and reference interest rates and generally also entail exchange of principal amounts at the start and/or end of the contract. | |
– | Credit default swaps (CDSs) are the most common form of a credit derivative, under which the party buying protection makes one or more payments to the party selling protection in exchange for an undertaking by the seller to make a payment to the buyer following a credit event (as defined in the contract) with respect to a third-party credit entity (as defined in the contract). Settlement following a credit event may be a net cash amount or cash in return for physical delivery of one or more obligations of the credit entity and is made regardless of whether the protection buyer has actually suffered a loss. After a credit event and settlement, the contract is terminated. An elaboration of credit derivatives is included in a separate section below. | |
– | Total rate of return swaps give the total return receiver exposure to all of the cash flows and economic benefits and risks of an underlying asset, without having to own the asset, in exchange for a series of payments, often based on a reference interest rate, e.g. LIBOR. The total return payer has an equal and opposite position. | |
– | Metal swaps (precious metal swaps and base metal swaps) involve the purchase and sale of specific metals. A precious metal swap involves the purchase and sale of a specified metal with fixed notional amount and fixed price but different settlement dates. A base metal swap is the simultaneous purchase and sale of a specified metal with same settlement dates but different pricing terms. |
Options and warrantsare contractual agreements under which, typically, the seller (writer) grants the purchaser the right, but not the obligation, either to buy (call option) or to sell (put option) by or at a set date, a specified quantity of a financial instrument or commodity at a predetermined price.
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Note 23 Derivative instruments and hedge accounting (continued)
The purchaser pays a premium to the seller for this right. Options involving more complex payment structures are also transacted. Options may be traded OTC or on a regulated exchange and may be traded in the form of a security (warrant).
Credit derivatives
UBS’s credit derivative portfolio consists of credit default swaps, total return swaps and options and warrants. As of 31 December 2009, the total notional value of protection bought was CHF 1,288 billion (CHF 56 billion and CHF 23 billionPositive replacement valuesandNegative replacement values,respectively) and the total notional value of protection sold was CHF 1,187 billion (CHF 23 billion and CHF 47 billionPositive replacement valuesandNegative replacement values, respectively), in 2009. UBS’s credit derivatives are usually traded as OTC contracts. During 2009 a number of initiatives were launched in both the US and Europe to establish centralized clearing solutions for OTC CDS contracts (exchange cleared derivatives), with the aim of reducing counterparty risk. UBS, along with other dealer members, has been an active participant in these initiatives.
A significant portion of UBS’s credit derivatives are traded under an ISDA MTA between UBS and its counterparty. UBS’s CDS trades are also documented using industry standard forms of documentation published by ISDA or equivalent terms documented in a bespoke (i.e. tailored) agreement. Those forms and agreements use standardized terms that form the basis for market conventions related to the types of credit events that would trigger performance (i.e. payment) under a CDS.
The types of credit events that would require UBS to perform under a CDS contract are subject to agreement between the parties at the time of the transaction. However, nearly all transactions are traded using credit events that are applicable under certain market conventions based on the type of reference entity to which the transaction relates. Applicable credit events by market conventions include “bankruptcy”, “failure to pay”, “restructuring”, “obligation acceleration” and “repudiation/moratorium”.
Recourse provisions
UBS uses standardized agreements and forms as the basis for its credit derivative contracts. Those agreements and forms do not contain recourse provisions that would enable UBS to recover from third parties any amounts paid out by UBS (i.e. this is the case where a credit event occurs and UBS is required to make payment under a CDS).
Economic hedges and strategy
UBS actively utilizes CDS to economically hedge specific counterparty credit risks in its banking book loans portfolio (includ-
ing loan commitments) with the aim of reducing concentrations in individual names, sectors or specific portfolios. In addition, UBS actively utilizes CDS to economically hedge specific counterparty credit risks in its OTC derivative portfolios.
UBS is an active dealer in fixed income instruments and CDS and related products with respect to a large number of securities issuers. The primary purpose of these activities is for the benefit of UBS’s clients (market making) and to a lesser extent creating new credit exposures taken for UBS’s own trading purposes (proprietary trading).
Market making activity consists of buying and selling single-name CDS, index CDS, loan CDS and related referenced cash instruments to facilitate client trading activity. Proprietary trading consists of trading in single-name CDS, index CDS and loan CDS to capitalize on pricing discrepancies between various credit instruments (bonds, loans and equities) across investment grade, high-yield and emerging markets.
As a general matter, risk to the relevant issuers arising from fixed income instruments, CDS and related products are reviewed and risk-managed on a net exposure basis (i.e. taking into account all exposures to a particular issuer arising from fixed income instruments, CDS and related products) across market making and proprietary trading activities.
UBS’s strategy with respect to CDS trading was the reduction in scope and scale of the firm’s structured credit, proprietary credit and asset securitization (including synthetic securitization) activities during 2009 and 2008.
Contingent features of derivative liabilities
Based on UBS’s credit ratings as of 31 December 2009, additional collateral or termination payments pursuant to bilateral agreements with certain counterparties of approximately CHF 1.2 billion and CHF 2.8 billion would have been required in the event of a one-notch and two-notch reduction, respectively, in UBS’s long-term credit ratings. In evaluating UBS’s liquidity requirements, UBS considers additional collateral or termination payments that would be required in the event of a reduction in UBS’s long-term credit ratings.
Derivatives transacted for trading purposes
Most of the Group’s derivative transactions relate to sales and trading activities. Sales activities include the structuring and marketing of derivative products to customers to enable them to take, transfer, modify or reduce current or expected risks. Trading activities include market making, positioning and arbitrage activities. Market making involves quoting bid and offer prices to other market participants with the intention of generating revenues based on spread and volume. Positioning means managing market risk positions with the expectation of profiting from favorable move-
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Note 23 Derivative instruments and hedge accounting (continued)
ments in prices, rates or indices. Arbitrage activities involve identifying and profiting from price differentials between the same product in different markets or the same economic factor in different products.
Derivatives transacted for hedging purposes
The Group enters into derivative transactions for the purposes of hedging assets, liabilities, forecast transactions, cash flows and credit exposures. The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge qualifies as such for accounting purposes.
Derivative transactions may qualify as hedges for accounting purposes. These are described under the corresponding headings in this note. The Group’s accounting policies for derivatives designated and accounted for as hedging instruments are explained in Note 1a) 15)Derivative instruments and hedge accounting,where terms used in the following sections are explained.
The Group has also entered into interest rate swaps and other interest rate derivatives (e.g. futures) for day-to-day economic interest rate risk management purposes, but without applying hedge accounting.
The Group has also used equity futures, options and, to a lesser extent, swaps for economically hedging in a variety of equities trading strategies to offset underlying equity and equity volatility exposure.
The Group has also entered into CDS’s that provide economic hedges for credit risk exposures (refer to the credit derivatives section).
Fair value changes of derivatives that are part of economic relationships, but do not qualify for hedge accounting treatment, are booked toNet trading income.
Fair value hedges
The Group’s fair value hedges principally consist of interest rate swaps that are used to protect against changes in the fair value of fixed-rate instruments (e.g. long-term-fixed rate debt issues) due to movements in market interest rates. The fair values of outstanding interest rate derivatives designated as fair value hedges were CHF 526 million and CHF 71 millionPositive replacement values andNegative replacement values,respectively, at 31 December 2009 and a CHF 883 million net Positive replacement values at 31 December 2008.
Fair value hedges of interest rate risk | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Gains/(losses) on hedging instruments | (171 | ) | 778 | 15 | ||||||||
Gains/(losses) on hedged items attributable to the hedged risk | 182 | (796 | ) | (11 | ) | |||||||
Net gains/(losses) representing ineffective portions of fair value hedges | 11 | (18 | ) | 4 | ||||||||
Fair value hedges of portfolio interest rate risk
The Group also applies fair value hedge accounting of portfolio interest rate risk. The change in fair value of the hedged items is recorded separately from the hedged item and is included inOther assetson the balance sheet. The fair value of derivatives designated for this hedge method at 31 December 2009 was CHF 956 millionNegative replacement
value,31 December 2008 was a CHF 765 million netNegative replacement value.
During 2008, UBS expanded the use of Fair Value hedge accounting for portfolio interest rate risk to include other Swiss mortgage loan portfolios. In 2009 no further scope expansion was made.
Fair value hedge of portfolio of interest rate risk1 | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Gains/(losses) on hedging instruments | (48 | ) | (644 | ) | (37 | ) | ||||||
Gains/(losses) on hedged items attributable to the hedged risk | 11 | 688 | 30 | |||||||||
Net gains/(losses) representing ineffective portions of fair value hedges | (37 | ) | 44 | (7 | ) | |||||||
1 | Hedge effectiveness is calculated on a cumulative basis. |
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Note 23 Derivative instruments and hedge accounting (continued)
Cash flow hedges of forecasted transactions
The Group is exposed to variability in future interest cash flows on non-trading assets and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities, based on contractual terms and other relevant factors including esti-
mates of prepayments and defaults. The aggregate principal balances and interest cash flows across all portfolios over time form the basis for identifying the non-trading interest rate risk of the Group, which is hedged with interest rate swaps, the maximum maturity of which is 19 years.
The schedule of forecasted principal balances on which the expected interest cash flows arise as of 31 December 2009 is shown below.
Forecasted cash flows | ||||||||||||||||||||
CHF billion | < 1 year | 1–3 years | 3–5 years | 5–10 years | over 10 years | |||||||||||||||
Cash inflows (assets) | 205 | 352 | 202 | 141 | 20 | |||||||||||||||
Cash outflows (liabilities) | 69 | 136 | 96 | 78 | 4 | |||||||||||||||
Net cash flows | 136 | 216 | 106 | 63 | 16 | |||||||||||||||
Gains and losses on the effective portions of derivatives designated as cash flow hedges of forecasted transactions are initially recorded inEquityasNet incomerecognized directly in equity and are transferred to current period earnings when the forecasted cash flows affect net profit or loss. The gains and losses on ineffective portions of such derivatives are recognized immediately in the income statement. A CHF 183 million loss, a CHF 108 million loss and a CHF 443 million gain was recognized in 2009, 2008 and 2007, respectively, due to hedge ineffectiveness.
As of 31 December 2009, the fair values of outstanding derivatives designated as cash flow hedges of forecasted transactions were CHF 5,180 million and CHF 2,736 millionPositive replacement valuesandNegative replacement values,respectively, and as of 31 December 2008 the amount was CHF 2,539 million netPositive replacement values.
At the end of 2009 and 2008, gains of CHF 46 million and CHF 86 million associated with de-designated interest rate swaps were deferred inEquity.They will be removedfrom Equitywhen the previously hedged forecasted cash flows have an impact on net profit or loss, or when the forecasted cash flows are no longer expected to occur. Amounts reclassified fromEquitytoNet interest incomeof de-designated swaps were CHF 40 million net gain in 2009, CHF 49 million net gain in 2008 and CHF 79 million net gain in 2007.
In 2008, due to reductions in the volume of short-term financial instruments, some of the forecasted cash flows previously included in the hedge relationships were determined to no longer be expected to occur.
Hedges of net investments in foreign operations
The Group applies hedge accounting for certain consolidated net investments in USD-denominated operations. At 31 December 2009 the fair values of the financial liabilities (predominantly structured products issued by UBS) designated as hedging instruments in net investment hedges was CHF 2.5 billion. Gains or losses on the translation of these hedging instruments are transferred directly to Equity to offset any gains or losses on translation of the net investments in the subsidiaries, which are also recognized in Equity. No ineffectiveness from hedges of net investments in foreign operations was recognized in the income statements during 2009.
Contractual maturities of derivatives designated as hedging instruments in hedge accounting relationships
The contractual maturities of derivatives designated as hedging instruments in hedge accounting relationships are considered “essential” for an understanding of the timing of their cash flows.
Derivatives designated in hedge accounting relationships (undiscounted cash flows) | ||||||||||||||||||||||||||||
Due within | Due between | Due between | Due between | Due after | ||||||||||||||||||||||||
CHF billion | On demand | 1 month | 1 and 3 months | 3 and 12 months | 1 and 5 years | 5 years | Total | |||||||||||||||||||||
Interest rate swaps1 | ||||||||||||||||||||||||||||
Cash outflows | 0 | 0 | (0 | ) | (1 | ) | (3 | ) | (15 | ) | (19 | ) | ||||||||||||||||
Cash inflows | 0 | 0 | 0 | 0 | 2 | 18 | 20 | |||||||||||||||||||||
Total 31.12.09 | 0 | 0 | (0 | ) | (1 | ) | (1 | ) | 3 | 1 | ||||||||||||||||||
1 | Interest rate swaps are gross settled. The table includes all cash inflows and outflows of interest rate swaps withPositive and Negative replacement values. |
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Note 23 Derivative instruments and hedge accounting (continued)
Risks of derivative instruments
ample, because on the one hand, replacement values can increase over time (“potential future exposure”), while on the other hand, exposure may be mitigated by entering into master netting agreements and bilateral collateral arrangements with counterparties. Both the exposure measures used by the Group internally to control credit risk and the capital requirements imposed by regulators reflect these additional factors.
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Note 23 Derivative instruments and hedge accounting1 (continued) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional | Notional | |||||||||||||||||||||||||||||||||||||||||||||||||||
As of 31 December 2009 | Term to maturity | values | values | Other | ||||||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3–12 months | 1–5 years | over 5 years | Total | related to | Total | related to | notional | ||||||||||||||||||||||||||||||||||||||||||||
CHF billion | PRV2 | NRV3 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | PRVs | NRV | NRVs | values4 | |||||||||||||||||||||||||||||||||||||||
Interest rate contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 1.8 | 1.6 | 0.7 | 0.8 | 0.1 | 0.1 | 0.0 | 0.0 | 2.5 | 1,343.7 | 2.5 | 1,286.5 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Swaps | 8.2 | 6.8 | 18.7 | 16.9 | 89.7 | 82.6 | 69.5 | 65.0 | 186.2 | 7,110.7 | 171.4 | 6,802.7 | 15,949.2 | |||||||||||||||||||||||||||||||||||||||
Options | 1.0 | 1.1 | 3.5 | 3.0 | 10.1 | 11.9 | 11.3 | 13.5 | 25.9 | 543.2 | 29.4 | 611.8 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 271.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0.1 | 0.1 | 0.2 | 0.2 | 0.2 | 0.2 | 0.0 | 0.0 | 0.5 | 3.9 | 0.4 | 3.5 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 11.1 | 9.6 | 23.1 | 20.8 | 100.0 | 94.8 | 80.8 | 78.6 | 215.1 | 9,001.5 | 203.7 | 8,704.5 | 16,221.2 | |||||||||||||||||||||||||||||||||||||||
Credit derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 0.1 | 0.3 | 0.9 | 0.9 | 33.1 | 32.1 | 42.9 | 36.4 | 77.1 | 1,254.7 | 69.7 | 1,208.9 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total rate of return swaps | 0.1 | 0.1 | 0.0 | 0.0 | 1.0 | 0.3 | 0.4 | 0.4 | 1.5 | 5.7 | 0.9 | 5.4 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options and warrants | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 9.3 | 0.0 | 6.6 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 0.2 | 0.4 | 1.0 | 0.9 | 34.1 | 32.4 | 43.3 | 36.9 | 78.6 | 1,269.6 | 70.6 | 1,220.9 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 7.5 | 6.3 | 2.4 | 2.6 | 0.8 | 0.6 | 0.0 | 0.0 | 10.6 | 453.2 | 9.5 | 403.7 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Interest and currency swaps | 31.2 | 30.3 | 13.1 | 15.3 | 18.9 | 23.5 | 17.3 | 16.8 | 80.5 | 2,279.8 | 85.8 | 2,209.6 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options | 1.8 | 1.7 | 2.1 | 2.0 | 1.2 | 1.2 | 0.9 | 0.8 | 5.9 | 609.7 | 5.7 | 560.2 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 1.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | 1.5 | 0.1 | 0.1 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 40.4 | 38.3 | 17.6 | 20.0 | 20.9 | 25.2 | 18.2 | 17.6 | 97.1 | 3,344.2 | 101.1 | 3,173.5 | 1.5 | |||||||||||||||||||||||||||||||||||||||
Equity/index contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 0.9 | 0.8 | 1.1 | 1.2 | 0.5 | 0.8 | 0.4 | 0.9 | 2.9 | 56.6 | 3.7 | 46.9 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options | 0.4 | 0.9 | 2.1 | 2.7 | 2.4 | 4.1 | 2.1 | 1.7 | 7.0 | 60.9 | 9.5 | 73.7 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 6.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 4.9 | 4.6 | 4.7 | 4.9 | 5.2 | 5.8 | 0.2 | 0.1 | 15.1 | 30.5 | 15.5 | 36.2 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 6.2 | 6.3 | 8.0 | 8.8 | 8.1 | 10.7 | 2.7 | 2.8 | 25.1 | 148.0 | 28.7 | 156.8 | 6.8 | |||||||||||||||||||||||||||||||||||||||
Commodities contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 0.6 | 0.6 | 0.7 | 0.6 | 0.7 | 0.7 | 0.1 | 0.1 | 2.0 | 20.6 | 2.0 | 15.0 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options | 0.3 | 0.2 | 0.7 | 0.6 | 0.9 | 0.9 | 0.1 | 0.2 | 1.9 | 21.7 | 1.9 | 23.6 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 2.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0.4 | 0.4 | 0.7 | 0.7 | 0.8 | 0.8 | 0.0 | 0.0 | 1.9 | 0.6 | 1.9 | 2.0 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 1.3 | 1.2 | 2.0 | 1.9 | 2.4 | 2.4 | 0.2 | 0.4 | 5.9 | 42.9 | 5.8 | 40.7 | 2.7 | |||||||||||||||||||||||||||||||||||||||
Total derivative instruments, based on IFRS netting | 59.3 | 55.9 | 51.7 | 52.4 | 165.5 | 165.5 | 145.2 | 136.2 | 421.7 | 13,806.2 | 409.9 | 13,296.5 | 16,232.2 | |||||||||||||||||||||||||||||||||||||||
Replacement value netting, based on capital adequacy rules | (313.2 | ) | (313.2 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral netting | (37.2 | ) | (32.7 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Total derivative instruments, based on capital adequacy netting6 | 71.3 | 64.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 23 Derivative instruments and hedge accounting1 (continued) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional | Notional | |||||||||||||||||||||||||||||||||||||||||||||||||||
As of 31 December 2008 | Term to maturity | values | values | Other | ||||||||||||||||||||||||||||||||||||||||||||||||
Within 3 months | 3–12 months | 1–5 years | Over 5 years | Total | related to | Total | related to | notional | ||||||||||||||||||||||||||||||||||||||||||||
CHF billion | PRV2 | NRV3 | PRV | NRV | PRV | NRV | PRV | NRV | PRV | PRVs | NRV | NRVs | values4 | |||||||||||||||||||||||||||||||||||||||
Interest rate contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 2.1 | 2.2 | 3.8 | 4.1 | 0.3 | 0.4 | 0.0 | 0.0 | 6.2 | 1,544.9 | 6.7 | 1,584.5 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Swaps | 9.5 | 9.9 | 23.6 | 24.3 | 152.1 | 140.5 | 144.8 | 142.9 | 330.0 | 8,543.3 | 317.6 | 8,260.0 | 15,002.0 | |||||||||||||||||||||||||||||||||||||||
Options | 4.0 | 3.7 | 6.6 | 7.0 | 14.3 | 15.7 | 12.6 | 16.5 | 37.4 | 498.4 | 43.0 | 595.5 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 527.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0.8 | 0.8 | 0.5 | 0.5 | 0.1 | 0.1 | 0.0 | 0.0 | 1.4 | 6.4 | 1.4 | 8.7 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 16.4 | 16.6 | 34.5 | 36.0 | 166.8 | 156.7 | 157.4 | 159.5 | 375.1 | 10,593.1 | 368.7 | 10,448.7 | 15,529.6 | |||||||||||||||||||||||||||||||||||||||
Credit derivative contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit default swaps | 0.5 | 0.3 | 3.4 | 3.5 | 95.4 | 91.2 | 89.8 | 88.2 | 189.1 | 1,856.1 | 183.3 | 1,754.0 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total rate of return swaps | 3.4 | 0.4 | 0.2 | 0.1 | 3.1 | 0.5 | 1.6 | 0.5 | 8.3 | 31.2 | 1.5 | 12.6 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options and warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 3.9 | 0.7 | 3.6 | 3.6 | 98.4 | 91.7 | 91.4 | 88.8 | 197.4 | 1,887.2 | 184.8 | 1,766.7 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 21.0 | 22.8 | 8.4 | 10.6 | 1.6 | 1.1 | 0.1 | 0.1 | 31.2 | 468.1 | 34.5 | 485.6 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Interest and currency swaps | 72.1 | 74.5 | 36.2 | 33.8 | 34.9 | 39.2 | 27.1 | 26.5 | 170.3 | 2,047.4 | 173.9 | 1,868.4 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options | 7.5 | 7.6 | 10.0 | 9.1 | 2.1 | 1.8 | 0.0 | 0.0 | 19.7 | 610.1 | 18.6 | 524.8 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 1.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 0.2 | 0.3 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.2 | 12.8 | 0.3 | 6.1 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 101.0 | 105.2 | 54.6 | 53.5 | 38.7 | 42.1 | 27.2 | 26.6 | 221.5 | 3,138.3 | 227.3 | 2,884.8 | 1.7 | |||||||||||||||||||||||||||||||||||||||
Equity/index contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 1.9 | 1.6 | 2.0 | 1.8 | 2.2 | 2.0 | 0.2 | 0.3 | 6.4 | 68.5 | 5.7 | 40.1 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options | 1.7 | 3.2 | 4.8 | 7.4 | 4.7 | 8.5 | 1.7 | 4.0 | 12.9 | 108.9 | 23.0 | 106.1 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | �� | 33.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 5.0 | 5.2 | 5.3 | 6.7 | 4.8 | 5.6 | 0.9 | 1.2 | 16.1 | 97.9 | 18.7 | 110.5 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 8.6 | 10.0 | 12.1 | 16.0 | 11.7 | 16.1 | 2.9 | 5.5 | 35.3 | 275.2 | 47.4 | 256.7 | 33.5 | |||||||||||||||||||||||||||||||||||||||
Commodities contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Over-the-counter (OTC) contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Forward contracts | 3.0 | 2.4 | 4.3 | 3.7 | 1.9 | 1.6 | 0.9 | 1.1 | 10.0 | 39.1 | 8.7 | 33.1 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Options | 0.8 | 1.0 | 2.6 | 2.5 | 2.6 | 2.3 | 0.3 | 0.2 | 6.3 | 36.3 | 6.1 | 42.4 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Exchange-traded contracts5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Futures | 14.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Options | 2.1 | 2.2 | 3.8 | 3.9 | 2.7 | 2.7 | 0.0 | 0.0 | 8.6 | 74.7 | 8.7 | 95.6 | 0.0 | |||||||||||||||||||||||||||||||||||||||
Total | 5.8 | 5.6 | 10.7 | 10.1 | 7.1 | 6.6 | 1.2 | 1.4 | 24.9 | 150.1 | 23.6 | 171.1 | 14.1 | |||||||||||||||||||||||||||||||||||||||
Total derivative instruments, based on IFRS netting | 135.7 | 138.1 | 115.5 | 119.2 | 322.8 | 313.1 | 280.0 | 281.6 | 854.1 | 16,043.9 | 851.9 | 15,528.0 | 15,578.9 | |||||||||||||||||||||||||||||||||||||||
Replacement value netting, based on capital adequacy rules | (651.7 | ) | (651.7 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash collateral netting | (41.3 | ) | (52.8 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Total derivative instruments, based on capital adequacy netting6 | 161.1 | 147.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Financial information
Notes to the consolidated financial statements
Off-balance-sheet information
Note 24 Pledgeable off-balance-sheet securities
The Group obtains securities which are not recorded on the balance sheet with the right to sell or repledge them as shown in the table below.
CHF million | 31.12.09 | 31.12.08 | ||||||
Fair value of securities received which can be sold or repledged | 528,856 | 651,380 | ||||||
under reverse repurchase, securities borrowing and lending arrangements, derivative transactions and other transactions | 515,314 | 621,981 | ||||||
in unsecured borrowings | 13,542 | 29,399 | ||||||
thereof sold or repledged | 398,883 | 430,670 | ||||||
in connection with financing activities | 335,371 | 343,252 | ||||||
to satisfy commitments under short sale transactions | 47,469 | 62,431 | ||||||
in connection with derivative and other transactions | 16,043 | 24,987 | ||||||
Note 25 Operating lease commitments
At 31 December 2009, UBS was obligated under a number of non-cancellable operating leases for premises and equipment used primarily for banking purposes. The significant premises leases usually include renewal options and escalation clauses in line with general office rental market conditions as well as rent adjustments based on price indices. However, the lease agreements do not contain contingent
rent payment clauses and purchase options, nor do they impose any restrictions on UBS’s ability to pay dividends, engage in debt financing transactions or enter into further lease agreements.
CHF million | 31.12.09 | |||
Operating leases due | ||||
2010 | 989 | |||
2011 | 870 | |||
2012 | 786 | |||
2013 | 658 | |||
2014 | 555 | |||
2015 and thereafter | 2,113 | |||
Subtotal commitments for minimum payments under operating leases | 5,971 | |||
Less: Sublease rentals under non-cancellable leases | 690 | |||
Net commitments for minimum payments under operating leases | 5,281 | |||
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Note 25 Operating lease commitments (continued)
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Gross operating lease expense | 1,191 | 1,215 | 1,251 | |||||||||
from continuing operations | 1,191 | 1,215 | 1,233 | |||||||||
from discontinued operations | 0 | 0 | 18 | |||||||||
Sublease rental income from continuing operations | 57 | 50 | 54 | |||||||||
Net operating lease expense | 1,134 | 1,165 | 1,197 | |||||||||
from continuing operations | 1,134 | 1,165 | 1,179 | |||||||||
from discontinued operations | 0 | 0 | 18 | |||||||||
Operating lease contracts include non-cancellable long-term leases of office buildings in most UBS locations. At 31 December 2009, the minimum lease commitments for each of
11 office locations exceeded CHF 100 million and non-cancellable minimum lease commitments for the office location in New York exceeded CHF 500 million.
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Financial information
Notes to the consolidated financial statements
Additional information
Note 26 Capital increases and mandatory convertible notes
June 2009 share capital increase
On 25 June 2009, UBS increased its share capital by issuing 293,258,050 new registered shares with a par value of CHF 0.10 each. The shares were placed with a small number of large institutional investors at a price of CHF 13.00 per share. Net proceeds from the capital increase were CHF 3.8 billion. The shares were issued upon decision by the Board of Directors out of authorized capital which had been approved at the annual general meeting of shareholders on 15 April 2009.
Conversion of the mandatory convertible notes
(MCNs) issued to the Swiss Confederation
On 19 August 2009, the Swiss Confederation announced the conversion of its UBS CHF 6 billion mandatory convert-
ible notes (MCNs). Upon conversion on 25 August 2009, UBS issued 332,225,913 new shares with a nominal value of CHF 0.10 each from existing conditional capital. The liability and theNegative replacement valuerecorded on the balance sheet for the principal amount and the embedded derivative component of the MCNs were reclassified to equity. The conversion of the MCNs resulted in an overall increase in equity of CHF 6,718 million for 2009, reflecting an increase in share capital of CHF 33 million and an increase in share premium of CHF 6,685 million. Prior to the conversion of the MCNs, the embedded derivative component was re-measured to fair value resulting in a gain of CHF 341 million for 2009. In addition, the Swiss Confederation waived its right to receive future coupon payments on the converted MCNs for a cash amount of approximately CHF 1.8 billion. The impact on UBS’s income statement resulting from this waiver was not material.
Note 27 Fair value of financial instruments
a) Valuation principles
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Financial instruments classified as held for trading or designated at fair value through profit or loss and financial assets classified as available for sale are recognized in the financial statements at fair value. All derivatives are measured at fair value.
instrument’s complexity and the availability of market-based data. Valuation adjustments may be made to allow for additional factors including model risks, liquidity risk and credit risk. Based on the established fair value and model governance policies and related controls and procedures applied, the management believes that these valuation adjustments are necessary and appropriate to fairly state the values of financial instruments carried at fair value on the balance sheet.
Pricing models and valuation techniques
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value models and option pricing models. Discounted cash flows determine the value by estimating the expected future cash flows from assets or liabilities discounted to their present value. Relative value models determine the value based on the market prices of similar assets or liabilities. Option pricing models are complex present value models, such as binomial options pricing models.
Interest rate curves
Counterparty credit risk in the valuation of OTC derivative instruments, derivatives embedded in funded assets designated at fair value and derivatives embedded in traded debt instruments
UBS’s own credit risk in the valuations of derivative financial liabilities (Negative replacement values)
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Financial information
Notes to the consolidated financial statements
mark-to-market movements, and UBS’s credit default spreads to determine the UBS counterparty exposure from the perspective of holders of UBS debt. The debit valuation adjustments (DVA) so calculated represent the theoretical costs to counterparties of hedging their UBS credit exposure or the credit risk reserve that a counterparty could reasonably be expected to hold against their credit risk exposure to
UBS, if they applied the same methodology as used to calculate UBS’s CVA. The impact of this methodology change is included in the financial impact of the valuation changes for derivative liabilities and financial liabilities designated at fair value described below.
31.12.09 | ||||||||
CHF billion | CVA1 | DVA | ||||||
Life-to-date | (4.3 | ) | 0.4 | |||||
of which: CVA on monoline credit protection – negative basis trades | (2.9 | ) | N/A | |||||
of which: CVA on monoline credit protection – other | (0.2 | ) | N/A | |||||
of which: CVA on other instruments | (1.2 | ) | N/A | |||||
Year-to-date2 | 0.6 | (1.9 | ) | |||||
of which: CVA on monoline credit protection – negative basis trades | (0.8 | ) | N/A | |||||
of which: CVA on monoline credit protection – other | 0.4 | N/A | ||||||
of which: CVA on other instruments | 1.1 | N/A | ||||||
UBS’s own credit risk in the valuations of financial liabilities designated at fair value
for funding associated with new senior debt issued by the Group, or relevant secondary market transactions in senior long-term UBS debt. The senior debt curve is considered to be representative of the credit risk which reflects the premium (or discount) that market participants require to acquire UBS debt. In the absence of an observable senior debt curve, credit default swap spreads would be considered as well.
Own credit on financial liabilities designated at fair value | ||||||||||||
As of or for the year ended | ||||||||||||
CHF million | 31.12.09 | 1 | 31.12.08 | 31.12.07 | ||||||||
Total gain/(loss) for the year ended | (2,023 | ) | 2,032 | 659 | ||||||||
of which: credit spread related only | (1,958 | ) | 3,993 | 659 | ||||||||
Life-to-date gain | 890 | 2,953 | 663 | |||||||||
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The year-to-date amounts represent the portion of the change in fair value of the financial liabilities designated at fair value that is related to own credit. The life-to-date amount reflects the gain related to own credit by which the fair value of financial liabilities designated at fair value has changed since inception. Included in these amounts is the quantification of changes in fair value attributable to changes in UBS’s credit spread during the periods. In addition, the total own credit changes include the credit effect of “volume changes”, i.e. the credit effect of period changes in fair values attributable to factors other than credit spreads, such as redemptions, effects from time decay, changes in the value of referenced instruments issued by third parties, or, in the case of the life-to-date amount, changes in the foreign exchange rates.
Changes to the valuation of derivative financial instruments and financial instruments designated at fair value
Reflection of market liquidity risk in fair value determinations
calibrating to market prices that incorporate such premiums) or explicitly.
Reflection of model uncertainty in fair value determinations
Valuation processes
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Financial information
Notes to the consolidated financial statements
Note 27 Fair value of financial instruments (continued)
b) Fair value hierarchy
All financial instruments at fair value are categorized into one of three fair value hierarchy levels at year-end, based upon the lowest level input that is significant to the product’s fair value measurement in its entirety:
– | Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities |
– | Level 2 – valuation techniques for which all significant inputs are market observable, either directly or indirectly; and | |
– | Level 3 – valuation techniques which include significant inputs that are not based on observable market data. |
Determination of fair values from quoted market prices or valuation techniques | ||||||||||||||||||||||||||||||||
31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||
CHF billion | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Trading portfolio assets | 110.9 | 65.5 | 11.6 | 188.0 | 128.1 | 128.4 | 15.3 | 271.8 | ||||||||||||||||||||||||
Trading portfolio assets | ||||||||||||||||||||||||||||||||
pledged as collateral | 31.3 | 12.3 | 0.6 | 44.2 | 25.4 | 13.2 | 1.6 | 40.2 | ||||||||||||||||||||||||
Positive replacement values | 4.0 | 393.8 | 23.8 | 421.7 | 5.1 | 811.2 | 37.8 | 854.1 | ||||||||||||||||||||||||
of which: | ||||||||||||||||||||||||||||||||
Interest rate contracts | 0.8 | 213.7 | 0.6 | 215.1 | 0.1 | 372.0 | 3.0 | 375.1 | ||||||||||||||||||||||||
Credit derivative contracts | 0.0 | 58.0 | 20.5 | 78.6 | 0.0 | 166.7 | 30.7 | 197.4 | ||||||||||||||||||||||||
Foreign exchange contracts | 0.3 | 95.9 | 0.9 | 97.1 | 0.4 | 221.0 | 0.0 | 221.5 | ||||||||||||||||||||||||
Equity/index contracts | 2.9 | 20.5 | 1.7 | 25.1 | 4.6 | 26.7 | 4.1 | 35.3 | ||||||||||||||||||||||||
Commodities contracts | 0.0 | 5.8 | 0.1 | 5.9 | 0.0 | 24.8 | 0.0 | 24.8 | ||||||||||||||||||||||||
Financial assets designated | ||||||||||||||||||||||||||||||||
at fair value | 0.8 | 9.2 | 0.3 | 10.2 | 1.1 | 11.2 | 0.6 | 12.9 | ||||||||||||||||||||||||
Financial investments | ||||||||||||||||||||||||||||||||
available-for-sale | 74.3 | 6.1 | 1.4 | 81.8 | 2.4 | 1.2 | 1.6 | 5.2 | ||||||||||||||||||||||||
Total assets | 221.4 | 487.0 | 37.6 | 745.9 | 162.1 | 965.2 | 57.0 | 1,184.3 | ||||||||||||||||||||||||
Trading portfolio liabilities | 33.5 | 13.6 | 0.4 | 47.5 | 33.9 | 27.5 | 1.0 | 62.4 | ||||||||||||||||||||||||
Negative replacement values | 3.7 | 389.2 | 17.0 | 409.9 | 4.9 | 812.0 | 35.0 | 851.9 | ||||||||||||||||||||||||
of which: | ||||||||||||||||||||||||||||||||
Interest rate contracts | 0.7 | 203.1 | 0.0 | 203.7 | 0.0 | 366.9 | 1.8 | 368.7 | ||||||||||||||||||||||||
Credit derivative contracts | 0.0 | 55.8 | 14.7 | 70.6 | 0.0 | 153.7 | 31.0 | 184.8 | ||||||||||||||||||||||||
Foreign exchange contracts | 0.3 | 99.4 | 1.4 | 101.1 | 0.3 | 227.0 | 0.0 | 227.3 | ||||||||||||||||||||||||
Equity/index contracts | 2.8 | 25.0 | 1.0 | 28.7 | 4.5 | 40.7 | 2.1 | 47.4 | ||||||||||||||||||||||||
Commodities contracts | 0.0 | 5.8 | 0.0 | 5.8 | 0.0 | 23.6 | 0.0 | 23.6 | ||||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||||||
designated at fair value | 0.0 | 102.4 | 10.3 | 112.7 | 0.0 | 91.2 | 10.3 | 101.5 | ||||||||||||||||||||||||
Total liabilities | 37.2 | 505.2 | 27.7 | 570.1 | 38.8 | 930.7 | 46.3 | 1,015.8 | ||||||||||||||||||||||||
Detailed breakdowns of UBS’s trading portfolio and financial investments available-for-sale by fair value hierarchy levels are shown in Note 11 and 13, respectively.
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Note 27 Fair value of financial instruments (continued)
b) Fair value hierarchy (continued)
Transfers between level 1 and level 2 of the fair value hierarchy
to level 2 consisted equally of short sold debt and equity instruments. These assets and liabilities transferred from level 1 to level 2 no longer met the average market activity UBS considers necessary when determining whether an instrument is traded in an active market.
Movements of level 3 instruments
Movements of level 3 instruments and gains/losses for level 3 instruments held at the end of the reporting period | ||||||||||||
Trading portfolio assets | Derivative instruments | Financial liabilities | ||||||||||
(including those pledged | (net replacement | designated at | ||||||||||
CHF billion | as collateral)1 | values)1 | fair value1 | |||||||||
Balance at 31 December 2008 | 16.9 | 2.8 | 10.3 | |||||||||
Total gains/losses included in the income statement | (3.9 | ) | 2.4 | (1.7 | ) | |||||||
Net trading income | (3.7 | ) | 2.2 | (1.1 | ) | |||||||
Other | (0.2 | ) | 0.2 | (0.6 | ) | |||||||
Purchases, sales, issuances and settlements | (6.3 | ) | (1.0 | ) | (4.6 | ) | ||||||
Purchases | 5.6 | 0.0 | 0.0 | |||||||||
Sales | (11.9 | ) | 0.0 | 0.0 | ||||||||
Issuances | 0.0 | 2.0 | 2.7 | |||||||||
Settlements | 0.0 | (3.0 | ) | (7.3 | ) | |||||||
Transfers into and/or out of level 3 | 5.4 | 2.8 | 5.3 | |||||||||
Transfers into level 3 | 12.5 | 3.3 | 8.0 | |||||||||
Transfers out of level 3 | (7.1 | ) | (0.5 | ) | (2.7 | ) | ||||||
Foreign currency translation | 0.1 | (0.2 | ) | 1.0 | ||||||||
Balance at 31 December 2009 | 12.2 | 6.8 | 10.3 | |||||||||
Total gains/losses for the period included in the income statement for level 3 instruments held at the end of the reporting period | (0.5 | ) | (0.6 | ) | (0.7 | ) | ||||||
Net trading income | (1.0 | ) | (0.6 | ) | (0.7 | ) | ||||||
Other | 0.5 | 0.0 | 0.0 | |||||||||
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Financial information
Notes to the consolidated financial statements
Note 27 Fair value of financial instruments (continued)
b) Fair value hierarchy (continued)
Material changes in level 3 instruments
– | structured rates and credit trades, including bespoke collateralized debt obligations (CDOs), | |
– | instruments linked to the US residential and US commercial real estate markets, | |
– | non-US reference-linked notes, and | |
– | equity-linked notes issued by UBS. |
Trading portfolio assets
Derivative instruments
Financial liabilities designated at fair value
Level 3 sensitivity information
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Note 27 Fair value of financial instruments (continued)
b) Fair value hierarchy (continued)
uations for level 3 instruments. In undertaking this analysis, UBS evaluated these instruments by classifying them into low, medium and high categories of valuation uncertainty based on the assessment of instrument level characteristics and available market information. Instrument level characteristics include the model from which the valuation was derived, the degree of impact on fair value by unobservable parameters, reserves and valuation adjustments. Market information includes any data that supports the classification such as reference to similar instruments and observable pa-
rameter information. Based on the valuation uncertainty assigned to an instrument, the market value was adjusted upward and downward and summed across the level 3 financial assets and liabilities to arrive at the estimated range of reasonably possible alternative valuations, as shown in the table below: Favorable valuation changes for assets would be offset to a significant degree by unfavorable changes in liabilities and vice versa as a consistent use of different assumptions and estimates would prevent a simultaneous favorable or unfavorable valuation change of assets and liabilities.
As of 31 December 2009, CHF billion | Favorable changes | Unfavorable changes | ||||||
Financial assets1 | �� | 4.1 | (4.1 | ) | ||||
of which: trading portfolio assets (including those pledged as collateral) | 1.0 | (10 | ) | |||||
of which: positive replacement values | 3.1 | (3.1 | ) | |||||
Financial liabilities | (3.3 | ) | 3.3 | |||||
of which: financial liabilities designated at fair value | (1.6 | ) | 1.6 | |||||
of which: negative replacement values | (1.7 | ) | 1.7 | |||||
c) Valuation techniques by product and market risk sensitivity
This section includes a description of the valuation of certain significant product categories and related valuation techniques and models. In addition, sensitivity information for certain significant instrument categories that are excluded from Management Value-at-Risk as disclosed in the Risk and treasury management section of this report is provided.
Credit valuation adjustments on monoline credit protection
UBS previously entered into negative basis trades with monolines, whereby they provided credit default swap protection against UBS-held underlyings, including residential mortgage-backed securities collateralized debt obligations (RMBS CDO), transactions with collateralized loan obligation (CLO) and asset-backed securities collateralized debt obligations (ABS CDO). Since the start of the financial crisis, the credit valuation adjustments (CVA) relating to these mono-line exposures have been a source of valuation uncertainty, given market illiquidity and the terms of these exposures relative to other monoline-related instruments.
CDO, and CLO asset categories, cash flow projections are used in conjunction with current fair values of the underlying assets to provide estimates of expected future exposure levels. For other asset categories, future exposure is based on current exposure.
Instruments linked to US residential real estate market
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Financial information
Notes to the consolidated financial statements
Note 27 Fair value of financial instruments (continued)
c) Valuation techniques by product and market risk sensitivity (continued)
based on contractual cash flows of the underlying bonds due to the absence of liquidity, and therefore pricing information. The contractual cash flows are adjusted for the expected rate of underlying defaults. Losses in the underlying mortgage pools are derived from the development of default and prepayment curves to which loss severity and interest curves are applied. The projected lifetime losses are additionally calibrated to ABX market indices. The default adjusted mortgage bond cash flows are then aggregated across all bond positions in the CDO, to arrive at the overall expected cash flows from the mortgage pool, used for the discounting process. The principles of this model are applied to both cash and synthetic instruments.
Commitments to acquire auction rate securities (ARSs)
US reference-linked notes (US RLNs)
RLNs is fair valued using a market standard approach to the valuation of portfolio credit protection (Gaussian copula). This approach effectively is intended to simulate correlated defaults within the portfolio, where the expected losses and defaults of the individual assets are closely linked to the observed market prices (spread levels) of those assets. Key assumptions of the model include correlations and recovery rates. UBS applies fair value adjustments related to potential uncertainty in each of these parameters, which are only partly observable. In addition, UBS applies fair value adjustments for uncertainties associated with the use of observed spread levels as the primary inputs. These fair value adjustments are calculated by applying shocks to the relevant parameters and revaluing the credit protection. These shocks for correlation, recovery and spreads are set to various levels depending on the asset type and / or region and may vary over time depending on the best judgment of the relevant trading and control personnel. Correlation and recovery shocks are generally in the reasonably possible range of 5 to 15 percentage points. Spread shocks vary more widely and depend on whether the underlying protection is funded or unfunded to reflect cash or synthetic basis effects. As of 31 December 2009, the fair value of the US RLN credit protection (pre-reserve) is approximately USD 1,502 million (CHF 1,555 million; 31 December 2008: USD 3,284 million or CHF 3,502 million). The fair value adjustments calculated by applying the shocks described above are approximately USD 71 million (CHF 74 million; 31 December 2008: USD 299 million or CHF 319 million) as of 31 December 2009. This adjustment may also be considered a measurement of sensitivity.
Non-US reference-linked notes (Non-US RLNs)
Option to acquire equity of the SNB StabFund
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Note 27 Fair value of financial instruments (continued)
c) Valuation techniques by product and market risk sensitivity (continued)
fair value(Positive replacement values)with changes to fair value recognized in profit and loss. As of 31 December 2009, the fair value (after adjustments) of UBS’s call option was approximately USD 1,174 million (CHF 1,216 million; 31 December 2008: CHF 1,100 million).
Bespoke collateralized debt obligations (CDOs)
risks that the investor is exposed to is the correlation behavior of the names in the tranche.
Equity-linked notes issued by UBS
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Financial information
Notes to the consolidated financial statements
Note 27 Fair value of financial instruments (continued)
d) Deferred day 1 profit or loss
The table reflects financial instruments for which fair value is determined using valuation models where not all significant inputs are market observable. Such financial instruments are initially recognized at their transaction price although the values obtained from the relevant valuation
model on day 1 may differ. The table shows the aggregate difference yet to be recognized in profit or loss at the beginning and end of the period and a reconciliation of changes in the balance of this difference (movement of deferred day 1 profit or loss).
Deferred day 1 profit or loss
For the year ended | ||||||||
CHF million | 31.12.09 | 31.12.08 | ||||||
Balance at the beginning of the year | 627 | 550 | ||||||
Deferred profit/(loss) on new transactions | 231 | 588 | ||||||
Recognized (profit)/loss in the income statement | (240 | ) | (459 | ) | ||||
Foreign currency translation | (19 | ) | (52 | ) | ||||
Balance at the end of the year | 599 | 627 | ||||||
On 31 December 2009, deferred day 1 profit or loss of approximately CHF 0.3 billion (31 December 2008: approximately CHF 0.4 billion) pertains to multi-name credit default swaps (largely structured rates and credit trades, including
bespoke CDOs), and of approximately CHF 0.3 billion (31 December 2008: approximately CHF 0.2 billion) to over-the-counter (OTC) equity options. Both instruments are presented as replacement values on UBS’s balance sheet.
e) Financial instruments accounted for at amortized cost
The following table reflects the estimated fair values for UBS’s instruments accounted for at amortized cost. Refer to Note 29 for an overview of financial assets classified as
“loans and receivables” and financial liabilities accounted for at amortized cost.
31.12.09 | 31.12.08 | |||||||||||||||
CHF billion | Carrying value | Fair value | Carrying value | Fair value | ||||||||||||
Assets | ||||||||||||||||
Due from banks | 46.6 | 46.6 | 64.5 | 64.5 | ||||||||||||
Loans | 305.1 | 306.0 | 338.5 | 338.1 | ||||||||||||
Cash collateral on securities borrowed | 63.5 | 63.5 | 122.9 | 122.9 | ||||||||||||
Reverse repurchase agreements | 116.7 | 116.7 | 224.6 | 224.8 | ||||||||||||
Accrued income and prepaid expenses, other assets | 5.1 | 5.1 | 9.1 | 9.1 | ||||||||||||
Liabilities | ||||||||||||||||
Due to banks | 65.2 | 65.1 | 125.6 | 125.6 | ||||||||||||
Due to customers | 410.5 | 410.5 | 465.7 | 465.7 | ||||||||||||
Cash collateral on securities lent | 8.0 | 8.0 | 14.1 | 14.1 | ||||||||||||
Repurchase agreements | 64.2 | 64.2 | 102.5 | 102.5 | ||||||||||||
Debt issued | 134.5 | 133.6 | 201.2 | 199.7 | ||||||||||||
Accrued expenses and deferred income, other liabilities | 15.9 | 15.9 | 22.8 | 22.8 | ||||||||||||
Off-balance-sheet financial instruments | ||||||||||||||||
Loan commitments1 | 0.3 | 0.4 | ||||||||||||||
Guarantees and similar instruments2 | 0.1 | (0.1 | ) | |||||||||||||
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Note 27 Fair value of financial instruments (continued)
e) Financial instruments accounted for at amortized cost (continued)
The fair values included in the table above were calculated for disclosure purposes only. The valuation techniques and assumptions described below provide a measurement of fair value of UBS’s financial instruments accounted for at amortized cost. However, because other institutions may use different methods and assumptions for their fair value estimation, such fair value disclosures cannot necessarily be compared from one financial institution to another. UBS applies significant judgments and assumptions to arrive at these fair values, which are more holistic and less sophisticated than UBS’s established fair value and model governance policies and processes applied for financial instruments accounted for at fair value, whose fair values impact UBS’s balance sheet and net profit. The following principles were applied when determining fair value estimates for financial instruments accounted for at amortized cost:
– | For financial instruments with remaining maturities greater than three months, the fair value was determined from quoted market prices, where available. | |
– | Where quoted market prices were not available, the fair values were estimated by discounting contractual cash flows using current market interest rates or appropriate yield curves for instruments with similar credit risk and maturity. These estimates generally include adjustments for counterparty credit or UBS’s own credit. | |
– | For short-term financial instruments with remaining maturities of three months or less, the carrying amount, which is net of credit loss allowances, is generally considered a reasonable estimate of fair value. The following financial instruments accounted for at amortized cost |
have remaining maturities of three months or less: 99% of loans due from banks; 55% of loans due from customers; 100% of cash collateral on securities borrowed; 100% of reverse repurchase agreements; 96% of amounts due to banks; 100% of amount due to customers; 100% of cash collateral on securities lent; 100% of repurchase agreements; and 49% of debt issued. | ||
– | The fair value of variable-interest bearing financial instruments accounted for at amortized cost is assumed to be approximated by their carrying amounts, which are net of credit loss allowances, and does not reflect fair value changes in the credit quality of counterparties or UBS’s own credit movements. | |
– | The fair value estimates for repurchase and reverse repurchase agreements with variable and fixed interest rates, for all maturities, include the valuation of the interest rate component of these instruments. Credit and debit valuation adjustments have not been included in the valuation due to the short-term nature of these instruments. | |
– | Loans include Wealth Management assets, mainly mortgage loans, where fair values exceed related carrying values by CHF 3.3 billion, and Investment Bank assets where fair values fall below related carrying values by CHF 2.4 billion, of which CHF 0.9 billion relate to reclassified financial assets. | |
– | The estimated fair values of off-balance sheet financial instruments are based on market prices for similar facilities and guarantees. Where this information is not available, fair value is estimated using discounted cash flow analysis. |
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Financial information
Notes to the consolidated financial statements
Note 28 Pledged assets and transferred financial assets which do not qualify for derecognition
Financial assets are mainly pledged in securities borrowing and lending transactions, in repurchase and reverse repurchase transactions, under collateralized credit lines with central banks, against loans from mortgage institutions, in con-
nection with derivative transactions, as security deposits for stock exchanges and clearinghouse memberships, or transferred for security purpose in connection with the issuance of covered bonds.
Assets pledged | ||||||
Carrying amount | ||||||
CHF million | 31.12.09 | 31.12.08 | ||||
Financial assets held for trading pledged to third parties for liabilities with and without the right of rehypothecation | 64,748 | 78,002 | ||||
of which: pledged to third parties with right of rehypothecation | 44,221 | 40,216 | ||||
Mortgage loans1 | 21,741 | 3,699 | ||||
Other2 | 65,775 | 21,040 | ||||
Total | 152,264 | 102,741 | ||||
The following table presents details of financial assets which have been sold or otherwise transferred, but which do not
qualify for derecognition. Criteria for derecognition are discussed in Note 1a) 5).
Transfer of financial assets which do not qualify for derecognition | ||||||||
Continued asset recognition in full – Total assets | ||||||||
CHF billion | 31.12.09 | 31.12.08 | ||||||
Nature of transaction | ||||||||
Securities lending agreements | 17.1 | 22.0 | ||||||
Repurchase agreements | 24.6 | 13.1 | ||||||
Other financial asset transfers | 110.9 | 46.6 | ||||||
Total | 152.6 | 81.7 | ||||||
The transactions are mostly conducted under standard agreements employed by financial market participants and are undertaken with counterparties subject to UBS’s normal credit risk control processes. The resulting credit exposures are controlled by daily monitoring and collateralization of the positions. The financial assets which continue to be recognized are typically transferred in exchange for cash or other financial assets. The associated liabilities can therefore be assumed to be approximately the carrying amount of the transferred financial assets except for certain positions pledged with central banks.
UBS retains substantially all risks and rewards of the transferred assets in each situation of continued recognition in
full. These include credit risk, settlement risk, country risk and market risk.
Repurchase agreements and securities lending agreements are discussed in Notes 1a) 13) and 1a) 14). Other financial asset transfers include sales of financial assets while concurrently entering into a total rate of return swap with the same counterparty and sales of financial assets involving guarantees.
Transferred financial assets which are subject to partial continued recognition were immaterial in 2009 and 2008. The carrying amounts of the partially recognized transferred financial assets are included in the table.
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Note 29 Measurement categories of financial assets and financial liabilities
a) Measurement categories of financial assets and financial liabilities
The following table provides information about the carrying amounts of individual classes of financial instruments within the measurement categories of financial assets and financial liabilities as defined in IAS 39. Only those assets and liabilities which are deemed to be financial instruments are included
in the table below, which causes certain balances to differ from those presented on the balance sheet.
Refer to “Note 27 Fair value of financial instruments” for more information on how fair value of financial instruments is determined.
31.12.09 | 31.12.08 | ||||||||
Financial assets1 | |||||||||
Held for trading | |||||||||
Trading portfolio assets | 171,173 | 261,904 | |||||||
Trading portfolio assets pledged as collateral | 44,221 | 40,216 | |||||||
Debt issued2 | 3,109 | 4,152 | |||||||
Positive replacement values | 421,694 | 854,100 | |||||||
Total | 640,197 | 1,160,372 | |||||||
Fair value through profit or loss | |||||||||
Financial assets designated at fair value | 10,223 | 12,882 | |||||||
Cash, loans and receivables | |||||||||
Cash and balances with central banks | 20,899 | 32,744 | |||||||
Due from banks | 46,574 | 64,451 | |||||||
Cash collateral on securities borrowed | 63,507 | 122,897 | |||||||
Reverse repurchase agreements | 116,689 | 224,648 | |||||||
Loans | 305,061 | 338,520 | |||||||
Accrued income and prepaid expenses | 1,465 | 3,238 | |||||||
Other assets | 3,594 | 5,901 | |||||||
Total | 557,789 | 792,399 | |||||||
Available-for-sale | |||||||||
Financial investments available-for-sale | 81,757 | 5,248 | |||||||
Total financial assets | 1,289,966 | 1,970,901 | |||||||
Financial liabilities | |||||||||
Held for trading | |||||||||
Trading portfolio liabilities | 47,469 | 62,431 | |||||||
Debt issued2 | 8 | 185 | |||||||
Negative replacement values | 409,943 | 851,864 | |||||||
Total | 457,420 | 914,480 | |||||||
Fair value through profit or loss, other | |||||||||
Financial liabilities designated at fair value | 112,653 | 101,546 | |||||||
Amounts due under unit-linked contracts | 21,740 | 22,084 | |||||||
Total | 134,393 | 123,630 | |||||||
Financial liabilities at amortized cost | |||||||||
Due to banks | 65,166 | 125,628 | |||||||
Cash collateral on securities lent | 7,995 | 14,063 | |||||||
Repurchase agreements | 64,175 | 102,561 | |||||||
Due to customers | 410,475 | 465,741 | |||||||
Accrued expenses and deferred income | 8,522 | 10,012 | |||||||
Debt issued | 134,453 | 201,221 | |||||||
Other liabilities | 7,415 | 12,765 | |||||||
Total | 698,201 | 931,991 | |||||||
Total financial liabilities | 1,290,014 | 1,970,101 | |||||||
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Financial information
Notes to the consolidated financial statements
Note 29 Measurement categories of financial assets and financial liabilities (continued)
b) Reclassification of financial assets
The reclassification of financial assets reflected UBS’s change in intent and ability to hold these financial assets for the foreseeable future rather than for trading in the near term. The financial assets were reclassified using their fair value on the date of the reclassification, which became their new cost basis at that date.
In 2008 and first quarter 2009, financial assets with fair values on their reclassification dates of CHF 26 billion and CHF 0.6 billion, respectively, were reclassified out ofTrading portfolio assetstoLoans.
The table below shows the carrying values and fair values of these financial assets.
Trading portfolio assets reclassified to loans | ||||||||
CHF billion | 31.12.09 | 31.12.08 | ||||||
Carrying value of trading portfolio assets reclassified | 19.9 | 24.2 | ||||||
Fair value of trading portfolio assets reclassified | 19.0 | 20.8 | ||||||
Pro-forma fair value gain/(loss) | (0.9 | ) | (3.4 | ) | ||||
In 2009, carrying values decreased by approximately CHF 4.3 billion mainly due to sales of approximately CHF 2.6 billion. Redemptions, credit loss expenses of CHF 1 billion and the appreciation of the Swiss franc against the US dollar resulted in a decrease of approximately CHF 3.3 billion. The decrease was partially offset by financial assets of CHF 0.6 billion reclassified in 2009, and the accretion of interest of approximately CHF 0.9 billion from the amortization of the discount between carrying values and the expected recoverable amounts.
Fair values of reclassified financial assets decreased as well by approximately CHF 1.8 billion in 2009, which includes a fair value gain of approximately CHF 4.7 billion and financial assets reclassified in 2009 of CHF 0.6 billion, offset by decreases of approximately CHF 2.6 billion related to sales and decreases of approximately CHF 4.5 billion related to redemptions and the decline of the CHF/USD exchange rate.
The table below provides notional values, fair values, and carrying values by product category, as well as the ratio of carrying value to notional value.
Reclassified assets | ||||||||||||||||
Ratio of carrying | ||||||||||||||||
31.12.09, CHF billion | Notional value | Fair value | Carrying value | to notional value | ||||||||||||
US student loan and municipal auction rate securities | 9.3 | 8.0 | 8.2 | 88% | ||||||||||||
Monoline-protected assets1 | 7.5 | 6.1 | 6.5 | 86% | ||||||||||||
Leveraged finance | 2.6 | 0.9 | 0.8 | 30% | ||||||||||||
CMBS/CRE (excluding interest-only strips) | 2.0 | 1.5 | 1.6 | 82% | ||||||||||||
US reference-linked notes | 1.1 | 0.9 | 1.0 | 86% | ||||||||||||
Other assets | 1.1 | 0.9 | 1.0 | 90% | ||||||||||||
Total (excluding CMBS interest-only strips) | 23.6 | 18.2 | 19.0 | 80% | ||||||||||||
CMBS interest-only strips | 0.8 | 0.9 | ||||||||||||||
Total reclassified assets | 23.6 | 19.0 | 19.9 | |||||||||||||
Reclassified financial assets impacted UBS’s income statement as presented in the table below.
Contribution of the reclassified assets to the income statement | ||||||||
For the year ended | ||||||||
CHF billion | �� | 31.12.09 | 31.12.08 | |||||
Net interest income | 1.5 | 0.1 | ||||||
Credit loss (expense)/recovery | (1.0 | ) | (1.3 | ) | ||||
Other income | 0.1 | 0.0 | ||||||
Impact on operating profit before tax | 0.6 | (1.2 | ) | |||||
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Note 29 Measurement categories of financial assets and financial liabilities (continued)
c) Maximum exposure to credit risk and credit quality information
The table below presents the Group’s maximum exposure to credit risk without taking account of any collateral held or other credit enhancements. The amounts included in the table represent the carrying amounts of financial instruments subject to credit risk which were determined under the guidance
of IFRS. Financial instruments have been netted only if and to the extent a) legally enforceable rights to offset exist, and b) UBS has the intention to settle the underlying transactions on a net basis. As such, the amounts disclosed in the table below should not necessarily be considered a “risk measure”.
Maximum exposure to credit risk1 | ||||||||||||||||||||||||||||||||||||||||
31.12.09 | 31.12.08 | |||||||||||||||||||||||||||||||||||||||
CHF million | WM&SB | WMA | IB | Other | 2 | UBS | WM&SB | WMA | IB | Other | 2 | UBS | ||||||||||||||||||||||||||||
Balances with central banks | 8,589 | 0 | 9,525 | 0 | 18,114 | 17,628 | 0 | 11,528 | 0 | 29,156 | ||||||||||||||||||||||||||||||
Due from banks | 2,651 | 1,074 | 42,568 | 282 | 46,574 | 5,499 | 1,096 | 57,475 | 381 | 64,451 | ||||||||||||||||||||||||||||||
Loans | 194,410 | 21,492 | 89,057 | 101 | 305,061 | 203,758 | 23,956 | 110,056 | 750 | 338,520 | ||||||||||||||||||||||||||||||
Cash collateral on securities borrowed | 0 | 0 | 63,507 | 0 | 63,507 | 0 | 0 | 122,897 | 0 | 122,897 | ||||||||||||||||||||||||||||||
Reverse repurchase agreements | 1,107 | 4,302 | 109,896 | 1,384 | 116,689 | 0 | 4,223 | 219,580 | 844 | 224,648 | ||||||||||||||||||||||||||||||
Accrued income, other assets and debt underwriting commitments subject to credit risk | 1,319 | 147 | 2,436 | 1,185 | 5,087 | 1,955 | 183 | 4,526 | 2,479 | 9,144 | ||||||||||||||||||||||||||||||
Financial instruments measured at amortized cost on balance sheet | 208,076 | 27,015 | 316,989 | 2,952 | 555,032 | 228,840 | 29,458 | 526,062 | 4,454 | 788,816 | ||||||||||||||||||||||||||||||
Positive replacement values | 2,534 | 520 | 416,862 | 1,778 | 421,694 | 5,610 | 491 | 847,158 | 841 | 854,100 | ||||||||||||||||||||||||||||||
Trading portfolio assets (including pledged positions) – debt instruments | 16,341 | 1,107 | 117,047 | 4,535 | 139,030 | 85 | 1,343 | 219,739 | 3,695 | 224,862 | ||||||||||||||||||||||||||||||
Financial assets designated at fair value – debt instruments | 65 | 0 | 9,317 | 0 | 9,383 | 0 | 0 | 11,803 | 0 | 11,803 | ||||||||||||||||||||||||||||||
Financial investments available-for-sale – debt instruments | 5,393 | 16,515 | 52,183 | 6,315 | 80,406 | 615 | 278 | 2,451 | 223 | 3,567 | ||||||||||||||||||||||||||||||
Financial instruments measured at fair value on balance sheet | 24,333 | 18,142 | 595,409 | 12,628 | 650,513 | 6,310 | 2,112 | 1,081,151 | 4,759 | 1,094,332 | ||||||||||||||||||||||||||||||
Credit guarantees, performance guarantees, documentary credits and similar instruments3 | 11,888 | 385 | 4,569 | 137 | 16,979 | 14,258 | 405 | 4,856 | 149 | 19,668 | ||||||||||||||||||||||||||||||
Undrawn irrevocable credit facilities | 7,236 | 498 | 51,593 | 0 | 59,328 | 2,775 | 13 | 57,528 | 0 | 60,316 | ||||||||||||||||||||||||||||||
Irrevocable commitments to acquire ARS | 0 | 0 | 8,700 | 0 | 8,700 | 0 | 0 | 16,571 | 0 | 16,571 | ||||||||||||||||||||||||||||||
Commitments | 19,124 | 883 | 64,862 | 137 | 85,007 | 17,033 | 418 | 78,955 | 149 | 96,555 | ||||||||||||||||||||||||||||||
Total at the year-end | 251,533 | 46,040 | 977,260 | 15,717 | 1,290,552 | 252,183 | 31,988 | 1,686,168 | 9,362 | 1,979,703 | ||||||||||||||||||||||||||||||
The table above does not include written credit protection, which is generally recognized on UBS’s balance sheet underNegative replacement values.It also excludes UBS’s obligations under the Swiss Deposit Insurance.
The maximum exposure to credit risk determined under IFRS guidance and disclosed in the table above is actively managed and subject to credit risk management such as collater-
alization and hedging. Collateral held and credit risk mitigation is described in the section “Risk management and control”.
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Financial information
Notes to the consolidated financial statements
Note 29 Measurement categories of financial assets and financial liabilities (continued)
c) Maximum exposure to credit risk and credit quality information (continued)
Financial assets subject to credit risk by rating category | ||||||||||||||||||||||||||||
CHF million | 31.12.09 | |||||||||||||||||||||||||||
Rating category | 0–1 | 2–3 | 4–5 | 6–8 | 9–13 | defaulted | Total | |||||||||||||||||||||
Balances with central banks | 14,491 | 3,615 | 9 | 18,114 | ||||||||||||||||||||||||
Due from banks | 3,392 | 39,256 | 2,526 | 1,108 | 186 | 106 | 46,574 | |||||||||||||||||||||
Loans | 21,000 | 82,204 | 81,791 | 98,611 | 18,544 | 2,910 | 305,061 | |||||||||||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | 47,928 | 100,127 | 24,108 | 7,444 | 537 | 52 | 180,196 | |||||||||||||||||||||
Positive replacement values | 18,138 | 357,590 | 31,511 | 10,316 | 2,682 | 1,456 | 421,694 | |||||||||||||||||||||
Trading portfolio assets (including pledged) – debt instruments | 61,492 | 57,128 | 10,081 | 4,523 | 5,090 | 716 | 139,030 | |||||||||||||||||||||
Financial investments available-for-sale – debt instruments | 75,363 | 5,007 | 3 | 25 | 8 | 80,406 | ||||||||||||||||||||||
Other financial instruments | 696 | 9,211 | 2,435 | 945 | 559 | 624 | 14,470 | |||||||||||||||||||||
Commitments1 | ||||||||||||||||||||||||||||
Guarantees and similar instruments2 | 87 | 8,391 | 4,129 | 2,931 | 1,475 | 56 | 17,070 | |||||||||||||||||||||
Undrawn irrevocable credit facilities | 962 | 40,682 | 8,441 | 3,357 | 5,463 | 422 | 59,328 | |||||||||||||||||||||
Total | 243,550 | 703,210 | 165,033 | 129,262 | 34,546 | 6,341 | 1,281,942 | |||||||||||||||||||||
CHF million | 31.12.08 | |||||||||||||||||||||||||||
Rating category | 0-1 | 2-3 | 4-5 | 6-8 | 9-13 | defaulted | Total | |||||||||||||||||||||
Balances with central banks | 23,619 | 5,534 | 3 | 29,156 | ||||||||||||||||||||||||
Due from banks | 5,697 | 43,075 | 13,847 | 1,418 | 327 | 87 | 64,451 | |||||||||||||||||||||
Loans | 26,210 | 97,300 | 82,431 | 108,076 | 20,204 | 4,298 | 338,520 | |||||||||||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | 95,379 | 218,644 | 19,841 | 12,528 | 711 | 441 | 347,544 | |||||||||||||||||||||
Positive replacement values | 46,805 | 602,505 | 172,865 | 24,333 | 5,081 | 2,511 | 854,100 | |||||||||||||||||||||
Trading portfolio assets (including pledged) – debt instruments | 98,836 | 89,508 | 20,780 | 7,103 | 8,031 | 604 | 224,862 | |||||||||||||||||||||
Financial investments available-for-sale – debt instruments | 3,271 | 131 | 110 | 35 | 16 | 3 | 3,567 | |||||||||||||||||||||
Other financial instruments | 1,253 | 13,085 | 2,846 | 2,048 | 890 | 824 | 20,947 | |||||||||||||||||||||
Commitments1 | ||||||||||||||||||||||||||||
Guarantees and similar instruments2 | 36 | 9,496 | 4,944 | 3,654 | 1,497 | 72 | 19,699 | |||||||||||||||||||||
Undrawn irrevocable credit facilities | 238 | 33,820 | 15,285 | 2,840 | 7,719 | 415 | 60,316 | |||||||||||||||||||||
Total | 301,344 | 1,113,099 | 332,952 | 162,035 | 44,477 | 9,254 | 1,963,161 | |||||||||||||||||||||
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Note 30 Pension and other post-employment benefit plans
a) Defined benefit plans
UBS has established various pension plans inside and outside of Switzerland. The major plans are located in Switzerland, the UK, the US and Germany. Independent actuarial valuations are performed for the plans in these locations. The measurement date of these plans is 31 December for each year presented.
Swiss pension plan
Contributions to the pension plan are paid by employees and the employer. The employee contributions are calculated as a percentage of covered salary and are deducted monthly. The percentages deducted from salary for the full standard level of benefit coverage depend on age and vary between 1% and 9% of covered base salary and 3% and 8% of covered variable compensation. The employer pays a contribution that ranges between 100% and 375% of employees’ contributions for the standard level of benefit coverage. The benefits covered include retirement benefits; disability, death and survivor pensions; and employment termination benefits.
Foreign pension plans
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Notes to the consolidated financial statements
Note 30 Pension and other post-employment benefit plans (continued)
a) Defined benefit plans (continued) | ||||||||||||||||||||||||
CHF million | Swiss | Foreign | ||||||||||||||||||||||
For the year ended | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||
Defined benefit obligation at the beginning of the year | (21,311 | ) | (20,877 | ) | (21,506 | ) | (3,642 | ) | (4,928 | ) | (5,207 | ) | ||||||||||||
Service cost | (432 | ) | (336 | ) | (367 | ) | (41 | ) | (63 | ) | (88 | ) | ||||||||||||
Interest cost | (672 | ) | (710 | ) | (633 | ) | (230 | ) | (251 | ) | (264 | ) | ||||||||||||
Plan participant contributions | (195 | ) | (233 | ) | (236 | ) | ||||||||||||||||||
Amendments | 0 | 0 | (414 | ) | ||||||||||||||||||||
Actuarial gain/(loss) | 231 | (288 | ) | 1,508 | (471 | ) | 318 | 236 | ||||||||||||||||
Benefits paid | 1,314 | 1,158 | 792 | 153 | 148 | 151 | ||||||||||||||||||
Termination benefits | (54 | ) | (25 | ) | (21 | ) | ||||||||||||||||||
Acquisitions | 0 | 0 | (54 | ) | ||||||||||||||||||||
Foreign currency translation | (122 | ) | 1,134 | 298 | ||||||||||||||||||||
Defined benefit obligation at the end of the year | (21,119 | ) | (21,311 | ) | (20,877 | ) | (4,353 | ) | (3,642 | ) | (4,928 | ) | ||||||||||||
Fair value of plan assets at the beginning of the year | 19,029 | 22,181 | 21,336 | 2,866 | 4,579 | 4,602 | ||||||||||||||||||
Expected return on plan assets | 846 | 990 | 1,067 | 202 | 282 | 313 | ||||||||||||||||||
Actuarial gain/(loss) | 963 | (3,820 | ) | (250 | ) | 266 | (1,027 | ) | (97 | ) | ||||||||||||||
Employer contributions | 567 | 603 | 584 | 232 | 194 | 200 | ||||||||||||||||||
Plan participant contributions | 195 | 233 | 236 | |||||||||||||||||||||
Benefits paid | (1,314 | ) | (1,158 | ) | (792 | ) | (153 | ) | (148 | ) | (151 | ) | ||||||||||||
Foreign currency translation | 104 | (1,014 | ) | (288 | ) | |||||||||||||||||||
Fair value of plan assets at the end of the year | 20,286 | 19,029 | 22,181 | 3,517 | 2,866 | 4,579 | ||||||||||||||||||
Funded status | (833 | ) | (2,282 | ) | 1,304 | (836 | ) | (776 | ) | (349 | ) | |||||||||||||
Unrecognized net actuarial (gains)/losses | 2,996 | 4,405 | 2,123 | 1,475 | 1,324 | 975 | ||||||||||||||||||
Unrecognized assets | 0 | 0 | (1,304 | ) | ||||||||||||||||||||
(Accrued)/prepaid pension cost | 2,163 | 2,123 | 2,123 | 639 | 548 | 626 | ||||||||||||||||||
Movement in the net (liability) or asset | ||||||||||||||||||||||||
(Accrued)/prepaid pension cost at the beginning of the year | 2,123 | 2,123 | 1,953 | 548 | 626 | 633 | ||||||||||||||||||
Net periodic pension cost | (527 | ) | (603 | ) | (414 | ) | (167 | ) | (69 | ) | (97 | ) | ||||||||||||
Employer contributions | 567 | 603 | 584 | 232 | 194 | 200 | ||||||||||||||||||
Acquisitions | 0 | 0 | (54 | ) | ||||||||||||||||||||
Foreign currency translation | 26 | (203 | ) | (56 | ) | |||||||||||||||||||
(Accrued)/prepaid pension cost | 2,163 | 2,123 | 2,123 | 639 | 548 | 626 | ||||||||||||||||||
Amounts recognized in the balance sheet | ||||||||||||||||||||||||
Prepaid pension cost | 2,163 | 2,123 | 2,123 | 890 | 798 | 887 | ||||||||||||||||||
Accrued pension liability | (251 | ) | (250 | ) | (261 | ) | ||||||||||||||||||
(Accrued)/prepaid pension cost | 2,163 | 2,123 | 2,123 | 639 | 548 | 626 | ||||||||||||||||||
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Note 30 Pension and other post-employment benefit plans (continued)
a) Defined benefit plans (continued)
CHF million | Swiss | Foreign | ||||||||||||||||||||||
For the year ended | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||
Components of net periodic pension cost | ||||||||||||||||||||||||
Service cost | 432 | 336 | 367 | 41 | 63 | 88 | ||||||||||||||||||
Interest cost | 672 | 710 | 633 | 230 | 251 | 264 | ||||||||||||||||||
Expected return on plan assets | (846 | ) | (990 | ) | (1,067 | ) | (202 | ) | (282 | ) | (313 | ) | ||||||||||||
Amortization of unrecognized net (gains)/losses | 215 | 0 | 0 | 98 | 37 | 58 | ||||||||||||||||||
Immediate recognition of net actuarial (gains)/losses in current period | 0 | 1,826 | (1,258 | ) | ||||||||||||||||||||
Immediate recognition of past service cost in current period | 0 | 0 | 414 | |||||||||||||||||||||
Special termination benefits | 54 | 25 | 21 | |||||||||||||||||||||
Limit of defined benefit asset | 0 | (1,304 | ) | 1,304 | ||||||||||||||||||||
Net periodic pension cost | 527 | 603 | 414 | 167 | 69 | 97 | ||||||||||||||||||
Funded and unfunded plans | ||||||||||||||||||||||||
Swiss | ||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||||||
Defined benefit obligation from funded plans | (21,119 | ) | (21,311 | ) | (20,877 | ) | (21,506 | ) | (20,972 | ) | ||||||||||||||
Plan assets | 20,286 | 19,029 | 22,181 | 21,336 | 20,229 | |||||||||||||||||||
Surplus/(deficit) | (833 | ) | (2,282 | ) | 1,304 | (170 | ) | (743 | ) | |||||||||||||||
Experience gains/(losses) on plan liabilities | 214 | 0 | 0 | |||||||||||||||||||||
Experience gains/(losses) on plan assets | 963 | (3,820 | ) | (250 | ) | |||||||||||||||||||
Foreign | ||||||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||||||
Defined benefit obligation from funded plans | (4,078 | ) | (3,402 | ) | (4,654 | ) | (5,002 | ) | (4,635 | ) | ||||||||||||||
Defined benefit obligation from unfunded plans | (275 | ) | (240 | ) | (274 | ) | (205 | ) | (385 | ) | ||||||||||||||
Plan assets | 3,517 | 2,866 | 4,579 | 4,602 | 4,288 | |||||||||||||||||||
Surplus/(deficit) | (836 | ) | (776 | ) | (349 | ) | (605 | ) | (732 | ) | ||||||||||||||
Experience gains/(losses) on plan liabilities | (12 | ) | 62 | (32 | ) | |||||||||||||||||||
Experience gains/(losses) on plan assets | 266 | (1,027 | ) | (97 | ) | |||||||||||||||||||
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Financial information
Notes to the consolidated financial statements
Note 30 Pension and other post-employment benefit plans (continued)
a) Defined benefit plans (continued)
Swiss | Foreign | |||||||||||||||||||||||
31.12.09 | 31.12.08 | 31.12.07 | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||||||||||||
Principal weighted average actuarial assumptions used (%) | ||||||||||||||||||||||||
Assumptions used to determine defined benefit obligations at the end of the year | ||||||||||||||||||||||||
Discount rate | 3.3 | 3.3 | 3.5 | 5.7 | 6.0 | 5.8 | ||||||||||||||||||
Expected rate of salary increase | 2.5 | 2.5 | 2.5 | 5.0 | 4.5 | 4.8 | ||||||||||||||||||
Rate of pension increase | 0.5 | 0.5 | 0.8 | 2.5 | 1.9 | 2.4 | ||||||||||||||||||
Assumptions used to determine net periodic pension cost for the year ended | ||||||||||||||||||||||||
Discount rate | 3.3 | 3.5 | 3.0 | 6.0 | 5.8 | 5.2 | ||||||||||||||||||
Expected rate of return on plan assets | 4.5 | 4.5 | 5.0 | 6.6 | 7.1 | 7.0 | ||||||||||||||||||
Expected rate of salary increase | 2.5 | 2.5 | 2.5 | 4.5 | 4.8 | 4.6 | ||||||||||||||||||
Rate of pension increase | 0.5 | 0.8 | 0.8 | 1.9 | 2.4 | 2.1 | ||||||||||||||||||
Plan assets (weighted average) | ||||||||||||||||||||||||
Actual plan asset allocation (%) | ||||||||||||||||||||||||
Equity instruments | 35 | 26 | 38 | 46 | 46 | 50 | ||||||||||||||||||
Debt instruments | 51 | 55 | 47 | 35 | 35 | 38 | ||||||||||||||||||
Real estate | 13 | 13 | 11 | 3 | 3 | 4 | ||||||||||||||||||
Other | 1 | 6 | 4 | 16 | 16 | 8 | ||||||||||||||||||
Total | 100 | 100 | 100 | 100 | 100 | 100 | ||||||||||||||||||
Long-term target plan asset allocation (%) | ||||||||||||||||||||||||
Equity instruments | 18–44 | 20–48 | 33–51 | 42–45 | 45–48 | 49–52 | ||||||||||||||||||
Debt instruments | 41–65 | 37–63 | 31–50 | 37–44 | 37–38 | 38–44 | ||||||||||||||||||
Real estate | 9–17 | 10–20 | 10–19 | 3–7 | 3–7 | 4–6 | ||||||||||||||||||
Other | 0–5 | 0–5 | 0 | 11–12 | 10–12 | 1–3 | ||||||||||||||||||
Actual return on plan assets (%) | 9.7 | (12.8 | ) | 3.9 | 15.5 | (18.2 | ) | 4.8 | ||||||||||||||||
Additional details to fair value of plan assets | ||||||||||||||||||||||||
UBS financial instruments and UBS bank accounts | 205 | 782 | 336 | |||||||||||||||||||||
UBS AG shares1 | 66 | 55 | 128 | |||||||||||||||||||||
Securities lent to UBS included in plan assets | 0 | 0 | 9,379 | |||||||||||||||||||||
Other assets used by UBS included in plan assets | 218 | 148 | 111 | |||||||||||||||||||||
Mortality tables and life expectancies for major plans | ||||||||||||||||||||||||||
Life expectancy at age 65 for a male member currently | ||||||||||||||||||||||||||
aged 65 | aged 45 | |||||||||||||||||||||||||
Country | Mortality table | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||||||||||||
Switzerland | BVG 2005 | 17.9 | 17.8 | 17.8 | 17.9 | 17.8 | 17.8 | |||||||||||||||||||
PA 2000 G, medium cohort with | ||||||||||||||||||||||||||
UK | adjustment | 22.8 | 22.7 | 21.9 | 25.7 | 25.6 | 23.0 | |||||||||||||||||||
Germany | Dr. K. Heubeck 2005 G | 19.1 | 19.0 | 18.9 | 21.9 | 21.8 | 21.6 | |||||||||||||||||||
US | RP 2000 with projections | 18.4 | 18.4 | 18.3 | 18.4 | 18.4 | 18.3 | |||||||||||||||||||
Life expectancy at age 65 for a female member currently | ||||||||||||||||||||||||||
aged 65 | aged 45 | |||||||||||||||||||||||||
Country | Mortality table | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||||||||||||
Switzerland | BVG 2005 | 21.0 | 21.1 | 21.1 | 21.0 | 21.1 | 21.1 | |||||||||||||||||||
PA 2000 G, medium cohort with | ||||||||||||||||||||||||||
UK | adjustment | 24.6 | 24.5 | 24.8 | 26.5 | 26.4 | 25.8 | |||||||||||||||||||
Germany | Dr. K. Heubeck 2005 G | 23.3 | 23.1 | 23.0 | 25.8 | 25.7 | 25.6 | |||||||||||||||||||
US | RP 2000 with projections | 20.6 | 20.6 | 20.5 | 20.6 | 20.6 | 20.5 | |||||||||||||||||||
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Note 30 Pension and other post-employment benefit plans (continued)
b) Post-retirement medical and life plans
In the US and the UK, UBS offers retiree medical benefits that contribute to the health care coverage of employees and beneficiaries after retirement. The UK plan is closed to new entrants. In addition to retiree medical benefits, UBS in the US also provides retiree life insurance benefits. The benefit obligation in excess of the fair value of plan assets for these plans amounts to CHF 186 million as of 31 December 2009 (2008: CHF 159 million; 2007: CHF 190 million) and the total accrued post-retirement cost amounts to CHF 163 million as of
31 December 2009 (2008: CHF 164 million; 2007: CHF 181 million). The net periodic post-retirement costs for the years ended 31 December 2009, 31 December 2008, and 31 December 2007 were CHF 9 million (including a curtailment gain of CHF 8 million), CHF 9 million (including a curtailment gain of CHF 11 million), and CHF 26 million, respectively.
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||||||||||
Post-retirement benefit obligation at the beginning of the year | (159 | ) | (190 | ) | (219 | ) | ||||||||||||||
Service cost | (7 | ) | (8 | ) | (12 | ) | ||||||||||||||
Interest cost | (10 | ) | (11 | ) | (11 | ) | ||||||||||||||
Plan participant contributions | (2 | ) | (0 | ) | (1 | ) | ||||||||||||||
Actuarial gain/(loss) | (31 | ) | 14 | 39 | ||||||||||||||||
Amendments | 0 | 0 | (8 | ) | ||||||||||||||||
Benefits paid | 10 | 7 | 8 | |||||||||||||||||
Curtailments | 9 | 9 | 0 | |||||||||||||||||
Foreign currency translation | 4 | 20 | 14 | |||||||||||||||||
Post-retirement benefit obligation at the end of the year | (186 | ) | (159 | ) | (190 | ) | ||||||||||||||
Fair value of plan assets at the beginning of the year | 0 | 0 | 0 | |||||||||||||||||
Employer contributions | 8 | 6 | 7 | |||||||||||||||||
Plan participant contributions | 2 | 1 | 1 | |||||||||||||||||
Benefits paid | (10 | ) | (7 | ) | (8 | ) | ||||||||||||||
Fair value of plan assets at the end of the year | 0 | 0 | 0 | |||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Defined benefit obligation | (186 | ) | (159 | ) | (190 | ) | (219 | ) | (216 | ) | ||||||||||
Plan asset | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Surplus/(deficit) | (186 | ) | (159 | ) | (190 | ) | (219 | ) | (216 | ) | ||||||||||
Experience gains/(losses) on plan liabilities | 8 | 3 | 8 | 1 | (3 | ) | ||||||||||||||
The assumed average health care cost trend rate used in determining post-retirement benefit expense is assumed to be 9% for 2009 and to decrease to an ultimate trend rate of 5% in 2015. On a country-by-country basis, the same discount rate is used for the calculation of the post-retirement benefit obligation from medical and life plans as for the defined benefit obligations arising from pension plans.
Assumed average health care cost trend rates have a significant effect on the amounts reported for health care plans. A one percentage point change in the assumed health care cost trend rates would change the US post-retirement benefit obligation and the service and interest cost components of the net periodic post-retirement benefit costs as follows:
CHF million | 1% increase | 1% decrease | ||||||
Effect on total service and interest cost | 4 | (3 | ) | |||||
Effect on the post-retirement benefit obligation | 26 | (21 | ) | |||||
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Financial information
Notes to the consolidated financial statements
Note 30 Pension and other post-employment benefit plans (continued)
c) Defined contribution plans
UBS also sponsors a number of defined contribution plans in its foreign locations. The locations with defined contribution plans of a material nature are in the UK and the US. Certain plans permit employees to make contributions and earn matching or other contributions from UBS. The em-
ployer contributions to these plans recognized as expense for the years ended 31 December 2009, 31 December 2008, and 31 December 2007 were CHF 246 million, CHF 312 million, and CHF 285 million, respectively.
d) Related party disclosure
UBS is the principal bank for the pension fund of UBS in Switzerland. In this function, UBS is engaged to execute most of the pension fund’s banking activities. These activities include, but are not limited to, trading and securities lending and borrowing. All transactions have been executed at arm’s length conditions.
into lease-back arrangements for some of the properties with 25-year lease terms and two renewal options for ten years each. At 31 December 2008 the minimum commitment towards the Swiss pension fund under the related leases was approximately CHF 41 million.
Related party disclosure | ||||||||||||
For the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Received by UBS | ||||||||||||
Fees | 34 | 44 | 58 | |||||||||
Paid by UBS | ||||||||||||
Interest | 2 | 1 | 2 | |||||||||
Dividends and capital repayments | 0 | 4 | 38 | |||||||||
The transaction volumes in UBS shares and other UBS securities are as follows:
Transaction volumes – related parties | ||||||||||||
For the year ended | ||||||||||||
31.12.09 | 31.12.08 | 31.12.07 | ||||||||||
Financial instruments bought by pension funds | ||||||||||||
UBS AG shares (in thousands of shares) | 3,869 | 6,925 | 1,728 | |||||||||
UBS financial instruments (nominal values in CHF million) | 35 | 78 | 950 | |||||||||
Financial instruments sold by pension funds or matured | ||||||||||||
UBS AG shares (in thousands of shares) | 4,116 | 1,881 | 1,930 | |||||||||
UBS financial instruments (nominal values in CHF million) | 14 | 10 | 976 | |||||||||
UBS has also leased buildings from its pension funds. The rent paid by UBS under these leases amounted to CHF 12 million in 2009, CHF 7 million in 2008, and CHF 6 million in 2007.
defined benefit pension plans are included in the additional details to the fair value of plan assets. Furthermore, UBS defined contribution plans hold 17,259,203 UBS shares with a market value of CHF 278 million as of 31 December 2009 (2008: 17,866,949 shares with a market value of CHF 272 million; 2007: 14,121,239 shares with a market value of CHF 736 million).
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Note 31 Equity participation and other compensation plans
a) Plans offered
UBS has established several equity participation and other compensation plans to further align the interests of executives, managers and staff with the interests of shareholders. The plans are offered to eligible employees in approximately 50 countries and are designed to meet the complex legal, tax and regulatory requirements of each country in which they are offered. UBS’s compensation plans are mandatory, discretionary or voluntary. The explanations below provide a general description of the terms of the most significant plans offered, however specific plan rules may vary by country. Refer to Note 1a) 24) for a description of the accounting policy related to equity participation and other compensation plans.
Mandatory share-based compensation plans
all SEEOP awards is recognized during the performance year, which is generally the period prior to the grant date.
Mandatory deferred cash compensation plans
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Financial information
Notes to the consolidated financial statements
Note 31 Equity participation and other compensation plans (continued)
a) Plans offered (continued)
cause, certain financial losses, behavior that contributes substantially to a material restatement of financial results or to harm to UBS’s reputation, breaches of legal or regulatory requirements or of risk/compliance policies, and a number of other events. Compensation expense is recognized in the performance year, which is generally the year prior to the grant date.
Discretionary share-based compensation plans
ing the performance year, which is generally the period prior to the grant date. During 2009, UBS only granted SESOP awards to certain employees for which it had a contractual commitment.
Voluntary share-based compensation plans
Other plans
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Note 31 Equity participation and other compensation plans (continued)
b) Effect on income statement
Mandatory, discretionary and voluntary share-based
compensation plans
The total share-based compensation expense, including amounts for AIVs granted under EOP, recognized for the years ended 31 December 2009, 31 December 2008 and 31 December 2007 was CHF 913 million, negative CHF 94 million and CHF 3,173 million, respectively. For the years ended 31 December 2009, 31 December 2008 and 31 December 2007, the compensation expense recognized for share-based payments was primarily related to equity-settled plans. At 31 December 2009, total compensation expense related to non-vested mandatory, discretionary and voluntary share-based awards, including amounts for AIVs issued under EOP, granted in 2009 and previous years which will be recognized as an expense in the income statement from 2010 and later is CHF 832 million. This amount is expected to be recognized in Personnel expenses over a weighted average period of 3.6 years.
Mandatory deferred cash compensation plans
The total deferred cash compensation expense, related to CBP and CVCP (as described in previous section), recognized for the year ended 31 December 2009 was CHF 63 million. At 31 December 2009, total compensation expense related to CVCP awards granted in 2009 which will be recognized as an expense in the income statement from 2010 and later is CHF 570 million. This amount is expected to be recognized in Personnel expenses over a weighted average period of 1.8 years.
c) UBS share awards
Movements in shares granted under the equity participation plans described in Note 31a) are as follows:
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Number of | average | Number of | average | Number of | average | |||||||||||||||||||
shares | grant date | shares | grant date | shares | grant date | |||||||||||||||||||
31.12.09 | fair value CHF | 31.12.08 | fair value CHF | 31.12.07 | fair value CHF | |||||||||||||||||||
Forfeitable, at the beginning of the year | 84,736,935 | 53 | 59,102,580 | 66 | 56,141,102 | 58 | ||||||||||||||||||
Shares awarded during the year | 39,067,130 | 12 | 90,895,594 | 32 | 30,271,820 | 70 | ||||||||||||||||||
Distributions during the year | (31,293,824 | ) | 66 | (60,105,109 | ) | 61 | (25,031,819 | ) | 55 | |||||||||||||||
Forfeited during the year | (5,621,615 | ) | 38 | (5,156,131 | ) | 54 | (2,278,523 | ) | 66 | |||||||||||||||
Forfeitable, at the end of the year | 86,888,626 | 31 | 84,736,935 | 53 | 59,102,580 | 66 | ||||||||||||||||||
of which: shares vested for accounting purposes | 40,148,461 | 65,767,017 | 47,700,903 | |||||||||||||||||||||
UBS measures compensation expense based on the average market price of the UBS share on the grant date as quoted on the SIX Swiss Exchange less a discount for post-vesting sale and hedge restrictions and non-vesting conditions, in accordance with IFRS 2Share-based Payment: Vesting Conditions and Cancellations.The grant date fair value of notional UBS shares without dividend entitlements also includes a deduction for the present value of future expected dividends to be paid between grant date and distribution.
weighted average discount for share awards granted in 2009 is approximately 31.7% of the market price of the UBS share. Discounts for non-vesting conditions are based on the probability that the non-vesting conditions will be achieved and the award will become exercisable. The fair value of share-based awards granted prior to 2008 was not discounted for post-vesting sale and hedge restrictions, as there was no distinction between vesting and non-vesting conditions until the IASB amended IFRS 2Share-based Payment: Vesting Conditions and Cancellations.The market value of shares legally vested was CHF 346 million, CHF 1,385 million, and CHF 1,737 million for the years ended 31 December 2009, 31 December 2008, and 31 December 2007, respectively.
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Financial information
Notes to the consolidated Financial information
Note 31 Equity participation and other compensation plans (continued)
d) UBS option awards
Movements in options granted under the equity participation plans described in Note 31a) are as follows:
Weighted | ||||||||||||||||||||||||
Number of | average | Number of | Weighted | Number of | Weighted | |||||||||||||||||||
options | exercise price | options | average exercise | options | average exercise | |||||||||||||||||||
31.12.09 | CHF2 | 31.12.081 | price CHF1,2 | 31.12.071 | price CHF1,2 | |||||||||||||||||||
Outstanding, at the beginning of the year | 236,055,545 | 47 | 198,213,092 | 52 | 188,393,473 | 47 | ||||||||||||||||||
Granted during the year | 22,525,624 | 13 | 62,973,879 | 30 | 48,094,483 | 67 | ||||||||||||||||||
Exercised during the year | (48,241 | ) | 16 | (3,673,657 | ) | 26 | (34,331,511 | ) | 36 | |||||||||||||||
Forfeited during the year | (7,245,512 | ) | 37 | (6,732,080 | ) | 52 | (3,650,942 | ) | 62 | |||||||||||||||
Expired unexercised | (22,663,530 | ) | 48 | (14,725,689 | ) | 46 | (292,411 | ) | 58 | |||||||||||||||
Outstanding, at the end of the year | 228,623,886 | 43 | 236,055,545 | 47 | 198,213,092 | 52 | ||||||||||||||||||
Exercisable, at the end of the year | 137,797,186 | 51 | 124,054,442 | 46 | 96,396,428 | 39 | ||||||||||||||||||
The weighted average share price at the time when the options were exercised during the year was CHF 18, CHF 34, and CHF 72 for the years ended 31 December 2009, 31 De-
cember 2008, and 31 December 2007, respectively. The following table provides additional information about option awards:
31.12.09 | 31.12.08 | 31.12.07 | ||||||||||
Intrinsic value of options exercised during the year (CHF million) | 0.2 | 29 | 1,046 | |||||||||
Weighted average grant date fair value of options granted (CHF) | 6.00 | 7.53 | 10.43 | |||||||||
The following table summarizes additional information about options outstanding and options exercisable at 31 December 2009:
Options outstanding | Options exercisable | |||||||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||||||
Weighted | Aggregate | average | Weighted | Aggregate | average | |||||||||||||||||||||||||||
Number of | average | intrinsic value | remaining | Number of | average | intrinsic value | remaining | |||||||||||||||||||||||||
options | exercise price | (CHF/USD | contractual | options | exercise price | (CHF/USD | contractual | |||||||||||||||||||||||||
Range of exercise price per share | outstanding | (CHF/USD) | million) | term (years) | exercisable | (CHF/USD) | million) | term (years) | ||||||||||||||||||||||||
CHF awards | ||||||||||||||||||||||||||||||||
10.21–15.00 | 18,599,225 | 11.33 | 87.8 | 9.1 | 2,001 | 14.47 | 0.0 | 8.9 | ||||||||||||||||||||||||
15.01–25.00 | 11,560,852 | 18.70 | 1.8 | 9.3 | 93,767 | 20.07 | 0.0 | 8.7 | ||||||||||||||||||||||||
25.01–35.00 | 45,514,537 | 31.10 | 0.0 | 7.3 | 8,319,508 | 28.31 | 0.0 | 3.4 | ||||||||||||||||||||||||
35.01–15.00 | 25,831,524 | 39.04 | 0.0 | 5.0 | 16,931,901 | 40.58 | 0.0 | 3.3 | ||||||||||||||||||||||||
45.01–55.00 | 21,961,024 | 49.34 | 0.0 | 5.4 | 21,539,533 | 49.26 | 0.0 | 5.3 | ||||||||||||||||||||||||
55.01–65.00 | 4,945,136 | 60.26 | 0.0 | 7.0 | 4,509,038 | 59.96 | 0.0 | 6.9 | ||||||||||||||||||||||||
65.01–75.00 | 67,395,232 | 67.89 | 0.0 | 6.7 | 53,616,749 | 67.27 | 0.0 | 6.6 | ||||||||||||||||||||||||
10.21–75.00 | 195,807,530 | 44.98 | 89.6 | 6.9 | 105,012,497 | 55.83 | 0.0 | 5.6 | ||||||||||||||||||||||||
USD awards | ||||||||||||||||||||||||||||||||
4.61–15.00 | 15,632 | 13.53 | 0.0 | 0.3 | 15,632 | 13.53 | 0.0 | 0.3 | ||||||||||||||||||||||||
15.01–25.00 | 10,288,746 | 21.11 | 0.0 | 2.7 | 10,268,746 | 21.11 | 0.0 | 2.7 | ||||||||||||||||||||||||
25.01–35.00 | 3,037,460 | 27.95 | 0.0 | 3.7 | 3,037,355 | 27.95 | 0.0 | 3.7 | ||||||||||||||||||||||||
35.01–45.00 | 16,052,302 | 38.12 | 0.0 | 4.8 | 16,040,740 | 38.12 | 0.0 | 4.8 | ||||||||||||||||||||||||
45.01–51.99 | 3,422,216 | 44.89 | 0.0 | 5.4 | 3,422,216 | 44.89 | 0.0 | 5.4 | ||||||||||||||||||||||||
4.61–51.99 | 32,816,356 | 32.54 | 0.0 | 4.1 | 32,784,689 | 32.54 | 0.0 | 4.1 | ||||||||||||||||||||||||
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Note 31 Equity participation and other compensation plans (continued)
e) UBS SAR awards
Movements in SARs granted under the equity participation plans described in Note 31a) are as follows:
Number of rights | Weighted average | |||||||
31.12.09 | exercise price (CHF) | |||||||
Outstanding, at the beginning of the year | 0 | 0 | ||||||
Granted during the year | 66,126,830 | 12 | ||||||
Exercised during the year | 0 | 0 | ||||||
Forfeited during the year | (5,219,655 | ) | 11 | |||||
Expired unexercised | 0 | 0 | ||||||
Outstanding, at the end of the year | 60,907,175 | 12 | ||||||
Exercisable, at the end of the year | 4,000,000 | 10 | ||||||
The following table summarizes additional information about SARs outstanding at 31 December 2009.
SARs outstanding | ||||||||||||||||
Weighted average | ||||||||||||||||
Number of SARs | Weighted average | Aggregate | remaining contractual | |||||||||||||
Range of exercise price per SAR | outstanding | exercise price (CHF) | intrinsic value (CHF) | term (years) | ||||||||||||
CHF awards | ||||||||||||||||
9.35–12.50 | 59,273,505 | 11.26 | 283.9 | 8.8 | ||||||||||||
12.51–15.00 | 53,410 | 14.57 | 0.1 | 9.5 | ||||||||||||
15.01–17.50 | 268,330 | 16.47 | 0.0 | 9.5 | ||||||||||||
17.51–20.00 | 406,930 | 19.25 | 0.0 | 9.7 | ||||||||||||
37.51–40.00 | 905,000 | 40.00 | 0.0 | 9.2 | ||||||||||||
9.35–40.00 | 60,907,175 | 11.77 | 284.0 | 8.8 | ||||||||||||
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Financial information
Notes to the consolidated financial statements
Note 31 Equity participation and other compensation plans (continued)
f) Valuation
The fair value of options and SARs (instruments) is determined by means of a Monte Carlo simulation. The simulation technique uses a mix of implied and historic volatility and specific employee exercise behavior patterns based on statistical data, taking into account the specific terms and conditions under which the instruments are granted, such as the vesting period, forced exercises during the lifetime, and gain- and time-dependent exercise behavior. The expected term of each instrument is calculated as the probability-
weighted average period of the time between grant and exercise. The term structure of volatility is derived from the implied volatilities of traded UBS options in combination with the observed long-term historic share price volatility. Expected future dividends are derived from the historical dividend pattern.
31.12.09 | ||||||||||||
CHF awards | range low | range high | ||||||||||
Expected volatility (%) | 48.22 | 40.91 | 53.47 | |||||||||
Risk-free interest rate (%) | 2.16 | 1.50 | 2.57 | |||||||||
Expected dividend (CHF) | 0.27 | 0.00 | 0.29 | |||||||||
Strike price (CHF) | 11.88 | 9.35 | 40.00 | |||||||||
Share price (CHF) | 11.64 | 9.35 | 19.27 | |||||||||
31.12.08 | ||||||||||||
CHF awards | range low | range high | ||||||||||
Expected volatility (%) | 33.86 | 30.00 | 49.32 | |||||||||
Risk-free interest rate (%) | 2.83 | 1.74 | 3.27 | |||||||||
Expected dividend (CHF) | 1.85 | 1.10 | 2.57 | |||||||||
Strike price (CHF) | 30.11 | 14.47 | 46.02 | |||||||||
Share price (CHF) | 28.05 | 14.47 | 43.61 | |||||||||
31.12.07 | ||||||||||||
CHF awards | range low | range high | ||||||||||
Expected volatility (%) | 23.86 | 22.51 | 29.23 | |||||||||
Risk-free interest rate (%) | 2.58 | 2.46 | 3.27 | |||||||||
Expected dividend (CHF) | 3.13 | 2.20 | 4.56 | |||||||||
Strike price (CHF)1 | 71.31 | 55.48 | 78.80 | |||||||||
Share price (CHF)1 | 70.25 | 55.48 | 78.80 | |||||||||
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The Group defines related parties as associated companies (entities which are controlled or significantly influenced by UBS), post-employment benefit plans for the benefit of UBS employees, key management personnel, close family members of key management personnel and entities which are, directly or indirectly, controlled or jointly controlled
by key management personnel or their close family members. Key management personnel is defined as members of the Board of Directors (BoD) and Group Executive Board (GEB). This definition is based on the revised requirements of IAS 24Related Party Disclosuresissued in November 2009.
a) Remuneration of key management personnel
The non-independent members of the BoD have top management employment contracts and receive pension benefits upon retirement. Total remuneration of the non-inde-
pendent members of the BoD, and GEB including those who stepped down during, 20091 is as follows:
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Base salaries and other cash payments | 16 | 12 | 14 | |||||||||
Incentive awards – cash | 64 | 0 | 38 | |||||||||
Employer’s contributions to retirement benefit plans | 2 | 2 | 2 | |||||||||
Benefits in kind, fringe benefits (at market value) | 1 | 1 | 2 | |||||||||
Equity compensation benefits2 | 29 | 0 | 22 | |||||||||
Total | 112 | 15 | 78 | |||||||||
Marcel Rohner stepped down as Group CEO on 26 February 2009. In honoring the twelve-month notice period of his contract, he received his annual salary of CHF 1,500,000. For 2009, as also for 2008, he did not receive any discretionary incentive awards. After assessing his tenure as Group CEO and the specific organizational transition requirements, the HRCC deemed it appropriate to approve a one-time contribution of CHF 1,200,000 into the UBS pension fund on his behalf to cover the deficit in his pension fund.
The independent members of the BoD do not have employment or service contracts with UBS, and thus are not entitled to benefits upon termination of their service on the BoD. Payments to these individuals for their services as external board members amounted to CHF 6.4 million in 2009, CHF 6.4 million in 2008 and CHF 5.7 million in 2007.
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Notes to the consolidated financial statements
Note 32 Related parties (continued)
b) Equity holdings
31.12.09 | 31.12.08 | 31.12.07 | ||||||||||
Number of stock options from equity participation plans held by non-independent members of the BoD and the GEB1 | 9,410,280 | 8,458,037 | 6,828,152 | |||||||||
Number of shares held by members of the BoD, GEB and parties closely linked to them | 4,180,154 | 5,869,952 | 6,693,012 | |||||||||
Of the share totals above, at 31 December 2009, 31 December 2008 and 31 December 2007, 0 shares, 15,878 shares and 4,852 shares, respectively, were held by close family members of key management personnel and 0 shares, 103,841 shares and 2,200,000 shares, respectively, were held by entities which are directly or indirectly controlled or
jointly controlled by key management personnel or their close family members. Further information about UBS’s equity participation plans can be found in Note 31. No member of the BoD or GEB is the beneficial owner of more than 1% of the Group’s shares at 31 December 2009.
c) Loans, advances and mortgages to key management personnel
Non-independent members of the BoD and GEB members have been granted loans, fixed advances and mortgages on the same terms and conditions that are available to other employees, based on terms and conditions granted to third parties adjusted for reduced credit risk. Independent BoD
members are granted loans and mortgages at general market conditions.
CHF million | 31.12.09 | 31.12.08 | ||||||
Balance at the beginning of the year | 11 | 15 | ||||||
Additions | 12 | 8 | ||||||
Reductions | (5 | ) | (12 | ) | ||||
Balance at the end of the year | 18 | 11 | ||||||
No unsecured loans were granted to key management personnel as of 31 December 2009 and 31 December 2008.
d) Associated companies
CHF million | 31.12.09 | 31.12.08 | ||||||
Balance at the beginning of the year | 301 | 220 | ||||||
Additions | 295 | 171 | ||||||
Reductions | (222 | ) | (77 | ) | ||||
Credit loss (expense)/recovery | (1 | ) | 0 | |||||
Foreign currency translation | 0 | (13 | ) | |||||
Balance at the end of the year | 373 | 301 | ||||||
of which: unsecured loans | 42 | 82 | ||||||
of which: allowances for credit losses | 1 | 3 | ||||||
All loans to associated companies are transacted at arm’s length.
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Note 32 Related parties (continued)
d) Associated companies (continued)
Other transactions with associated companies transacted at arm’s length are as follows:
As of or for the year ended | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Payments to associates for goods and services received | 130 | 90 | 87 | |||||||||
Fees received for services provided to associates | 2 | 6 | 20 | |||||||||
Commitments and contingent liabilities to associates | 156 | 40 | 33 | |||||||||
Note 34 provides a list of significant associates.
e) Other related party transactions
During 2008 and 2007, UBS entered into transactions at arm’s length with entities which are directly or indirectly controlled or jointly controlled by UBS’s key management personnel or their close family members. In 2009, UBS did not enter into any such transactions. The 2008 and 2007 numbers included into the table below have been restated to reflect the revised guidance in IAS 24Related Party Disclosures.Refer to Note 1b for details.
In 2008 these entities included: Aebi + Co. AG (Switzerland), Kedge Capital Selected Funds Ltd. (Jersey), Löwenfeld AG (Switzerland), Martown Trading Ltd. (Isle of Man), Omega Fund I Ltd (Jersey), Omega Fund IV Ltd (Jersey), Stadler Rail Group (Switzerland), Team Alinghi (Switzerland) and Team Alinghi (Spain).
Movements in loans to other related parties are as follows:
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Balance at the beginning of the year | 6 | 158 | 539 | |||||||||
Additions | 0 | 0 | 77 | |||||||||
Reductions | (6 | ) | (152 | ) | (458 | ) | ||||||
Balance at the end of the year1 | 0 | 6 | 158 | |||||||||
Other transactions with these related parties include:
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Goods sold and services provided to UBS | 0 | 1 | 8 | |||||||||
Fees received for services provided by UBS | 0 | 11 | 6 | |||||||||
As part of its sponsorship of Team Alinghi, UBS paid CHF 828,090 (EUR 538,000) in basic sponsoring fees for 2008.
Team Alinghi’s controlling shareholder is UBS former Board member Ernesto Bertarelli.
f) Additional information
UBS also engages in trading and risk management activities (e.g. swaps, options, forwards) with various related parties mentioned in previous sections. These transactions may give rise to credit risk either for UBS or for a related party towards
UBS. As part of its normal course of business, UBS is also a market maker in equity and debt instruments and at times may hold positions in instruments of related parties.
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Financial information
Notes to the consolidated financial statements
Note 33 Events after the reporting period
In January 2010, UBS closed the sale of its investments in several associated entities owning office space in New York. A significant portion of the office space is leased by UBS Group until 2018. The sales price is USD 180 million, with a resulting gain on sale of approximately USD 173 million, which will be recognized in 2010.
porting period which would require disclosure or adjustment to the 31 December 2009 Financial Statements.
Note 34 Significant subsidiaries and associates
The legal entity group structure of UBS is designed to support the Group’s businesses within an efficient legal, tax, regulatory and funding framework. Neither the business divisions of UBS (namely Investment Bank, Wealth Management Americas, Wealth Management & Swiss Bank and Global Asset Management) nor Corporate Center are replicated in their own individual legal entities, but rather they generally operate out of UBS AG (Parent Bank) through its Swiss and foreign branches.
Significant subsidiaries | ||||||||||||||||||||
Share capital in | Equity interest | |||||||||||||||||||
Company | Jurisdiction of incorporation | Business division1 | millions | accumulated in % | ||||||||||||||||
Caisse Centrale de Réescompte | Paris, France | Global AM | EUR | 5.0 | 100.0 | |||||||||||||||
CCR Asset Management S.A. | Paris, France | Global AM | EUR | 4.8 | 100.0 | |||||||||||||||
FondcenterAG | Zurich, Switzerland | Global AM | CHF | 0.1 | 100.0 | |||||||||||||||
OOO UBS Bank | Moscow, Russia | IB | RUB | 1,250.0 | 100.0 | |||||||||||||||
PT UBS Securities Indonesia | Jakarta, Indonesia | IB | IDR | 118,000.0 | 98.6 | |||||||||||||||
Topcard Service AG | Glattbrugg, Switzerland | WM&SB | CHF | 0.2 | 100.0 | |||||||||||||||
UBS (Bahamas) Ltd. | Nassau, Bahamas | WM&SB | USD | 4.0 | 100.0 | |||||||||||||||
UBS (France) S.A. | Paris, France | WM&SB | EUR | 125.7 | 100.0 | |||||||||||||||
UBS (Grand Cayman) Limited | George Town, Cayman Islands | IB | USD | 25.0 | 100.0 | |||||||||||||||
UBS (Italia) S.p.A. | Milan, Italy | WM&SB | EUR | 60.0 | 100.0 | |||||||||||||||
UBS (Luxembourg) S.A. | Luxembourg, Luxembourg | WM&SB | CHF | 150.0 | 100.0 | |||||||||||||||
UBS (Luxembourg) SA Austria Branch | Vienna, Austria | WM&SB | CHF | 0.0 | 100.0 | |||||||||||||||
UBS (Monaco) S.A. | Monte Carlo, Monaco | WM&SB | EUR | 9.2 | 100.0 | |||||||||||||||
UBS Alternative and Quantitative Investments Limited | London, Great Britain | Global AM | GBP | 0.3 | 100.0 | |||||||||||||||
UBS Alternative and Quantitative Investments LLC | Delaware, USA | Global AM | USD | 0.1 | 100.0 | |||||||||||||||
UBS Americas Inc | Delaware, USA | IB | USD | 0.0 | 100.0 | |||||||||||||||
UBS Asesores SA | Panama, Panama | WM&SB | USD | 0.0 | 100.0 | |||||||||||||||
UBS Bank (Canada) | Toronto, Canada | WMA | CAD | 8.5 | 100.0 | |||||||||||||||
UBS Bank Mexico, S.A. Institucion de Banca Multiple, UBS Grupo Financiero | Mexico City, Mexico | IB | MXN | 706.4 | 100.0 | |||||||||||||||
UBS Bank USA | Utah, USA | WMA | USD | 1,880.0 | 2 | 100.0 | ||||||||||||||
UBS Bank, S.A. | Madrid, Spain | WM&SB | EUR | 82.2 | 100.0 | |||||||||||||||
UBS Belgium SA/NV | Brussels, Belgium | WM&SB | EUR | 23.0 | 100.0 | |||||||||||||||
UBS Capital Securities (Jersey) Limited | St. Helier, Jersey | CC | EUR | 0.0 | 100.0 | |||||||||||||||
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Note 34 Significant subsidiaries and associates (continued)
Significant subsidiaries (continued) | ||||||||||||||||||||
Share capital in | Equity interest | |||||||||||||||||||
Company | Jurisdiction of incorporation | Business division1 | millions | accumulated in % | ||||||||||||||||
UBS Card Center AG | Glattbrugg, Switzerland | WM&SB | CHF | 0.1 | 100.0 | |||||||||||||||
UBS Casa de Bolsa, S.A. de C.V. | Mexico City, Mexico | IB | MXN | 114.9 | 100.0 | |||||||||||||||
UBS Convertible Securities (Jersey) Limited | St. Helier, Jersey | CC | CHF | 50.0 | 100.0 | |||||||||||||||
UBS Custody Services Singapore Pte. Ltd. | Singapore, Singapore | WM&SB | SGD | 5.5 | 100.0 | |||||||||||||||
UBS Derivatives Hong Kong Limited | Hong Kong, China | IB | HKD | 880.0 | 100.0 | |||||||||||||||
UBS Deutschland AG | Frankfurt am Main, Germany | WM&SB | EUR | 176.0 | 100.0 | |||||||||||||||
UBS Fiduciaria S.p.A. | Milan, Italy | WM&SB | EUR | 0.2 | 100.0 | |||||||||||||||
UBS Finance (Curação) N.V. | Willemstad, Netherlands Antilles | CC | USD | 0.1 | 100.0 | |||||||||||||||
UBS Finance (Delaware) LLC | Delaware, USA | IB | USD | 37.3 | 2 | 100.0 | ||||||||||||||
UBS Financial Services Inc. | Delaware, USA | WMA | USD | 3,505.8 | 2 | 100.0 | ||||||||||||||
UBS Financial Services Incorporated of Puerto Rico | Hato Rey, Puerto Rico | WMA | USD | 31.0 | 2 | 100.0 | ||||||||||||||
UBS Fund Advisor, L.L.C. | Delaware, USA | WMA | USD | 0.0 | 2 | 100.0 | ||||||||||||||
UBS Fund Holding (Luxembourg) S.A. | Luxembourg, Luxembourg | Global AM | CHF | 42.0 | 100.0 | |||||||||||||||
UBS Fund Holding (Switzerland) AG | Basel, Switzerland | Global AM | CHF | 18.0 | 100.0 | |||||||||||||||
UBS Fund Management (Switzerland) AG | Basel, Switzerland | Global AM | CHF | 1.0 | 100.0 | |||||||||||||||
UBS Fund Services (Cayman) Ltd | George Town, Cayman Islands | Global AM | USD | 5.6 | 100.0 | |||||||||||||||
UBS Fund Services (Ireland) Limited | Dublin, Ireland | Global AM | EUR | 1.3 | 100.0 | |||||||||||||||
UBS Fund Services (Luxembourg) S.A. | Luxembourg, Luxembourg | Global AM | CHF | 2.5 | 100.0 | |||||||||||||||
UBS Fund Services (Luxembourg) S.A. Poland Branch | Zabierzow, Poland | CC | PLN | 0.1 | 100.0 | |||||||||||||||
UBS Futures Singapore Ltd. | Singapore, Singapore | IB | USD | 39.8 | 2 | 100.0 | ||||||||||||||
UBS Global Asset Management (Americas) Inc | Delaware, USA | Global AM | USD | 0.0 | 100.0 | |||||||||||||||
UBS Global Asset Management (Australia) Ltd | Sydney, Australia | Global AM | AUD | 8.0 | 100.0 | |||||||||||||||
UBS Global Asset Management (Canada) Co | Toronto, Canada | Global AM | CAD | 117.0 | 2 | 100.0 | ||||||||||||||
UBS Global Asset Management (Deutschland) GmbH | Frankfurt am Main, Germany | Global AM | EUR | 7.7 | 100.0 | |||||||||||||||
UBS Global Asset Management (Hong Kong) Limited | Hong Kong, China | Global AM | HKD | 25.0 | 100.0 | |||||||||||||||
UBS Global Asset Management (Italia) SGR SpA | Milan, Italy | Global AM | EUR | 5.1 | 100.0 | |||||||||||||||
UBS Global Asset Management (Japan) Ltd | Tokyo, Japan | Global AM | JPY | 2,200.0 | 100.0 | |||||||||||||||
UBS Global Asset Management (Singapore) Ltd | Singapore, Singapore | Global AM | SGD | 4.0 | 100.0 | |||||||||||||||
UBS Global Asset Management (Taiwan) Ltd | Taipei, Taiwan | Global AM | TWD | 340.0 | 100.0 | |||||||||||||||
UBS Global Asset Management (UK) Ltd | London, Great Britain | Global AM | GBP | 93.0 | 100.0 | |||||||||||||||
UBS Global Asset Management (US) Inc | Delaware, USA | Global AM | USD | 17.2 | 2 | 100.0 | ||||||||||||||
UBS Global Asset Management Funds Ltd | London, Great Britain | Global AM | GBP | 26.0 | 100.0 | |||||||||||||||
UBS Global Asset Management Holding Ltd | London, Great Britain | Global AM | GBP | 109.4 | 100.0 | |||||||||||||||
UBS Global Asset Management Life Ltd | London, Great Britain | Global AM | GBP | 5.0 | 100.0 | |||||||||||||||
UBS Global Life AG | Vaduz, Liechtenstein | WM&SB | CHF | 5.0 | 100.0 | |||||||||||||||
UBS Global Trust Corporation | St. John, Canada | WM&SB | CAD | 0.1 | 100.0 | |||||||||||||||
UBS Hana Asset Management Company Ltd | Seoul, South Korea | Global AM | KRW | 45,000.0 | 51.0 | |||||||||||||||
UBS Hypotheken AG | Zurich, Switzerland | WM&SB | CHF | 0.1 | 98.0 | |||||||||||||||
UBS International Holdings B.V. | Amsterdam, the Netherlands | CC | EUR | 6.8 | 100.0 | |||||||||||||||
UBS International Life Limited | Dublin, Ireland | WM&SB | EUR | 1.0 | 100.0 | |||||||||||||||
UBS Investment Management Canada Inc. | Toronto, Canada | WMA | CAD | 0.0 | 100.0 | |||||||||||||||
UBS Investments Philippines, Inc. | Makati City, Philippines | IB | PHP | 360.0 | 99.4 | |||||||||||||||
UBS Italia SIM SpA | Milan, Italy | IB | EUR | 15.1 | 100.0 | |||||||||||||||
UBS Leasing AG | Zurich, Switzerland | WM&SB | CHF | 10.0 | 100.0 | |||||||||||||||
UBS Life AG | Zurich, Switzerland | WM&SB | CHF | 25.0 | 100.0 | |||||||||||||||
UBS Life Insurance Company USA | California, USA | WMA | USD | 39.3 | 2 | 100.0 | ||||||||||||||
UBS Limited | London, Great Britain | IB | GBP | 63.3 | 100.0 | |||||||||||||||
UBS Loan Finance LLC | Delaware, USA | IB | USD | 16.7 | 2 | 100.0 | ||||||||||||||
UBS Menkul Degerler AS | Istanbul, Turkey | IB | TRY | 30.0 | 100.0 |
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Financial information
Notes to the consolidated financial statements
Note 34 Significant subsidiaries and associates (continued)
Significant subsidiaries (continued) | ||||||||||||||||||||
Share capital in | Equity interest | |||||||||||||||||||
Company | Jurisdiction of incorporation | Business division1 | millions | accumulated in % | ||||||||||||||||
UBS New Zealand Limited | Auckland, New Zealand | IB | NZD | 7.5 | 100.0 | |||||||||||||||
UBS O’Connor Limited | London, Great Britain | Global AM | GBP | 8.8 | 100.0 | |||||||||||||||
UBS O’Connor LLC | Delaware, USA | Global AM | USD | 1.0 | 100.0 | |||||||||||||||
UBS Preferred Funding (Jersey) Limited | St. Helier, Jersey | CC | EUR | 0.0 | 100.0 | |||||||||||||||
UBS Preferred Funding Company LLC I | Delaware, USA | CC | USD | 0.0 | 100.0 | |||||||||||||||
UBS Preferred Funding Company LLC II | Delaware, USA | CC | USD | 0.0 | 100.0 | |||||||||||||||
UBS Preferred Funding Company LLC IV | Delaware, USA | CC | USD | 0.0 | 100.0 | |||||||||||||||
UBS Preferred Funding Company LLC V | Delaware, USA | CC | USD | 0.0 | 100.0 | |||||||||||||||
UBS Real Estate Kapitalanlagegesellschaft mbH | Munich, Germany | Global AM | EUR | 7.5 | 51.0 | |||||||||||||||
UBS Real Estate Securities Inc | Delaware, USA | IB | USD | 1,300.4 | 100.0 | |||||||||||||||
UBS Realty Investors LLC | Massachusetts, USA | Global AM | USD | 9.3 | 100.0 | |||||||||||||||
UBS Sauerborn Private Equity Komplementär GmbH | Bad Homburg, Germany | WM&SB | EUR | 0.0 | 100.0 | |||||||||||||||
UBS Securities (Thailand) Ltd | Bangkok, Thailand | IB | THB | 400.0 | 100.0 | |||||||||||||||
UBS Securities Asia Limited | Hong Kong, China | IB | HKD | 20.0 | 100.0 | |||||||||||||||
UBS Securities Australia Ltd | Sydney, Australia | IB | AUD | 209.8 | 2 | 100.0 | ||||||||||||||
UBS Securities Canada Inc | Toronto, Canada | IB | CAD | 10.0 | 100.0 | |||||||||||||||
UBS Securities España Sociedad de Valores SA | Madrid, Spain | IB | EUR | 15.0 | 100.0 | |||||||||||||||
UBS Securities France S.A. | Paris, France | IB | EUR | 22.9 | 100.0 | |||||||||||||||
UBS Securities Hong Kong Limited | Hong Kong, China | IB | HKD | 430.0 | 100.0 | |||||||||||||||
UBS Securities India Private Limited | Mumbai, India | IB | INR | 140.0 | 100.0 | |||||||||||||||
UBS Securities International Limited | London, Great Britain | IB | GBP | 18.0 | 100.0 | |||||||||||||||
UBS Securities Japan Ltd | George Town, Cayman Islands | IB | JPY | 60,000.0 | 100.0 | |||||||||||||||
UBS Securities LLC | Delaware, USA | IB | USD | 22.205.6 | 2 | 100.0 | ||||||||||||||
UBS Securities Malaysia Sdn. Bhd. | Kuala Lumpur, Malaysia | IB | MYR | 80.0 | 100.0 | |||||||||||||||
UBS Securities Philippines Inc | Makati City, Philippines | IB | PHP | 190.0 | 100.0 | |||||||||||||||
UBS Securities Pte. Ltd. | Singapore, Singapore | IB | SGD | 311.5 | 100.0 | |||||||||||||||
UBS Securities Pte. Ltd. Seoul Branch | Seoul, South Korea | IB | KRW | 150,000.0 | 100.0 | |||||||||||||||
UBS Service Centre (Poland) Sp. z o.o. | Krakow, Poland | CC | PLN | 0.1 | 100.0 | |||||||||||||||
UBS South Africa (Proprietary) Limited | Sandton, South Africa | IB | ZAR | 0.0 | 100.0 | |||||||||||||||
UBS Swiss Financial Advisers AG | Zurich, Switzerland | WM&SB | CHF | 1.5 | 100.0 | |||||||||||||||
UBS Trust Company National Association | New York, USA | WMA | USD | 105.0 | 2 | 100.0 | ||||||||||||||
UBS Trustees (Bahamas) Ltd | Nassau, Bahamas | WM&SB | USD | 2.0 | 100.0 | |||||||||||||||
UBS Trustees (Cayman) Ltd | George Town, Cayman Islands | WM&SB | USD | 2.0 | 100.0 | |||||||||||||||
UBS Trustees (Jersey) Ltd. | St. Helier, Jersey | WM&SB | GBP | 0.0 | 100.0 | |||||||||||||||
UBS Trustees (Singapore) Ltd | Singapore, Singapore | WM&SB | SGD | 3.3 | 100.0 | |||||||||||||||
UBS UK Properties Limited | London, Great Britain | IB | GBP | 132.0 | 100.0 | |||||||||||||||
UBS Wealth Management (UK) Ltd | London, Great Britain | WM&SB | GBP | 2.5 | 100.0 | |||||||||||||||
UBS Wealth Management Australia Ltd | Melbourne, Australia | WM&SB | AUD | 53.9 | 100.0 | |||||||||||||||
Vermogens Advies Holding B.V. | Amsterdam, the Netherlands | WM&SB | EUR | 0.3 | 100.0 |
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Note 34 Significant subsidiaries and associates (continued)
Changes in the consolidation scope 2009 | ||||
Newly significant, fully consolidated companies | ||||
Topcard Service AG – Glattbrugg, Switzerland | ||||
UBS (Luxembourg) SA Austria Branch – Vienna, Austria | ||||
UBS Capital Securities (Jersey) Limited – St. Helier, Jersey | ||||
UBS Casa de Bolsa, S.A. de C.V. – Mexico City, Mexico | ||||
UBS Custody Services Singapore Pte. Ltd. – Singapore, Singapore | ||||
UBS Hypotheken AG – Zurich, Switzerland | ||||
UBS Preferred Funding (Jersey) Limited – St. Helier, Jersey | ||||
Significant deconsolidated companies | Reason for deconsolidation | |||
Banco UBS Pactual S.A. – Rio de Janeiro, Brazil | Sold | |||
CCR Actions S.A. – Paris, France | Merged | |||
CCR Gestion S.A. – Paris, France | Merged | |||
UBS Factoring AG – Zurich, Switzerland | Merged | |||
UBS Finance (Cayman Islands) Ltd. – George Town, Cayman Islands | Liquidated | |||
UBS International Inc. – Delaware, USA | Merged | |||
UBS Pactual Asset Management S.A. DTVM – Rio de Janeiro, Brazil | Sold | |||
UBS Service Centre (India) Private Limited – Mumbai, India | Sold | |||
UBS Services USA LLC – Delaware, USA | Merged | |||
Significant associates | ||||||||
Company | Industry | Equity interest in % | ||||||
SIX Group AG – Zurich, Switzerland1 | Financial | 17.3 | ||||||
UBS Securities Co. Limited – Beijing, China | Financial | 20.0 | ||||||
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Financial information
Notes to the consolidated financial statements
Note 35 Invested assets and net new money
Invested assets include all client assets managed by or deposited with UBS for investment purposes. Invested assets include managed fund assets, managed institutional assets, discretionary and advisory wealth management portfolios, fiduciary deposits, time deposits, savings accounts and wealth management securities or brokerage accounts. All assets held for purely transactional purposes and custody-only assets, including corporate client assets held for cash management and transactional purposes, are excluded from invested assets as the Group only administers the assets and does not offer advice on how the assets should be invested. Also excluded are non-bankable assets (e.g. art collections) and deposits from third-party banks for funding or trading purposes.
utes it. This results in double counting within UBS total invested assets, as both business divisions are providing a service independently to their respective clients, and both add value and generate revenue.
As of or for the year ended | |||||||||
CHF billion | 31.12.09 | 31.12.08 | |||||||
Fund assets managed by UBS | 319 | 339 | |||||||
Discretionary assets | 590 | 528 | |||||||
Other invested assets | 1,325 | 1,307 | |||||||
Total invested assets (double counts included) | 2,233 | 2,174 | |||||||
of which: double count | 254 | 273 | |||||||
of which: acquisitions (divestments) | (48.2 | ) | 19.1 | ||||||
Net new money (double counts included) | (147.3 | ) | (226.0 | ) | |||||
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Note 36 Business combinations
Business combinations completed in 2009
Acquisition of the commodity index business of
AIG Financial Products Corp.
tributable transaction costs, amounted to CHF 74 million (USD 65 million) of which CHF 17 million (USD 15 million) was paid in cash upon closing. The remaining payments, based upon future earnings of the purchased business, are expected to be made by September 2010. The cost of the business combination was allocated toIntangible assetsof CHF 40 million (USD 35 million) andGoodwill of CHF 34 million (USD 30 million). The business of AIG was integrated into UBS’s Investment Bank.
AIG Commodity Index 2009 | ||||||||||||
CHF million | Book value | Step-up to fair value | Fair value | |||||||||
Assets | ||||||||||||
Intangible assets | 0 | 40 | 40 | |||||||||
Goodwill | 0 | 34 | 34 | |||||||||
All other assets | 598 | 0 | 598 | |||||||||
Total assets | 598 | 74 | 672 | |||||||||
Liabilities and equity | ||||||||||||
Liabilities | 598 | 0 | 598 | |||||||||
Equity | 0 | 74 | 74 | |||||||||
Total liabilities and equity | 598 | 74 | 672 | |||||||||
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Financial information
Notes to the consolidated financial statements
Note 36 Business combinations (continued)
Business combinations completed in 2008
Caisse Centrale de Réescompte Group
allocated toIntangible assetsreflecting customer relationships of CHF 36 million (EUR 23 million), net assets of CHF 209 million (EUR 131 million) andGoodwill ofCHF 368 million (EUR 233 million). The business of CCR, which included EUR 13.3 billion of invested assets as of 31 December 2007 and approximately 190 employees, was integrated into UBS’s asset management and wealth management businesses in France.
Caisse Centrale de Réescompte Group (CCR) 2008 | ||||||||||||
CHF million | Book value | Step-up to fair value | Fair value | |||||||||
Assets | ||||||||||||
Intangible assets | 0 | 36 | 36 | |||||||||
Property and equipment | 5 | 0 | 5 | |||||||||
Goodwill | 0 | 368 | 368 | |||||||||
All other assets | 513 | 1 | 514 | |||||||||
Total assets | 518 | 405 | 923 | |||||||||
Liabilities and equity | ||||||||||||
Liabilities | 297 | 13 | 310 | |||||||||
Equity | 221 | 392 | 613 | |||||||||
Total liabilities and equity | 518 | 405 | 923 | |||||||||
In 2009, the allocations were finalized and the intangible assets and goodwill were allocated to the divisions as follows:
Caisse Centrale de Réescompte Group (CCR) 2008 | ||||||||||||
Wealth Management & | Global Asset | |||||||||||
CHF million | Swiss Bank | Management | Total | |||||||||
Assets | ||||||||||||
Intangible assets | 10 | 26 | 36 | |||||||||
Goodwill | 33 | 335 | �� | 368 | ||||||||
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Note 36 Business combinations (continued)
VermogensGroep
cost of the business combination was allocated toIntangible assetsof CHF 49 million (EUR 30 million),Net liabilitiesof CHF 2.1 million (EUR 1.3 million) andGoodwillof CHF 126 million (EUR 78 million). VermogensGroep serve wealthy private clients, foundations and institutions in the Dutch market and managed client assets of approximately EUR 4 billion at the time of the transaction. VermogensGroep was integrated into UBS’s wealth management business.
VermogensGroep 2008 | ||||||||||||
CHF million | Book value | Step-up to fair value | Fair value | |||||||||
Assets | ||||||||||||
Intangible assets | 0 | 49 | 49 | |||||||||
Property and equipment | 2 | 0 | 2 | |||||||||
Goodwill | 0 | 126 | 126 | |||||||||
All other assets | 10 | 0 | 10 | |||||||||
Total assets | 12 | 175 | 187 | |||||||||
Liabilities and equity | ||||||||||||
Liabilities | 2 | 12 | 14 | |||||||||
Equity | 10 | 163 | 173 | |||||||||
Total liabilities and equity | 12 | 175 | 187 | |||||||||
Pro-forma information (unaudited)
The following pro-forma information shows UBS’s total operating income, net profit attributable to UBS shareholders and basic earnings per share as if all of the acquisitions completed in 2009 had been made as of 1 January 2008 and all acquisitions completed in 2008 had been made as of 1 Janu-
ary 2007. Adjustments have been made to reflect additional amortization and depreciation of assets and liabilities, which have been assigned fair values different from their carryover bases in purchase accounting.
Pro-forma information (unaudited) | ||||||||||||
For the year ended | ||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Total operating income | 22,606 | 910 | 31,932 | |||||||||
Net profit | (2,737 | ) | (21,251 | ) | (5,233 | ) | ||||||
Basic earnings per share (CHF) | (0.75 | ) | (7.61 | ) | (2.40 | ) | ||||||
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Financial information
Notes to the consolidated financial statements
Note 37 Discontinued operations
2009
In 2009, private equity investments sold in prior years contributed a subsequent loss of CHF 7 million to UBS’s net profit from discontinued operations.
2008
Industrial holdings
2007
Industrial holdings
Private Banks & GAM
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Note 37 Discontinued operations (continued)
For the year ended 31.12.08 | ||||||||
CHF million | Private Banks & GAM1,2 | Industrial Holdings2 | ||||||
Operating income | 0 | 19 | ||||||
Operating expenses | 0 | (15 | ) | |||||
Operating profit from discontinued operations before tax | 0 | 34 | ||||||
Pre-tax gain on sale | 44 | 120 | ||||||
Profit from discontinued operations before tax | 44 | 155 | ||||||
Tax expense on operating profit from discontinued operations before tax | 0 | 0 | ||||||
Tax expense on gain from sale | 1 | 0 | ||||||
Tax expense from discontinued operations | 1 | 0 | ||||||
Net profit from discontinued operations | 43 | 155 | ||||||
Net cash flows from | ||||||||
operating activities | 0 | (1 | ) | |||||
investing activities | 0 | 3 | ||||||
financing activities | 0 | 0 | ||||||
For the year ended 31.12.07 | ||||||||
CHF million | Private Banks & GAM1 | Industrial Holdings1 | ||||||
Operating income | 0 | 394 | ||||||
Operating expenses | 0 | 358 | ||||||
Operating profit from discontinued operations before tax | 0 | 36 | ||||||
Pre-tax gain on sale | 7 | 102 | ||||||
Profit from discontinued operations before tax | 7 | 138 | ||||||
Tax expense on operating profit from discontinued operations before tax | 0 | 0 | ||||||
Tax expense on gain from sale | (258 | ) | 0 | |||||
Tax expense from discontinued operations | (258 | ) | 0 | |||||
Net profit from discontinued operations | 265 | 138 | ||||||
Net cash flows from | ||||||||
operating activities | 0 | 32 | ||||||
investing activities | 0 | (1 | ) | |||||
financing activities | 0 | (42 | ) | |||||
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Financial information
Notes to the consolidated financial statements
Note 38 Reorganizations and disposals
Sale of UBS Pactual
On 18 September 2009, UBS completed the sale of its Brazilian financial services business, UBS Pactual, to BTG Investments, LP. The sale consideration consisted of a combination of cash and transfer of liabilities by BTG Investments. The total cash consideration amounted to USD 620 million, of which USD 420 million was paid at closing of the transaction and the remaining USD 200 million, plus accrued interest, will be payable 12 months after the closing. The liabilities transferred to BTG Investments consisted primarily of the present value of the residual payment obligation of USD 1.6 billion owed to former Pactual partners, which was incurred by UBS upon acquisition of Pactual in 2006 and was due in 2011.
Sale of 56 branches in Wealth Management Americas
Following an agreement announced in March 2009, UBS sold 56 branches in Wealth Management Americas to Stifel, Nicolaus & Company, Incorporated for an upfront cash payment of approximately USD 29 million. In addition, UBS received aggregate payments of USD 18 million for net fixed
assets and employee forgivable loans, and net USD 154 million for customer loans that were transferred. Under the terms of the agreement, UBS may also receive additional consideration contingent on the performance of the business sold during the two years following the closing of the transaction. The transaction was closed in four separate closings during the second half of 2009. Overall, for 2009 the impact of the transaction on UBS’s profit before tax was a net charge of approximately USD 12 million.
Sale of UBS’s India Service Centre (ISC)
On 30 December 2009, UBS completed the sale of its India Service Centre (ISC) to Cognizant Technology Solutions for a sale consideration of USD 82 million, which was paid in cash at closing.
Sale of assets to a third-party fund controlled by the Swiss National Bank (SNB)
As announced on 16 October 2008, UBS entered into an agreement with the Swiss National Bank (SNB) to transfer certain illiquid securities and other positions to the SNB StabFund limited partnership for collective investments (the “fund”), which is fully owned and controlled by the SNB.
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Note 38 Reorganizations and disposals (continued)
payment of the par value of these shares (the “contingent share issue”).
ability that has been deemed remote at 31 December 2009 and 2008. The contingent share issue was treated as an equity instrument and was recognized at fair value in equity as an increase to share premium and an expense in net trading income in 2008. The fair value of the contingent share issue was estimated at approximately CHF 607 million and not thereafter re-measured to fair value.
Restructuring
In 2009, UBS incurred restructuring charges of CHF 791 million, including CHF 491 million inPersonnel expenses,mainly for severance payments, CHF 256 million inGeneral and administrative expenses,primarily for real-estate related costs, and CHF 45 million of depreciation and impairment losses on property and equipment. These restructuring charges were allocated to the business divisions as follows: Wealth Management & Swiss Bank, CHF 322 million; Wealth Management Americas, CHF 152 million; Global Asset Management, CHF 48 million; Investment Bank, CHF 226 million; and the Corporate Center, CHF 45 million.
Note 39 Currency translation rates
The following table shows the principal rates used to translate the financial information of foreign entities into Swiss francs:
Spot rate | Average rate | |||||||||||||||||||||
As of | Year ended | |||||||||||||||||||||
31.12.09 | 31.12.08 | 31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||
1 USD | 1.04 | 1.07 | 1.08 | 1.06 | 1.22 | |||||||||||||||||
1 EUR | 1.48 | 1.49 | 1.51 | 1.58 | 1.65 | |||||||||||||||||
1 GBP | 1.67 | 1.56 | 1.70 | 1.96 | 2.31 | |||||||||||||||||
100 JPY | 1.11 | 1.17 | 1.16 | 0.98 | 1.02 | |||||||||||||||||
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Financial information
Notes to the consolidated financial statements
Note 40 Swiss banking law requirements
The consolidated Financial Statements of UBS are prepared in accordance with International Financial Reporting Standards (IFRS). The Guidelines of the Swiss Financial Market Supervisory Authority (FINMA) require banks which present their financial statements under IFRS to provide a narrative explanation of the main differences between IFRS and Swiss GAAP (FINMA circular 08/2) and the Banking Ordinance. Included in this note are the significant differences in regard to recognition and measurement between IFRS and the provisions of the Banking Ordinance and the Guidelines of the FINMA governing financial statement reporting pursuant to Article 23 through Article 27 of the Banking Ordinance. The differences outlined in points two through nine also apply to the Parent Bank statutory accounts.
1. Consolidation
Under IFRS, all entities which are controlled by the Group are consolidated.
2. Financial investments available-for-sale
Under IFRS, financial investments available-for-sale are carried at fair value. Changes in fair value are recorded directly in equity until an investment is sold, collected or otherwise disposed of, or until an investment is determined to be impaired. At the time an available-for-sale investment is determined to be impaired, the cumulative unrealized loss previously recognized in equity is included in net profit or loss for the period. On disposal of a financial investment available-for-sale, the cumulative unrecognized gain or loss previously recognized in equity is recognized in the income statement.
3. Cash flow hedges
The Group uses derivative instruments to hedge the exposure from varying cash flows. Under IFRS, when hedge ac-
counting is applied the fair value gain or loss on the effective portion of the derivative designated as a cash flow hedge is recognized in equity. When the hedged cash flows materialize, the accumulated unrecognized gain or loss is realized and released to income.
4. Investment property
5. Fair value option
Under IFRS, the Group applies the fair value option to certain financial assets and financial liabilities, mainly to hybrid debt instruments. As a result, the entire hybrid instrument is accounted for at fair value with changes in fair value reflected in net trading income. Furthermore, UBS designated certain loans, loan commitments and fund investments as financial assets designated at fair value through profit and loss.
6. Goodwill and intangible assets
7. Discontinued operations
Under certain conditions, IFRS requires that non-current assets or disposal groups be classified as held for sale. Disposal groups that meet the criteria of discontinued operations are presented in the income statement in a single line asNet income from discontinued operations.
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Note 40 Swiss banking law requirements (continued)
8. Extraordinary income and expense
9. Netting of replacement values
Note 41 Supplemental guarantor information required under SEC rules
Guarantee of PaineWebber securities
the holders of the Debt Securities or the Debt Securities trustee may demand payment from UBS without first proceeding against UBS Americas Inc. UBS’s obligations under the subordinated note guarantee are subordinated to the prior payment in full of the deposit liabilities of UBS and all other liabilities of UBS.
Supplemental guarantor consolidated income statement | ||||||||||||||||||||
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2009 | Parent Bank1 | Americas Inc. | Subsidiaries | entries | UBS Group | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 18,798 | 4,432 | 6,715 | (6,484 | ) | 23,461 | ||||||||||||||
Interest expense | (16,860 | ) | (1,982 | ) | (4,657 | ) | 6,484 | (17,016 | ) | |||||||||||
Net interest income | 1,939 | 2,450 | 2,058 | 0 | 6,446 | |||||||||||||||
Credit loss (expense)/recovery | (937 | ) | (897 | ) | 2 | 0 | (1,832 | ) | ||||||||||||
Net interest income after credit loss expense | 1,002 | 1,553 | 2,060 | 0 | 4,614 | |||||||||||||||
Net fee and commission income | 7,912 | 6,025 | 3,774 | 0 | 17,712 | |||||||||||||||
Net trading income | (1,487 | ) | (423 | ) | 1,586 | 0 | (324 | ) | ||||||||||||
Income from subsidiaries | 1,114 | 0 | 0 | (1,114 | ) | 0 | ||||||||||||||
Other income | 550 | (872 | ) | 921 | 0 | 599 | ||||||||||||||
Total operating income | 9,092 | 6,282 | 8,341 | (1,114 | ) | 22,601 | ||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 8,577 | 5,566 | 2,400 | 0 | 16,543 | |||||||||||||||
General and administrative expenses | 2,351 | 2,512 | 1,385 | 0 | 6,248 | |||||||||||||||
Depreciation of property and equipment | 686 | 171 | 191 | 0 | 1,048 | |||||||||||||||
Impairment of goodwill | 0 | 0 | 1,123 | 0 | 1,123 | |||||||||||||||
Amortization of intangible assets | 3 | 96 | 101 | 0 | 200 | |||||||||||||||
Total operating expenses | 11,617 | 8,345 | 5,200 | 0 | 25,162 | |||||||||||||||
Operating profit from continuing operations before tax | (2,526 | ) | (2,063 | ) | 3,141 | (1,114 | ) | (2,561 | ) | |||||||||||
Tax expense | 210 | (549 | ) | (104 | ) | 0 | (443 | ) | ||||||||||||
Net profit from continuing operations | (2,736 | ) | (1,514 | ) | 3,245 | (1,114 | ) | (2,118 | ) | |||||||||||
Net profit from discontinued operations | 0 | 0 | (7 | ) | 0 | (7 | ) | |||||||||||||
Net profit | (2,736 | ) | (1,514 | ) | 3,238 | (1,114 | ) | (2,125 | ) | |||||||||||
Net profit attributable to minority interests | 0 | (3 | ) | 613 | 0 | 610 | ||||||||||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (1,511 | ) | 2,625 | (1,114 | ) | (2,736 | ) | |||||||||||
363
Table of Contents
Financial information
Notes to the consolidated financial statements
Note 41 Supplemental guarantor information required under SEC rules (continued)
Supplemental guarantor consolidated balance sheet | ||||||||||||||||||||
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
As of 31 December 2009 | Parent Bank1 | Americas Inc. | Subsidiaries | entries | UBS Group | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 15,177 | 75 | 5,647 | 0 | 20,899 | |||||||||||||||
Due from banks | 67,640 | 8,597 | 100,909 | (130,572 | ) | 46,574 | ||||||||||||||
Cash collateral on securities borrowed | 39,807 | 56,402 | 10,700 | (43,402 | ) | 63,507 | ||||||||||||||
Reverse repurchase agreements | 113,891 | 37,914 | 82,474 | (117,590 | ) | 116,689 | ||||||||||||||
Trading portfolio assets | 122,801 | 18,224 | 48,739 | (1,727 | ) | 188,037 | ||||||||||||||
Trading portfolio assets pledged as collateral | 47,954 | 11,422 | 859 | (16,014 | ) | 44,221 | ||||||||||||||
Positive replacement values | 413,822 | 8,260 | 145,265 | (145,654 | ) | 421,694 | ||||||||||||||
Financial assets designated at fair value | 5,831 | 5,876 | 11,283 | (12,768 | ) | 10,223 | ||||||||||||||
Loans | 296,497 | 45,774 | 22,749 | (58,193 | ) | 306,828 | ||||||||||||||
Financial investments available-for-sale | 63,459 | 15,441 | 2,857 | 0 | 81,757 | |||||||||||||||
Accrued income and prepaid expenses | 1,664 | 3,880 | 1,100 | (828 | ) | 5,816 | ||||||||||||||
Investments in associates | 61,551 | 24 | 49 | (60,754 | ) | 870 | ||||||||||||||
Property and equipment | 4,920 | 791 | 501 | 0 | 6,212 | |||||||||||||||
Goodwill and intangible assets | 494 | 9,101 | 1,413 | 0 | 11,008 | |||||||||||||||
Deferred tax assets | 6,352 | 2,037 | 479 | 0 | 8,868 | |||||||||||||||
Other assets | 7,131 | 2,115 | 2,169 | (4,078 | ) | 7,336 | ||||||||||||||
Total assets | 1,268,991 | 225,933 | 437,194 | (591,580 | ) | 1,340,538 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 110,418 | 53,751 | 31,569 | (130,572 | ) | 65,166 | ||||||||||||||
Cash collateral on securities lent | 17,662 | 22,993 | 10,742 | (43,402 | ) | 7,995 | ||||||||||||||
Repurchase agreements | 38,563 | 66,545 | 76,657 | (117,590 | ) | 64,175 | ||||||||||||||
Trading portfolio liabilities | 41,884 | 10,792 | 610 | (5,817 | ) | 47,469 | ||||||||||||||
Negative replacement values | 400,432 | 8,173 | 146,992 | (145,654 | ) | 409,943 | ||||||||||||||
Financial liabilities designated at fair value | 100,768 | 276 | 27,953 | (16,344 | ) | 112,653 | ||||||||||||||
Due to customers | 341,200 | 54,470 | 72,999 | (58,193 | ) | 410,475 | ||||||||||||||
Accrued expenses and deferred income | 5,155 | 2,269 | 2,093 | (828 | ) | 8,689 | ||||||||||||||
Debt issued | 126,965 | 493 | 12,242 | (8,348 | ) | 131,352 | ||||||||||||||
Other liabilities | 8,229 | 3,380 | 26,455 | (4,078 | ) | 33,986 | ||||||||||||||
Total liabilities | 1,191,276 | 223,142 | 408,312 | (530,826 | ) | 1,291,905 | ||||||||||||||
Equity attributable to UBS shareholders | 77,715 | (234 | ) | 24,287 | (60,754 | ) | 41,013 | |||||||||||||
Equity attributable to minority interests | 0 | 3,025 | 4,595 | 0 | 7,620 | |||||||||||||||
Total equity | 77,715 | 2,791 | 28,882 | (60,754 | ) | 48,633 | ||||||||||||||
Total liabilities and equity | 1,268,991 | 225,933 | 437,194 | (591,580 | ) | 1,340,538 | ||||||||||||||
364
Table of Contents
Note 41 Supplemental guarantor information required under SEC rules (continued)
Supplemental guarantor consolidated statement of cash flows | ||||||||||||||||
CHF million | UBS AG | UBS | ||||||||||||||
For the year ended 31 December 2009 | Parent Bank1 | Americas Inc. | Subsidiaries | UBS Group | ||||||||||||
Net cash flow from/(used in) operating activities | 4,841 | (6,469 | ) | 56,126 | 54,497 | |||||||||||
Cash flow from/(used in) investing activities | ||||||||||||||||
Purchase of subsidiaries and associates | (42 | ) | 0 | 0 | (42 | ) | ||||||||||
Disposal of subsidiaries and associates | 296 | 0 | 0 | 296 | ||||||||||||
Purchase of property and equipment | (656 | ) | (124 | ) | (75 | ) | (854 | ) | ||||||||
Disposal of property and equipment | 104 | 53 | 6 | 163 | ||||||||||||
Net (investment in)/divestment of financial investments available-for-sale | (22,319 | ) | (12,484 | ) | 14,677 | (20,127 | ) | |||||||||
Net cash flow from/(used in) investing activities | (22,616 | ) | (12,555 | ) | 14,608 | (20,563 | ) | |||||||||
Cash flow from /(used in) financing activities | ||||||||||||||||
Net money market papers issued/(repaid) | (7,020 | ) | (1,596 | ) | (51,424 | ) | (60,040 | ) | ||||||||
Net movements in treasury shares and own equity derivative activity | 673 | 0 | 0 | 673 | ||||||||||||
Capital issuance | 3,726 | 0 | 0 | 3,726 | ||||||||||||
Issuance of long-term debt, including financial liabilities designated at fair value | 64,956 | 0 | 2,106 | 67,062 | ||||||||||||
Repayment of long-term debt, including financial liabilities designated at fair value | (55,616 | ) | (1,548 | ) | (7,861 | ) | (65,024 | ) | ||||||||
Increase in minority interests | 0 | 0 | 3 | 3 | ||||||||||||
Dividends paid to/decrease in minority interests | 0 | (8 | ) | (576 | ) | (583 | ) | |||||||||
Net activity in investments in subsidiaries | (4,032 | ) | 2,419 | 1,614 | 0 | |||||||||||
Net cash flow from/(used in) financing activities | 2,686 | (733 | ) | (56,136 | ) | (54,183 | ) | |||||||||
Effects of exchange rate differences | 5,886 | 574 | (933 | ) | 5,529 | |||||||||||
Net increase/(decrease) in cash and cash equivalents | (9,202 | ) | (19,183 | ) | 13,664 | (14,721 | ) | |||||||||
Cash and cash equivalents at the beginning of the year | 132,782 | 24,421 | 22,490 | 179,693 | ||||||||||||
Cash and cash equivalents at the end of the year | 123,580 | 5,238 | 36,154 | 164,973 | ||||||||||||
Cash and cash equivalents comprise: | ||||||||||||||||
Cash and balances with central banks | 15,177 | 75 | 5,647 | 20,899 | ||||||||||||
Money market papers2 | 78,025 | 3,714 | 16,694 | 98,432 | ||||||||||||
Due from banks with original maturity of less than three months | 30,378 | 1,450 | 13,814 | 45,642 | ||||||||||||
Total | 123,580 | 5,238 | 36,154 | 164,973 | ||||||||||||
365
Table of Contents
Financial information
Notes to the consolidated financial statements
Note 41 Supplemental guarantor information required under SEC rules (continued)
Supplemental guarantor consolidated income statement | ||||||||||||||||||||
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2008 | Parent Bank1 | Americas Inc. | Subsidiaries | entries | UBS Group | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 49,699 | 21,343 | 27,354 | (32,717 | ) | 65,679 | ||||||||||||||
Interest expense | (48,686 | ) | (17,436 | ) | (26,282 | ) | 32,717 | (59,687 | ) | |||||||||||
Net interest income | 1,013 | 3,907 | 1,072 | 0 | 5,992 | |||||||||||||||
Credit loss (expense)/recovery | (861 | ) | (2,050 | ) | (85 | ) | 0 | (2,996 | ) | |||||||||||
Net interest income after credit loss expense | 152 | 1,857 | 987 | 0 | 2,996 | |||||||||||||||
Net fee and commission income | 9,709 | 7,910 | 5,310 | 0 | 22,929 | |||||||||||||||
Net trading income | (8,129 | ) | (19,847 | ) | 2,156 | 0 | (25,820 | ) | ||||||||||||
Income from subsidiaries | (19,882 | ) | 0 | 0 | 19,882 | 0 | ||||||||||||||
Other income | 2,836 | 1,058 | (3,202 | ) | 0 | 692 | ||||||||||||||
Total operating income | (15,314 | ) | (9,022 | ) | 5,251 | 19,882 | 796 | |||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 8,738 | 5,169 | 2,355 | 0 | 16,262 | |||||||||||||||
General and administrative expenses | 3,918 | 4,604 | 1,976 | 0 | 10,498 | |||||||||||||||
Depreciation of property and equipment | 770 | 205 | 266 | 0 | 1,241 | |||||||||||||||
Impairment of goodwill | 0 | 341 | 0 | 0 | 341 | |||||||||||||||
Amortization of intangible assets | 1 | 93 | 119 | 0 | 213 | |||||||||||||||
Total operating expenses | 13,427 | 10,412 | 4,716 | 0 | 28,555 | |||||||||||||||
Operating profit from continuing operations before tax | (28,741 | ) | (19,434 | ) | 535 | 19,882 | (27,758 | ) | ||||||||||||
Tax expense | (7,407 | ) | (4 | ) | 574 | 0 | (6,837 | ) | ||||||||||||
Net profit from continuing operations | (21,335 | ) | (19,430 | ) | (39 | ) | 19,882 | (20,922 | ) | |||||||||||
Net profit from discontinued operations | 43 | 0 | 155 | 0 | 198 | |||||||||||||||
Net profit | (21,292 | ) | (19,430 | ) | 116 | 19,882 | (20,724 | ) | ||||||||||||
Net profit attributable to minority interests | 0 | (9 | ) | 577 | 0 | 568 | ||||||||||||||
Net profit attributable to UBS shareholders | (21,292 | ) | (19,421 | ) | (461 | ) | 19,882 | (21,292 | ) | |||||||||||
366
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Note 41 Supplemental guarantor information required under SEC rules (continued)
Supplemental guarantor consolidated balance sheet | ||||||||||||||||||||
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
As of 31 December 2008 | Parent Bank1 | Americas Inc. | Subsidiaries | entries | UBS Group | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and balances with central banks | 27,030 | 332 | 5,382 | 0 | 32,744 | |||||||||||||||
Due from banks | 111,563 | 11,490 | 192,206 | (250,808 | ) | 64,451 | ||||||||||||||
Cash collateral on securities borrowed | 48,874 | 109,783 | 16,914 | (52,674 | ) | 122,897 | ||||||||||||||
Reverse repurchase agreements | 206,087 | 79,178 | 145,851 | (206,468 | ) | 224,648 | ||||||||||||||
Trading portfolio assets | 145,012 | 47,558 | 57,230 | 22,038 | 271,838 | |||||||||||||||
Trading portfolio assets pledged as collateral | 71,736 | 12,655 | 1,531 | (45,706 | ) | 40,216 | ||||||||||||||
Positive replacement values | 862,459 | 18,215 | 293,896 | (320,470 | ) | 854,100 | ||||||||||||||
Financial assets designated at fair value | 5,120 | 7,755 | 12,741 | (12,734 | ) | 12,882 | ||||||||||||||
Loans | 326,548 | 53,774 | 35,193 | (75,207 | ) | 340,308 | ||||||||||||||
Financial investments available-for-sale | 1,237 | 638 | 3,373 | 0 | 5,248 | |||||||||||||||
Accrued income and prepaid expenses | 3,684 | 2,700 | 2,666 | (2,909 | ) | 6,141 | ||||||||||||||
Investments in associates | 66,255 | 58 | 50 | (65,473 | ) | 892 | ||||||||||||||
Property and equipment | 5,093 | 971 | 642 | 0 | 6,706 | |||||||||||||||
Goodwill and intangible assets | 250 | 9,393 | 3,292 | 0 | 12,935 | |||||||||||||||
Deferred tax assets | 6,607 | 1,757 | 516 | 0 | 8,880 | |||||||||||||||
Other assets | 8,934 | 2,148 | 6,333 | (7,484 | ) | 9,931 | ||||||||||||||
Total assets | 1,896,489 | 358,405 | 777,816 | (1,017,895 | ) | 2,014,815 | ||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 196,723 | 68,213 | 111,500 | (250,808 | ) | 125,628 | ||||||||||||||
Cash collateral on securities lent | 25,248 | 32,884 | 8,605 | (52,674 | ) | 14,063 | ||||||||||||||
Repurchase agreements | 30,988 | 140,197 | 137,844 | (206,468 | ) | 102,561 | ||||||||||||||
Trading portfolio liabilities | 51,034 | 17,086 | 903 | (6,592 | ) | 62,431 | ||||||||||||||
Negative replacement values | 855,005 | 16,792 | 300,537 | (320,470 | ) | 851,864 | ||||||||||||||
Financial liabilities designated at fair value | 88,505 | 1,716 | 35,973 | (24,648 | ) | 101,546 | ||||||||||||||
Due to customers | 422,688 | 70,242 | 48,018 | (75,207 | ) | 465,741 | ||||||||||||||
Accrued expenses and deferred income | 7,417 | 2,584 | 3,104 | (2,909 | ) | 10,196 | ||||||||||||||
Debt issued | 127,408 | 2,439 | 72,569 | (5,162 | ) | 197,254 | ||||||||||||||
Other liabilities | 12,598 | 4,313 | 33,571 | (7,484 | ) | 42,998 | ||||||||||||||
Total liabilities | 1,817,614 | 356,466 | 752,624 | (952,422 | ) | 1,974,282 | ||||||||||||||
Equity attributable to UBS shareholders | 78,875 | (1,097 | ) | 20,226 | (65,473 | ) | 32,531 | |||||||||||||
Equity attributable to minority interests | 0 | 3,036 | 4,966 | 0 | 8,002 | |||||||||||||||
Total equity | 78,875 | 1,939 | 25,192 | (65,473 | ) | 40,533 | ||||||||||||||
Total liabilities and equity | 1,896,489 | 358,405 | 777,816 | (1,017,895 | ) | 2,014,815 | ||||||||||||||
367
Table of Contents
Financial information
Notes to the consolidated financial statements
Note 41 Supplemental guarantor information required under SEC rules (continued)
Supplemental guarantor consolidated statement of cash flows | ||||||||||||||||
CHF million | UBS AG | UBS | ||||||||||||||
For the year ended 31 December 2008 | Parent Bank1 | Americas Inc. | Subsidiaries | UBS Group | ||||||||||||
Net cash flow from / (used in) operating activities | 69,799 | (438 | ) | 7,646 | 77,007 | |||||||||||
Cash flow from / (used in) investing activities | ||||||||||||||||
Purchase of subsidiaries and associates | (1,502 | ) | 0 | 0 | (1,502 | ) | ||||||||||
Disposal of subsidiaries and associates | 1,686 | 0 | 0 | 1,686 | ||||||||||||
Purchase of property and equipment | (819 | ) | (258 | ) | (140 | ) | (1,217 | ) | ||||||||
Disposal of property and equipment | 37 | 27 | 5 | 69 | ||||||||||||
Net (investment in) / divestment of financial investments available-for-sale | 330 | 156 | (1,198 | ) | (712 | ) | ||||||||||
Net cash flow from / (used in) investing activities | (268 | ) | (75 | ) | (1,333 | ) | (1,676 | ) | ||||||||
Cash flow from / (used in) financing activities | ||||||||||||||||
Net money market papers issued / (repaid) | (52,815 | ) | 914 | 11,264 | (40,637 | ) | ||||||||||
Net movements in treasury shares and own equity derivative activity | 623 | 0 | 0 | 623 | ||||||||||||
Capital issuance | 23,135 | 0 | 0 | 23,135 | ||||||||||||
Issuance of long-term debt, including financial liabilities designated at fair value | 91,961 | 0 | 11,126 | 103,087 | ||||||||||||
Repayment of long-term debt, including financial liabilities designated at fair value | (62,822 | ) | (14,500 | ) | (15,572 | ) | (92,894 | ) | ||||||||
Increase in minority interests | 0 | 842 | 819 | 1,661 | ||||||||||||
Dividends paid to / decrease in minority interests | 0 | (112 | ) | (420 | ) | (532 | ) | |||||||||
Net activity in investments in subsidiaries | (11,978 | ) | 21,816 | (9,838 | ) | 0 | ||||||||||
Net cash flow from / (used in) financing activities | (11,896 | ) | 8,960 | (2,621 | ) | (5,557 | ) | |||||||||
Effects of exchange rate differences | (33,963 | ) | 442 | (5,665 | ) | (39,186 | ) | |||||||||
Net increase / (decrease) in cash and cash equivalents | 23,672 | 8,889 | (1,973 | ) | 30,588 | |||||||||||
Cash and cash equivalents at the beginning of the year | 109,110 | 15,532 | 24,463 | 149,105 | ||||||||||||
Cash and cash equivalents at the end of the year | 132,782 | 24,421 | 22,490 | 179,693 | ||||||||||||
Cash and cash equivalents comprise: | ||||||||||||||||
Cash and balances with central banks | 27,030 | 332 | 5,382 | 32,744 | ||||||||||||
Money market papers2 | 62,777 | 19,875 | 4,080 | 86,732 | ||||||||||||
Due from banks with original maturity of less than three months | 42,975 | 4,214 | 13,028 | 60,217 | ||||||||||||
Total | 132,782 | 24,421 | 22,490 | 179,693 | ||||||||||||
368
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Note 41 Supplemental guarantor information required under SEC rules (continued)
Supplemental guarantor consolidated income statement | ||||||||||||||||||||
CHF million | UBS AG | UBS | Consolidating | |||||||||||||||||
For the year ended 31 December 2007 | Parent Bank1 | Americas Inc. | Subsidiaries | entries | UBS Group | |||||||||||||||
Operating income | ||||||||||||||||||||
Interest income | 77,306 | 47,747 | 51,985 | (67,926 | ) | 109,112 | ||||||||||||||
Interest expense | (74,689 | ) | (46,420 | ) | (50,592 | ) | 67,926 | (103,775 | ) | |||||||||||
Net interest income | 2,617 | 1,327 | 1,393 | 0 | 5,337 | |||||||||||||||
Credit loss (expense) / recovery | 11 | (234 | ) | (15 | ) | 0 | (238 | ) | ||||||||||||
Net interest income after credit loss expense | 2,628 | 1,093 | 1,378 | 0 | 5,099 | |||||||||||||||
Net fee and commission income | 12,852 | 10,119 | 7,663 | 0 | 30,634 | |||||||||||||||
Net trading income | 3,467 | (9,932 | ) | (1,888 | ) | 0 | (8,353 | ) | ||||||||||||
Income from subsidiaries | 464 | 0 | 0 | (464 | ) | 0 | ||||||||||||||
Other income | (4,273 | ) | 8,369 | 245 | 0 | 4,341 | ||||||||||||||
Total operating income | 15,138 | 9,649 | 7,398 | (464 | ) | 31,721 | ||||||||||||||
Operating expenses | ||||||||||||||||||||
Personnel expenses | 13,239 | 8,329 | 3,947 | 0 | 25,515 | |||||||||||||||
General and administrative expenses | 5,684 | 3,446 | (701 | ) | 0 | 8,429 | ||||||||||||||
Depreciation of property and equipment | 930 | 138 | 175 | 0 | 1,243 | |||||||||||||||
Amortization of intangible assets | 3 | 101 | 172 | 0 | 276 | |||||||||||||||
Total operating expenses | 19,856 | 12,014 | 3,593 | 0 | 35,463 | |||||||||||||||
Operating profit from continuing operations before tax | (4,718 | ) | (2,365 | ) | 3,805 | (464 | ) | (3,742 | ) | |||||||||||
Tax expense | 794 | (486 | ) | 1,061 | 0 | 1,369 | ||||||||||||||
Net profit from continuing operations | (5,512 | ) | (1,879 | ) | 2,744 | (464 | ) | (5,111 | ) | |||||||||||
Net profit from discontinued operations | 265 | 0 | 138 | 0 | 403 | |||||||||||||||
Net profit | (5,247 | ) | (1,879 | ) | 2,882 | (464 | ) | (4,708 | ) | |||||||||||
Net profit attributable to minority interests | 0 | 18 | 521 | 0 | 539 | |||||||||||||||
Net profit attributable to UBS shareholders | (5,247 | ) | (1,897 | ) | 2,361 | (464 | ) | (5,247 | ) | |||||||||||
369
Table of Contents
Financial information
Notes to the consolidated financial statements
Note 41 Supplemental guarantor information required under SEC rules (continued)
Supplemental guarantor consolidated statement of cash flows | ||||||||||||||||
CHF million | UBS AG | UBS | ||||||||||||||
For the year ended 31 December 2007 | Parent Bank1 | Americas Inc. | Subsidiaries | UBS Group | ||||||||||||
Net cash flow from / (used in) operating activities | (65,749 | ) | 19,670 | (5,999 | ) | (52,078 | ) | |||||||||
Cash flow from / (used in) investing activities | ||||||||||||||||
Purchase of subsidiaries and associates | (2,337 | ) | 0 | 0 | (2,337 | ) | ||||||||||
Disposal of subsidiaries and associates | 885 | 0 | 0 | 885 | ||||||||||||
Purchase of property and equipment | (1,022 | ) | (581 | ) | (307 | ) | (1,910 | ) | ||||||||
Disposal of property and equipment | 40 | 28 | 66 | 134 | ||||||||||||
Net (investment in) / divestment of financial investments available-for-sale | 4,027 | 34 | 1,920 | 5,981 | ||||||||||||
Net cash flow from / (used in) investing activities | 1,593 | (519 | ) | 1,679 | 2,753 | |||||||||||
Cash flow from / (used in) financing activities | ||||||||||||||||
Net money market papers issued / (repaid) | 35,017 | (1,426 | ) | (919 | ) | 32,672 | ||||||||||
Net movements in treasury shares and own equity derivative activity | (2,771 | ) | 0 | 0 | (2,771 | ) | ||||||||||
Dividends paid | (4,275 | ) | 0 | 0 | (4,275 | ) | ||||||||||
Issuance of long-term debt, including financial liabilities designated at fair value | 105,197 | 1,022 | 4,655 | 110,874 | ||||||||||||
Repayment of long-term debt, including financial liabilities designated at fair value | (54,251 | ) | (7,022 | ) | (1,134 | ) | (62,407 | ) | ||||||||
Increase in minority interests | 0 | 32 | 1,062 | 1,094 | ||||||||||||
Dividends paid to / decrease in minority interests | 0 | (665 | ) | 46 | (619 | ) | ||||||||||
Net activity in investments in subsidiaries | 871 | (6,627 | ) | 5,756 | 0 | |||||||||||
Net cash flow from / (used in) financing activities | 79,788 | (14,686 | ) | 9,466 | 74,568 | |||||||||||
Effects of exchange rate differences | (9,070 | ) | (3,062 | ) | (96 | ) | (12,228 | ) | ||||||||
Net increase / (decrease) in cash and cash equivalents | 6,562 | 1,403 | 5,050 | 13,015 | ||||||||||||
Cash and cash equivalents at the beginning of the year | 102,548 | 14,129 | 19,413 | 136,090 | ||||||||||||
Cash and cash equivalents at the end of the year | 109,110 | 15,532 | 24,463 | 149,105 | ||||||||||||
Cash and cash equivalents comprise: | ||||||||||||||||
Cash and balances with central banks | 8,530 | 109 | 10,154 | 18,793 | ||||||||||||
Money market papers2 | 60,266 | 13,202 | 3,747 | 77,215 | ||||||||||||
Due from banks with original maturity of less than three months | 40,314 | 2,221 | 10,562 | 53,097 | ||||||||||||
Total | 109,110 | 15,532 | 24,463 | 149,105 | ||||||||||||
Guarantee of other securities
USD billion, unless otherwise indicated | Outstanding as of 31.12.09 | |||||||||||||||
Issuing entity | Type of security | Date issued | Interest (%) | Amount | ||||||||||||
UBS Preferred Funding Trust I | Trust preferred securities | October 2000 | 8.622 | 1.5 | ||||||||||||
UBS Preferred Funding Trust II | Trust preferred securities1 | June 2001 | 7.247 | 0.5 | ||||||||||||
UBS Preferred Funding Trust IV | Floating rate non-cumulative trust | one-month LIBOR | ||||||||||||||
preferred securities | May 2003 | + 0.7 | 0.3 | |||||||||||||
UBS Preferred Funding Trust V | Trust preferred securities | May 2006 | 6.243 | 1.0 | ||||||||||||
UBS AG has fully and unconditionally guaranteed these securities. UBS’s obligations under the trust preferred securities guarantee are subordinated to the prior payment in full of the deposit liabilities of UBS and all other liabilities of
UBS. At 31 December 2009, the amount of senior liabilities of UBS to which the holders of the subordinated debt securities would be subordinated is approximately CHF 1,280 billion.
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Financial information
UBS AG (Parent Bank)
UBS AG (Parent Bank)
Parent Bank review
Income statement
The Parent Bank UBS AG net loss decreased by CHF 31,448 million from a loss of CHF 36,489 million to a loss of CHF 5,041 million.
Balance sheet
In 2009, UBS’s overall balance sheet reduction initiatives led also to lower Parent Bank total assets. In particular UBS subsidiaries and third party banks in the Americas, European region, and to lesser extent in Asia, reduced their assets and therefore their funding needs from the Parent Bank. The Parent Bank total assets stood at CHF 848 billion at 31 December 2009, a drop of CHF 342 billion from CHF 1,189 billion at 31 December 2008.
itive replacement values (down CHF 133 billion), customer loans and collateral trading (down CHF 37 billion), trading balances (down CHF 21 billion), and liquid assets (down CHF 12 billion). These declines however were partially offset by higher positions in money market papers (up CHF 29 billion) and financial investments (up CHF 4 billion). Mortgage loans remained stable in 2009 at CHF 141 billion.
Interbank lending
During 2009, due from banks on time declined by CHF 53 billion, predominately due to lower funding needs of third party banks in the Americas and European region as well as UBS subsidiaries in the European region. Due from banks on demand declined by CHF 12 billion due to lower funding to bank subsidiaries in the European region. In addition, interbank collateral trading declined by CHF 100 billion, attributable to lower trading volumes and a shift into money market paper within UBS subsidiaries in the Americas, European region and Asia.
Customer lending
The customer loan drop of CHF 37 billion was the result of lower funding needs by clients in the Americas and in the European region, as well as UBS subsidiaries (non-banks), predominately in the Americas region.
Money market papers
The increase in money market papers is due to UBS’s strategic decision to rebalance its investment portfolio, which led to a shift from reverse repurchase agreements into money market papers available-for-sale. These instruments include highly liquid short-term securities issued by governments and government-controlled institutions in various currencies, mainly US dollar and euro.
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Financial information
UBS AG (Parent Bank)
Parent Bank financial statements
Income statement | ||||||||||||
For the year ended | % change from | |||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.08 | |||||||||
Interest and discount income | 13,764 | 37,825 | (64 | ) | ||||||||
Interest and dividend income from trading portfolio | 4,911 | 12,014 | (59 | ) | ||||||||
Interest and dividend income from financial investments | 92 | 76 | 21 | |||||||||
Interest expense | (16,901 | ) | (49,022 | ) | (66 | ) | ||||||
Net interest income | 1,866 | 893 | 109 | |||||||||
Credit-related fees and commissions | 255 | 208 | 23 | |||||||||
Fee and commission income from securities and investment business | 9,294 | 11,668 | (20 | ) | ||||||||
Other fee and commission income | 624 | 610 | 2 | |||||||||
Fee and commission expense | (2,264 | ) | (2,849 | ) | (21 | ) | ||||||
Net fee and commission income | 7,909 | 9,637 | (18 | ) | ||||||||
Net trading income | (476 | ) | (9,466 | ) | 95 | |||||||
Net income from disposal of financial investments | 123 | 176 | (30 | ) | ||||||||
Income from investments in associated companies | 1,154 | 3,763 | (69 | ) | ||||||||
Income from real estate holdings | 26 | 29 | (10 | ) | ||||||||
Sundry income from ordinary activities | 4,761 | 3,384 | 41 | |||||||||
Sundry ordinary expenses | (3,604 | ) | (2,767 | ) | 30 | |||||||
Other income from ordinary activities | 2,460 | 4,584 | (46 | ) | ||||||||
Operating income | 11,759 | 5,648 | 108 | |||||||||
Personnel expenses | 9,101 | 6,707 | 36 | |||||||||
General and administrative expenses | 4,421 | 5,822 | (24 | ) | ||||||||
Operating expenses | 13,522 | 12,528 | 8 | |||||||||
Operating profit | (1,763 | ) | (6,880 | ) | 74 | |||||||
Depreciation and write-offs on investments in associated companies and fixed assets | 2,405 | 26,900 | (91 | ) | ||||||||
Allowances, provisions and losses | 1,432 | 3,071 | (53 | ) | ||||||||
Profit before extraordinary items and taxes | (5,600 | ) | (36,852 | ) | 85 | |||||||
Extraordinary income | 688 | 1,002 | (31 | ) | ||||||||
Extraordinary expenses | (49 | ) | (482 | ) | (90 | ) | ||||||
Tax expense | (80 | ) | (157 | ) | (49 | ) | ||||||
Profit/(loss) for the period | (5,041 | ) | (36,489 | ) | 86 | |||||||
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Balance sheet | ||||||||||||
% change from | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.08 | |||||||||
Assets | ||||||||||||
Liquid assets | 15,177 | 27,030 | (44 | ) | ||||||||
Money market papers | 91,988 | 62,777 | 47 | |||||||||
Due from banks | 191,002 | 355,679 | (46 | ) | ||||||||
Due from customers | 153,893 | 191,308 | (20 | ) | ||||||||
Mortgage loans | 140,671 | 141,328 | 0 | |||||||||
Trading balances in securities and precious metals | 138,160 | 158,741 | (13 | ) | ||||||||
Financial investments | 15,206 | 11,085 | 37 | |||||||||
Investments in associated companies | 19,225 | 22,001 | (13 | ) | ||||||||
Fixed assets | 4,986 | 5,032 | (1 | ) | ||||||||
Accrued income and prepaid expenses | 1,754 | 3,877 | (55 | ) | ||||||||
Positive replacement values | 68,977 | 201,801 | (66 | ) | ||||||||
Other assets | 6,504 | 8,697 | (25 | ) | ||||||||
Total assets | 847,543 | 1,189,356 | (29 | ) | ||||||||
Total subordinated assets | 2,617 | 3,924 | (33 | ) | ||||||||
Total amounts receivable from Group companies | 242,617 | 435,721 | (44 | ) | ||||||||
Liabilities and equity | ||||||||||||
Money market papers issued | 45,043 | 52,063 | (13 | ) | ||||||||
Due to banks | 184,010 | 292,730 | (37 | ) | ||||||||
Due to customers on savings and deposit accounts | 72,985 | 61,872 | 18 | |||||||||
Other amounts due to customers | 287,156 | 388,338 | (26 | ) | ||||||||
Medium-term bonds | 2,967 | 3,150 | (6 | ) | ||||||||
Bonds issued and loans from central mortgage institutions | 155,907 | 143,589 | 9 | |||||||||
Accruals and deferred income | 7,520 | 7,895 | (5 | ) | ||||||||
Negative replacement values | 54,468 | 193,108 | (72 | ) | ||||||||
Other liabilities | 6,641 | 14,181 | (53 | ) | ||||||||
Allowances and provisions | 2,277 | 2,724 | (16 | ) | ||||||||
Share capital | 356 | 293 | 22 | |||||||||
General statutory reserve | 30,377 | 40,910 | (26 | ) | ||||||||
Reserve for own shares | 835 | 2,877 | (71 | ) | ||||||||
Other reserves | 2,042 | 22,115 | (91 | ) | ||||||||
Profit/(loss) for the period | (5,041 | ) | (36,489 | ) | 86 | |||||||
Total liabilities and equity | 847,543 | 1,189,356 | (29 | ) | ||||||||
Total subordinated liabilities | 19,410 | 21,228 | (9 | ) | ||||||||
Total amounts payable to Group companies | 145,268 | 271,434 | (46 | ) | ||||||||
Statement of appropriation of retained earnings
The Board of Directors proposes that the Annual General Meeting (AGM) on 14 April 2010 approves the following appropriation:
CHF million | ||||
Profit/(loss) for the financial year 2009 as per the Parent Bank’s Income Statement | (5,041 | ) | ||
Appropriation to other reserves | (2,042 | ) | ||
Appropriation to general statutory reserves: Share premium | (2,999 | ) | ||
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Financial information
UBS AG (Parent Bank)
Notes to the Parent Bank financial statements
Accounting policies
The Parent Bank Financial Statements are prepared in accordance with Swiss Federal banking law. The accounting policies are principally the same as for the Group Financial Statements outlined in Note 1, Summary of Significant Accounting Policies. Major differences between the Swiss Federal banking law requirements and International Financial Reporting Standards are described in Note 40 to the financial statements. The accounting policies applied for the statutory accounts of the Parent Bank are discussed below. The risk management of UBS AG is described in the context of the risk management for UBS Group. Refer to “Risk and treasury management” section.
Treasury shares
Treasury shares are own equity instruments held by an entity. Under Swiss law, treasury shares are recognized in the balance sheet as trading balances. Short positions in treasury shares are recognized in “Due to banks”. Treasury shares recognized as trading balances and short positions in treasury shares are measured at fair value with unrealized gains or losses from remeasurement to fair value included in the income statement. Realized gains and losses on the sale or acquisition of treasury shares are recognized in the income statement.
Foreign currency translation
Assets and liabilities of foreign branches are translated into CHF at the spot exchange rate at the balance sheet date. Income and expense items are translated at weighted average exchange rates for the period. Gains resulting from exchange differences on the translation of each of these foreign branches are credited to a provision account (other liabilities). Losses resulting from exchange differences are debited firstly to the aforementioned provision account until such provision is fully utilized, and secondly to profit and loss.
Investments in associated companies
Investments in associated companies are equity interests which are held for the purpose of the Parent Bank’s business activities or for strategic reasons. They include all directly held subsidiaries and are carried at cost less impairment, if applicable.
Deferred taxes
Deferred tax assets are not recognized in the Parent Bank Financial Statements. Deferred tax liabilities are recognized for all taxable temporary differences. The change in the deferred tax liability is recognized in profit or loss.
Equity participation and other compensation plans
Equity participation plans
Other compensation plans
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Changes in accounting policies, comparability and other adjustments
Netting of cash collateral against replacement values
CHF 28.3 billion inPositive replacement values,a decrease of approximately CHF 29.4 billion inNegative replacement valuesand a corresponding decrease inDue from banks/Due from customersandDue to banks/Due to customers.There was no impact to the income statement for the period.
Subordinated liabilities
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Financial information
UBS AG (Parent Bank)
Additional income statement information
Net trading income | ||||||||||||
For the year ended | % change from | |||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.08 | |||||||||
Investment Bank equities | 3,005 | 3,930 | (24 | ) | ||||||||
Investment Bank fixed income, currencies and commodities1 | (4,496 | ) | (12,678 | ) | 65 | |||||||
Other business divisions1 | 1,014 | (718 | ) | |||||||||
Total | (476 | ) | (9,466 | ) | 95 | |||||||
Extraordinary income and expenses
Extraordinary income includes gains from sale of subsidiaries and associated companies of CHF 393 million in 2009, whereas 2008 included a gain on sale of Bank of China investment of approximately CHF 360 million. Further, 2009 includes write-up of investments in associated companies of CHF 265 million (2008: CHF 30 million). Amounts in 2008 included a
release on reserves on investments in subsidiaries of CHF 490 million and a release of provisions of CHF 72 million.
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Additional balance sheet information
Allowances and provisions1 | ||||||||||||||||||||||||
Provisions applied | Recoveries, | |||||||||||||||||||||||
in accordance | doubtful interest, | |||||||||||||||||||||||
Balance at | with their | currency translation | Provisions released | New provisions | Balance at | |||||||||||||||||||
CHF million | 31.12.08 | specified purpose | differences | to income | charged to income | 31.12.09 | ||||||||||||||||||
Default risks (credit and country risk) | 1,556 | (1,408 | ) | 196 | (493 | ) | 1,405 | 1,256 | ||||||||||||||||
Litigation risks | 1,078 | (280 | ) | (100 | ) | (22 | ) | 134 | 810 | |||||||||||||||
Operational risks | 157 | (203 | ) | 0 | (57 | ) | 145 | 42 | ||||||||||||||||
Retirement benefit plans | 94 | (29 | ) | (1 | ) | 0 | 32 | 96 | ||||||||||||||||
Restructuring provisions | 74 | (205 | ) | 45 | (3 | ) | 303 | 214 | ||||||||||||||||
Deferred taxes | 36 | 0 | (15 | ) | (12 | ) | 0 | 9 | ||||||||||||||||
Other | 1,259 | (522 | ) | 2 | (173 | ) | 458 | 1,024 | ||||||||||||||||
Total allowances and provisions | 4,254 | (2,647 | ) | 127 | (760 | ) | 2,477 | 3,451 | ||||||||||||||||
Allowances deducted from assets | 1,530 | 1,174 | ||||||||||||||||||||||
Total provisions as per balance sheet | 2,724 | 2,277 | ||||||||||||||||||||||
Statement of shareholders' equity | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||
shareholders' | ||||||||||||||||||||||||
General statutory | General statutory | equity (before | ||||||||||||||||||||||
reserves: | reserves: | Reserves for own | distribution | |||||||||||||||||||||
CHF million | Share capital | Share premium | Retained earnings | shares | Other reserves | of profit | ||||||||||||||||||
As of 31.12.07 and 1.1.08 | 207 | 6,303 | 2,472 | 9,441 | 15,567 | 33,990 | ||||||||||||||||||
Capital increase1 | 86 | 15,911 | (15 | ) | 15,982 | |||||||||||||||||||
Capital increase related to MCNs | 16,223 | 16,223 | ||||||||||||||||||||||
Increase in reserves | 0 | |||||||||||||||||||||||
Prior year dividend | 0 | |||||||||||||||||||||||
Profit/(loss) for the period | (36,489 | ) | (36,489 | ) | ||||||||||||||||||||
Changes in reserves for own shares | (6,564 | ) | 6,564 | 0 | ||||||||||||||||||||
Transfers | (11,901 | ) | (2,472 | ) | 14,373 | 0 | ||||||||||||||||||
As of 31.12.08 and 1.1.09 | 293 | 26,536 | 0 | 2,877 | 0 | 29,706 | ||||||||||||||||||
Capital increase | 30 | 3,783 | 3,813 | |||||||||||||||||||||
Capital increase related to MCNs | 33 | 58 | 91 | |||||||||||||||||||||
Increase in reserves | 0 | |||||||||||||||||||||||
Prior year dividend | 0 | |||||||||||||||||||||||
Profit/(loss) for the period | (5,041 | ) | (5,041 | ) | ||||||||||||||||||||
Changes in reserves for own shares | (2,042 | ) | 2,042 | 0 | ||||||||||||||||||||
Transfers2 | (2,999 | ) | 2,999 | 0 | ||||||||||||||||||||
As of 31.12.09 | 356 | 27,378 | 0 | 835 | 0 | 28,569 | ||||||||||||||||||
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Financial information
UBS AG (Parent Bank)
Share capital | ||||||||||||||||
Par value | Ranking for dividends | |||||||||||||||
No. of shares | Capital in CHF | No. of shares | Capital in CHF | |||||||||||||
As of 31.12.09 | ||||||||||||||||
Issued and paid up | 3,558,112,753 | 355,811,275 | 3,558,112,753 | 355,811,275 | ||||||||||||
Conditional share capital | 527,773,646 | 52,777,365 | ||||||||||||||
As of 31.12.08 | ||||||||||||||||
Issued and paid up | 2,932,580,549 | 293,258,055 | 2,932,580,549 | 293,258,055 | ||||||||||||
Conditional share capital | 792,844,711 | 79,284,471 | ||||||||||||||
On 25 June 2009, UBS increased its share capital by issuing 293,258,050 new registered shares. The shares were placed with a small number of large institutional investors. The shares were issued out of authorized capital which had been approved at the Annual General Meeting of shareholders (AGM) on 15 April 2009.
Conditional share capital
On 31 December 2009, a maximum of 29,350 shares could have been issued against the future exercise of options from former PaineWebber employee option plans and 149,994,296 shares could have been issued to fund UBS’s employee share option programs. In addition, conditional capital of up to 277,750,000 shares was available for the UBS share delivery obligation due to the issuance of the March 2008 mandatory convertible notes (MCNs) and conditional capital of up to 100,000,000 shares is available in connection with the transaction with the Swiss National Bank (SNB).
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Off-balance-sheet and other information
Assets pledged or assigned as security for own obligations and assets subject to reservation of title | ||||||||||||||||||||||||
31.12.09 | 31.12.08 | Change in % | ||||||||||||||||||||||
CHF million | Book value | Effective liability | Book value | Effective liability | Book value | Effective liability | ||||||||||||||||||
Money market papers | 42,898 | 1,368 | 7,429 | 1,300 | 477 | 5 | ||||||||||||||||||
Mortgage loans1 | 21,741 | 12,321 | 3,699 | 2,418 | 488 | 410 | ||||||||||||||||||
Securities | 47,289 | 31,862 | 50,223 | 37,083 | (6 | ) | (14 | ) | ||||||||||||||||
Other | 8,578 | 0 | 8,149 | 0 | 5 | |||||||||||||||||||
Total | 120,506 | 45,551 | 69,500 | 40,801 | 73 | 12 | ||||||||||||||||||
Financial assets are mainly pledged in securities borrowing and lending transactions, in repurchase and reverse repurchase transactions, under collateralized credit lines with central banks, against loans from mortgage institutions, in con-
nection with derivative transactions, as security deposits for stock exchanges and clearinghouse memberships, or transferred for security purpose in connection with the issuance of covered bonds.
Commitments and contingent liabilities | ||||||||||||
% change from | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.08 | |||||||||
Contingent liabilities | 139,319 | 286,451 | (51 | ) | ||||||||
Irrevocable commitments | 73,270 | 68,660 | 7 | |||||||||
Liabilities for calls on shares and other equities | 151 | 145 | 4 | |||||||||
Confirmed credits | 2,083 | 2,079 | 0 | |||||||||
UBS AG is jointly and severally liable for the value added tax (VAT) liability of Swiss subsidiaries that belong to its VAT group.
Derivative instruments | ||||||||||||||||||||||||
31.12.09 | 31.12.08 | |||||||||||||||||||||||
Notional | Notional | |||||||||||||||||||||||
amount | amount | |||||||||||||||||||||||
CHF million, except where indicated | PRV1 | NRV2 | CHF billion | PRV1 | NRV2 | CHF billion | ||||||||||||||||||
Interest rate contracts | 187,506 | 174,632 | 33,787 | 377,307 | 370,346 | 36,476 | ||||||||||||||||||
Credit derivative contracts | 80,008 | 70,586 | 2,525 | 202,357 | 187,216 | 3,712 | ||||||||||||||||||
Foreign exchange contracts | 97,925 | 101,800 | 6,523 | 222,178 | 229,656 | 6,005 | ||||||||||||||||||
Precious metal contracts | 3,442 | 3,378 | 79 | 5,804 | 5,697 | 108 | ||||||||||||||||||
Equity/index contracts | 17,314 | 21,353 | 251 | 28,502 | 36,208 | 473 | ||||||||||||||||||
Commodities contracts, excluding precious metals contracts | 761 | 697 | 6 | 27,055 | 25,387 | 160 | ||||||||||||||||||
Total derivative instruments | 386,956 | 372,447 | 43,171 | 863,203 | 854,510 | 46,934 | ||||||||||||||||||
Replacement value netting | 317,979 | 317,979 | 661,402 | 661,402 | ||||||||||||||||||||
Replacement values after netting | 68,977 | 54,468 | 201,801 | 193,108 | ||||||||||||||||||||
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Financial information
UBS AG (Parent Bank)
Fiduciary transactions | ||||||||||||
% change from | ||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.08 | |||||||||
Deposits: | ||||||||||||
with third-party banks | 17,088 | 36,452 | (53 | ) | ||||||||
with subsidiaries | 1,810 | 2,738 | (34 | ) | ||||||||
Total | 18,898 | 39,190 | (52 | ) | ||||||||
Due to UBS pension plans | ||||||||||||
For the year ended | % change from | |||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.08 | |||||||||
Due to UBS pension plans and UBS debt instruments held by pension plans | 397 | 876 | (55 | ) | ||||||||
Transactions with related parties
Transactions with related parties (such as securities transactions, payment transfer services, borrowing and compensation for deposits) are conducted at internally agreed transfer prices or at arm’s length.
Outsourcing
Outsourcing of IT and other services through agreements with external service providers is in compliance with FINMA circular 08/7 “Outsourcing banks”.
Personnel
The Parent Bank employed 36,182 personnel on 31 December 2009 and 40,998 personnel on 31 December 2008.
Significant shareholders | ||||||||||||
In % of shares issued | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||
Chase Nominees Ltd, London | 11.63 | 7.19 | 7.99 | |||||||||
DTC (Cede & Co.), New York1 | 8.42 | 9.89 | 14.15 | |||||||||
Mellon Bank N.A., Everett | 3.21 | less than 3 | less than 3 | |||||||||
Nortrust Nominees Ltd, London | 3.07 | less than 3 | less than 3 | |||||||||
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Corporate governance and compensation report
Compensation details and additional information for executive members of the BoD | ||||||||||||||||||||||||||||||||
CHF, except where indicateda | ||||||||||||||||||||||||||||||||
Annual incentive | Discretionary | Contributions to | ||||||||||||||||||||||||||||||
For the | Annual incentive | award (shares | award (options | Benefits | retirement | |||||||||||||||||||||||||||
Name, function1 | year ended | Base salary | award (cash) | – fair value)c | – fair value)d | in kinde | benefits plansf | Total | ||||||||||||||||||||||||
Kaspar Villiger, Chairman | 2009 | 602,083 | 0 | 0 | 0 | 74,488 | 0 | 676,571 | ||||||||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||
Peter Kurer, former Chairman | 2009 | 666,667 | 0 | 0 | 0 | 37,561 | 89,780 | 794,008 | ||||||||||||||||||||||||
2008 | 1,333,333 | 0 | 0 | 0 | 58,267 | 174,047 | 1,565,647 | |||||||||||||||||||||||||
Marcel Ospel, former Chairman | 2009 | |||||||||||||||||||||||||||||||
2008 | 666,667 | 0 | 0 | 0 | 80,755 | 87,023 | 834,445 | |||||||||||||||||||||||||
Stephan Haeringer, | 2009 | |||||||||||||||||||||||||||||||
former Executive Vice Chairman | 2008 | 1,125,000 | 0 | 0 | 0 | 108,846 | 195,802 | 1,429,648 | ||||||||||||||||||||||||
Explanation of the tables outlining compensation details of executive members of
the BoD and members of the GEB:
a. | Local currencies are converted into CHF using the exchange rates as detailed in “Note 39 Currency translation rates” in the “Financial information” section of this report. | |
b. | The entire cash incentive is only paid out over a three-year period and is subject to forfeiture. | |
c. | Values per performance share at grant: CHF 16.30 for PEP awards and CHF 22.20 for IPP awards granted in 2010 related to the performance year 2009. These are based on the performance share valuation which will be used for accounting purposes under lFRS2. The valuation was carried out by PricewaterhouseCoopers and takes into account the relevant performance conditions, targets set, and the range of possible outcomes for these. | |
d. | No options were granted in 2010 for the performance year 2009. | |
e. | Benefits in kind – car leasing, company car allowance, staff discount on banking products and services, health and welfare benefits and general expense allowances – are all valued at market price. | |
f. | Swiss executives participate in the same pension plan as all other employees. Under this plan, employees receive a company contribution to the plan which covers compensation up to CHF 820,800. The retirement benefits consist of a pension, a bridging pension and a one-off payout of accumulated capital. Employees must also contribute to the plan. This figure excludes the mandatory employer’s social security contributions (AHV, ALV) but includes the portion attributed to the employer’s portion of the legal BVG requirement. The employee contribution is included in the base salary and annual incentive award components. | |
In both the US and the UK, executives participate in the same plans as all other employees. In the US the plans differ between the two business divisions. For each business division there are two different plans. The grandfathered plans, which are no longer open to new hires, operate, depending on the business division, either on a cash balance basis or a career average salary basis and participants accrue a pension based on their annual compensation limited to USD 250,000 (or USD 150,000 for Wealth Management Americas employees). In the defined contribution plan, participants receive company contributions to the plan based on compensation limited to USD 245,000. US management may also participate in a 401(k) defined contribution plan (open to all employees), which provides a company matching contribution for employee contributions. In the UK, management participates in either the principal pension plan, which operates on a defined contribution basis and is limited to an earnings cap of GBP 100,000, or a grandfathered defined benefit plan which provides a pension on retirement based on career average base salary (uncapped). |
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Financial information
UBS AG (Parent Bank)
Remuneration details and additional information for independent members of the BoD | ||||||||||||||||||||||||||||||||||||||||||
CHF, except where indicated3 | ||||||||||||||||||||||||||||||||||||||||||
For the | ||||||||||||||||||||||||||||||||||||||||||
HR & | Governance & | Corporate | period | Share | ||||||||||||||||||||||||||||||||||||||
Audit | Compensation | Nominating | Responsibility | Risk | Strategy | AGM to | Committee | Benefits | Additional | percent- | Number of | |||||||||||||||||||||||||||||||
Name, function1 | Committee | Committee | Committee | Committee | Committee | Committee | AGM | Base fee | retainer(s) | in kind | payments | Total | age3 | shares4,5 | ||||||||||||||||||||||||||||
Sergio Marchionne, | M | 2009/2010 | 325,000 | 100,000 | 0 | 250.000 | 6 | 675,000 | 100 | 51,845 | ||||||||||||||||||||||||||||||||
Senior Independent Director, Vice Chairman | M | M | 2008/2009 | 325,000 | 200,000 | 0 | 250.000 | 6 | 775,000 | 100 | 75,228 | |||||||||||||||||||||||||||||||
Ernesto Bertarelli, | 2009/2010 | |||||||||||||||||||||||||||||||||||||||||
former member | M | M | 2008/2009 | 325,000 | 200,000 | 0 | 0 | 525,000 | 100 | 51,596 | ||||||||||||||||||||||||||||||||
Sally Bott, | C | M | 2009/2010 | 325,000 | 350,000 | 0 | 0 | 675,000 | 50 | 27,261 | ||||||||||||||||||||||||||||||||
member2 | M | M | 2008/2009 | 162,500 | 75,000 | 0 | 0 | 237,500 | 50 | 12,280 | ||||||||||||||||||||||||||||||||
Michel Demaré, | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 50 | 21,203 | |||||||||||||||||||||||||||||||||
member | 2008/2009 | |||||||||||||||||||||||||||||||||||||||||
Rainer-Marc Frey, | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 100 | 40,301 | |||||||||||||||||||||||||||||||||
member2 | M | M | 2008/2009 | 162,500 | 150,000 | 0 | 0 | 312,500 | 50 | 16,158 | ||||||||||||||||||||||||||||||||
Bruno Gehrig, | M | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 50 | 21,203 | ||||||||||||||||||||||||||||||||
member2 | M | 2008/2009 | 162,500 | 100,000 | 0 | 0 | 262,500 | 50 | 13,572 | |||||||||||||||||||||||||||||||||
Ann F. Godbehere, | M | M | 2009/2010 | 325,000 | 250,000 | 0 | 0 | 575,000 | 50 | 23,222 | ||||||||||||||||||||||||||||||||
member | 2008/2009 | |||||||||||||||||||||||||||||||||||||||||
Gabrielle Kaufmann- | 2009/2010 | |||||||||||||||||||||||||||||||||||||||||
Kohler, former member | C | M | 2008/2009 | 325,000 | 250,000 | 0 | 0 | 575,000 | 50 | 29,731 | ||||||||||||||||||||||||||||||||
Axel P. Lehmann, | M | 2009/2010 | 325,000 | 200,000 | 0 | 0 | 525,000 | 100 | 40,301 | |||||||||||||||||||||||||||||||||
member | 2008/2009 | |||||||||||||||||||||||||||||||||||||||||
Rolf A. Meyer, | 2009/2010 | |||||||||||||||||||||||||||||||||||||||||
former member2 | M | M | 2008/2009 | 162,500 | 150,000 | 0 | 0 | 312,500 | 50 | 16,158 | ||||||||||||||||||||||||||||||||
Helmut Panke, | M | M | 2009/2010 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 25,242 | ||||||||||||||||||||||||||||||||
member | M | M | 2008/2009 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 32,316 | ||||||||||||||||||||||||||||||||
William G. Parrett, | C | 2009/2010 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 25,242 | |||||||||||||||||||||||||||||||||
member2 | M | 2008/2009 | 162,500 | 100,000 | 0 | 0 | 262,500 | 50 | 13,572 | |||||||||||||||||||||||||||||||||
David Sidwell, | C | 2009/2010 | 325,000 | 400,000 | 0 | 0 | 725,000 | 50 | 29,281 | |||||||||||||||||||||||||||||||||
member | M | C | 2008/2009 | 325,000 | 450,000 | 0 | 0 | 775,000 | 50 | 40,072 | ||||||||||||||||||||||||||||||||
Peter Spuhler, | 2009/2010 | |||||||||||||||||||||||||||||||||||||||||
former member2 | 2008/2009 | 162,500 | 0 | 0 | 0 | 162,500 | 100 | 15,945 | ||||||||||||||||||||||||||||||||||
Peter R.Voser, | M | 2009/2010 | 325,000 | 100,000 | 0 | 0 | 425,000 | 50 | 17,164 | |||||||||||||||||||||||||||||||||
member | C | M | 2008/2009 | 325,000 | 400,000 | 0 | 0 | 725,000 | 50 | 37,487 | ||||||||||||||||||||||||||||||||
Lawrence A. Weinbach, | 2009/2010 | |||||||||||||||||||||||||||||||||||||||||
former member2 | M | 2008/2009 | 162,500 | 100,000 | 0 | 0 | 262,500 | 50 | 13,572 | |||||||||||||||||||||||||||||||||
Joerg Wolle, | 2009/2010 | |||||||||||||||||||||||||||||||||||||||||
former member | C | M | 2008/2009 | 325,000 | 300,000 | 0 | 0 | 625,000 | 50 | 32,316 | ||||||||||||||||||||||||||||||||
Total 2009 | 6,425,000 | |||||||||||||||||||||||||||||||||||||||||
Total 2008 | 6,437,500 | |||||||||||||||||||||||||||||||||||||||||
382
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Total payments to all members of the BoD | ||||||
For the | ||||||
CHF, except where indicateda | year ended | Total | ||||
Aggregate of all members of the BoD | 2009 | 7,895,579 | ||||
Aggregate of all members of the BoD | 2008 | 10,267,240 | ||||
Total compensation for all members of the GEB | ||||||||||||||||||||||||||||||
CHF, except where indicateda | ||||||||||||||||||||||||||||||
Annual | Contributions | |||||||||||||||||||||||||||||
incentive | Annual | Annual | to retirement | |||||||||||||||||||||||||||
For the | award CBP | incentive | incentive | Benefits | benefits | |||||||||||||||||||||||||
Name, function | year ended | Base salary | and cashb | award PEPc | award IPPc | in kinde | plansf | Total | ||||||||||||||||||||||
Carsten Kengeter, co-CEO Investment Bank (highest-paid) | 2009 | 669,092 | 5,003,470 | 6,155,869 | 1,349,336 | 0 | 12,545 | 13,190,312 | ||||||||||||||||||||||
Marcel Rohner, Group Chief Executive Officer (highest-paid) | 2008 | 1,500,000 | 0 | 0 | 0 | 161,768 | 152,934 | 1,814,702 | ||||||||||||||||||||||
Aggregate of all members of the GEB who were in office on 31 December 20091 | 2009 | 12,000,055 | 25,734,711 | 13,453,424 | 3 | 15,696,333 | 270,971 | 1,551,068 | 68,706,562 | |||||||||||||||||||||
Aggregate of all members of the GEB who were in office on 31 December 20081 | 2008 | 7,815,943 | 0 | 0 | 0 | 457,652 | 817,315 | 9,090,911 | ||||||||||||||||||||||
Aggregate of all members of the GEB who stepped down during 20092 | 2009 | 2,447,544 | 38,443,097 | 0 | 0 | 215,151 | 171,122 | 41,276,914 | ||||||||||||||||||||||
Aggregate of all members of the GEB who stepped down during 20082 | 2008 | 1,614,871 | 0 | 0 | 0 | 234,838 | 258,423 | 2,108,132 | ||||||||||||||||||||||
383
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Financial information
UBS AG (Parent Bank)
Share and option ownership of members of the BoD on 31 December 2008/2009 | ||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | Type and quantity | |||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | of options3 | ||||||||||||||||||
Kaspar Villiger, Chairman | 2009 | 22,500 | 0.001 | 0 | 0.000 | |||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||
Sergio Marchionne, | 2009 | 164,154 | 0.009 | 0 | 0.000 | |||||||||||||||||||
Senior Independent Director, Vice Chairman | 2008 | 87,926 | 0.005 | 0 | 0.000 | |||||||||||||||||||
Ernesto Bertarelli, former member4 | 2009 | – | – | |||||||||||||||||||||
2008 | 89,434 | 0.005 | 0 | 0.000 | ||||||||||||||||||||
Sally Bott, member | 2009 | 12,281 | 0.001 | 0 | 0.000 | |||||||||||||||||||
2008 | 1 | 0.000 | 0 | 0.000 | ||||||||||||||||||||
Michel Demaré, member | 2009 | 2,500 | 0.000 | 0 | 0.000 | |||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||
Rainer-Marc Frey, member | 2009 | 16,158 | 0.001 | 0 | 0.000 | |||||||||||||||||||
2008 | 0 | 0.000 | 0 | 0.000 | ||||||||||||||||||||
Bruno Gehrig, member | 2009 | 16,572 | 0.001 | 0 | 0.000 | |||||||||||||||||||
2008 | 3,000 | 0.000 | 0 | 0.000 | ||||||||||||||||||||
Ann F. Godbehere, member | 2009 | 0 | 0.000 | 0 | 0.000 | |||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||
Gabrielle Kaufmann-Kohler, former member4 | 2009 | – | – | |||||||||||||||||||||
2008 | 18,713 | 0.001 | 0 | 0.000 | ||||||||||||||||||||
Peter Kurer, former Chairman4 | 2009 | – | – | |||||||||||||||||||||
2008 | 416,088 | 0.025 | 372,995 | 0.022 | xli: | 85,256 | ||||||||||||||||||
xlvii: | 95,913 | |||||||||||||||||||||||
lvi: | 95,913 | |||||||||||||||||||||||
lxiv: | 95,913 | |||||||||||||||||||||||
Axel P. Lehmann, member | 2009 | 18,151 | 0.001 | 0 | 0.000 | |||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||
Helmut Panke, member | 2009 | 64,287 | 0.003 | 0 | 0.000 | |||||||||||||||||||
2008 | 31,971 | 0.002 | 0 | 0.000 | ||||||||||||||||||||
William G. Parrett, member | 2009 | 17,573 | 0.001 | 0 | 0.000 | |||||||||||||||||||
2008 | 4,000 | 0.000 | 0 | 0.000 | ||||||||||||||||||||
David Sidwell, member | 2009 | 40,073 | 0.002 | 0 | 0.000 | |||||||||||||||||||
2008 | 1 | 0.000 | 0 | 0.000 | ||||||||||||||||||||
Peter R. Voser, member | 2009 | 68,310 | 0.004 | 0 | 0.000 | |||||||||||||||||||
2008 | 30,823 | 0.002 | 0 | 0.000 | ||||||||||||||||||||
Joerg Wolle, former member4 | 2009 | – | – | |||||||||||||||||||||
2008 | 41,509 | 0.002 | 0 | 0.000 | ||||||||||||||||||||
384
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Compensation paid to former members of the BoD and GEB1 | ||||||||||||||
CHF, except where indicateda | ||||||||||||||
For the | Benefits | |||||||||||||
Name, function | year ended | Compensation | in kind | Total | ||||||||||
Georges Blum, former member of the BoD | 2009 | 92,399 | 92,399 | |||||||||||
(Swiss Bank Corporation) | 2008 | 101,579 | 101,579 | |||||||||||
Franz Galliker, former member of the BoD | 2009 | 10,659 | 10,659 | |||||||||||
(Swiss Bank Corporation) | 2008 | 69,596 | 69,596 | |||||||||||
Walter G. Frehner, former member of the BoD | 2009 | 25,371 | 25,371 | |||||||||||
(Swiss Bank Corporation) | 2008 | 74,663 | 74,663 | |||||||||||
Hans (Liliane) Strasser, former member of the BoD | 2009 | 9,758 | 9,758 | |||||||||||
(Swiss Bank Corporation) | 2008 | 32,673 | 32,673 | |||||||||||
Robert Studer, former member of the BoD | 2009 | 18,751 | 18,751 | |||||||||||
(Union Bank of Switzerland) | 2008 | 126,208 | 126,208 | |||||||||||
Alberto Togni, former member of the BoD | 2009 | 320,136 | 355,983 | 676,119 | ||||||||||
(UBS) | 2008 | 318,461 | 427,949 | 746,410 | ||||||||||
Philippe (Alix) de Weck, former member of the BoD | 2009 | 93,135 | 93,135 | |||||||||||
(Union Bank of Switzerland) | 2008 | 109,703 | 109,703 | |||||||||||
Aggregate of all former members of the GEB2 | 2009 | 0 | 18,293 | 18,293 | ||||||||||
2008 | 0 | 171,180 | 171,180 | |||||||||||
Aggregate of all former members of the BoD and GEB | 2009 | 320,136 | 624,349 | 944,485 | ||||||||||
2008 | 318,461 | 1,113,551 | 1,432,012 | |||||||||||
385
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Financial information
UBS AG (Parent Bank)
Share and option ownership of members of the GEB on 31 December 2008/2009 | ||||||||||||||||||||||||
Type and | ||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | quantity of | |||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | ||||||||||||||||||
Oswald J. Grübel, | 2009 | 0 | 0.000 | 4,000,000 | 0.217 | lxx: | 4,000,000 | |||||||||||||||||
Group Chief Executive Officer | 2008 | – | – | |||||||||||||||||||||
Marcel Rohner, | 2009 | – | – | |||||||||||||||||||||
former Group Chief Executive Officer4 | 2008 | 711,366 | 0.042 | 1,055,043 | 0.063 | xxxii: | 31,971 | |||||||||||||||||
xli: | 213,140 | |||||||||||||||||||||||
xlvii: | 277,082 | |||||||||||||||||||||||
lvi: | 319,710 | |||||||||||||||||||||||
lxiv: | 213,140 | |||||||||||||||||||||||
John Cryan, | 2009 | 235,929 | 0.013 | 382,673 | 0.021 | iii: | 21,362 | |||||||||||||||||
Group Chief Financial Officer | iv: | 20,731 | ||||||||||||||||||||||
vii: | 20,725 | |||||||||||||||||||||||
xii: | 5,454 | |||||||||||||||||||||||
xiii: | 5,294 | |||||||||||||||||||||||
xvi: | 5,292 | |||||||||||||||||||||||
xxi: | 23,626 | |||||||||||||||||||||||
xxiii: | 23,620 | |||||||||||||||||||||||
xxvi: | 23,612 | |||||||||||||||||||||||
xxviii: | 5,526 | |||||||||||||||||||||||
xxix: | 5,524 | |||||||||||||||||||||||
xxx: | 5,524 | |||||||||||||||||||||||
xxxviii: | 17,072 | |||||||||||||||||||||||
xl: | 17,068 | |||||||||||||||||||||||
xlii: | 17,063 | |||||||||||||||||||||||
xliv: | 14,210 | |||||||||||||||||||||||
xlv: | 14,210 | |||||||||||||||||||||||
xlvi: | 14,207 | |||||||||||||||||||||||
liii: | 5,330 | |||||||||||||||||||||||
liv: | 5,328 | |||||||||||||||||||||||
lv: | 5,326 | |||||||||||||||||||||||
lxi: | 17,762 | |||||||||||||||||||||||
lxii: | 17,762 | |||||||||||||||||||||||
lxiii: | 17,760 | |||||||||||||||||||||||
lxvi: | 53,285 | |||||||||||||||||||||||
2008 | 235,929 | 0.014 | 382,673 | 0.023 | iii: | 21,362 | ||||||||||||||||||
iv: | 20,731 | |||||||||||||||||||||||
vii: | 20,725 | |||||||||||||||||||||||
xii: | 5,454 | |||||||||||||||||||||||
xiii: | 5,294 | |||||||||||||||||||||||
xvi: | 5,292 | |||||||||||||||||||||||
xxi: | 23,626 | |||||||||||||||||||||||
xxiii: | 23,620 | |||||||||||||||||||||||
xxvi: | 23,612 | |||||||||||||||||||||||
xxviii: | 5,526 | |||||||||||||||||||||||
xxix: | 5,524 | |||||||||||||||||||||||
xxx: | 5,524 | |||||||||||||||||||||||
xxxviii: | 17,072 | |||||||||||||||||||||||
xl: | 17,068 | |||||||||||||||||||||||
xlii: | 17,063 | |||||||||||||||||||||||
xliv: | 14,210 | |||||||||||||||||||||||
xlv: | 14,210 | |||||||||||||||||||||||
xlvi: | 14,207 | |||||||||||||||||||||||
liii: | 5,330 | |||||||||||||||||||||||
liv: | 5,328 | |||||||||||||||||||||||
lv: | 5,326 | |||||||||||||||||||||||
lxi: | 17,762 | |||||||||||||||||||||||
lxii: | 17,762 | |||||||||||||||||||||||
lxiii: | 17,760 | |||||||||||||||||||||||
lxvi: | 53,285 | |||||||||||||||||||||||
Markus U. Diethelm, | 2009 | 112,245 | 0.006 | 0 | 0.000 | |||||||||||||||||||
Group General Counsel | 2008 | 112,245 | 0.007 | 0 | 0.000 | |||||||||||||||||||
John A. Fraser, | 2009 | 480,464 | 0.027 | 1,088,795 | 0.059 | viii: | 76,380 | |||||||||||||||||
Chairman and CEO Global Asset Management | xix: | 127,884 | ||||||||||||||||||||||
xxv: | 127,884 | |||||||||||||||||||||||
xliii: | 170,512 | |||||||||||||||||||||||
xlviii: | 202,483 | |||||||||||||||||||||||
lvi: | 213,140 | |||||||||||||||||||||||
lxiv: | 170,512 | |||||||||||||||||||||||
386
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Share and option ownership of members of the GEB on 31 December 2008/2009 (continued) | |||||||||||||||||||||||||
Type and | |||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | quantity of | ||||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | |||||||||||||||||||
John A. Fraser, | 2008 | 561,216 | 0.035 | 1,144,808 | 0.068 | i: | 56,013 | ||||||||||||||||||
Chairman and CEO Global Asset Management | viii: | 76,380 | |||||||||||||||||||||||
xix: | 127,884 | ||||||||||||||||||||||||
xxv: | 127,884 | ||||||||||||||||||||||||
xliii: | 170,512 | ||||||||||||||||||||||||
xlviii: | 202,483 | ||||||||||||||||||||||||
lvi: | 213,140 | ||||||||||||||||||||||||
lxiv: | 170,512 | ||||||||||||||||||||||||
Marten Hoekstra, | 2009 | – | – | ||||||||||||||||||||||
former CEO Wealth Management US4 | 2008 | 245,397 | 0.015 | 684,168 | 0.041 | ii: | 8,679 | ||||||||||||||||||
vi: | 8,421 | ||||||||||||||||||||||||
ix: | 8,421 | ||||||||||||||||||||||||
xi: | 8,823 | ||||||||||||||||||||||||
xiv: | 4,262 | ||||||||||||||||||||||||
xv: | 8,563 | ||||||||||||||||||||||||
xviii: | 8,561 | ||||||||||||||||||||||||
xxxiii: | 42,628 | ||||||||||||||||||||||||
xliii: | 53,285 | ||||||||||||||||||||||||
xlviii: | 53,285 | ||||||||||||||||||||||||
lvi: | 85,256 | ||||||||||||||||||||||||
lxiv: | 154,931 | ||||||||||||||||||||||||
lxvii: | 239,053 | ||||||||||||||||||||||||
Jerker Johansson, | 2009 | – | – | ||||||||||||||||||||||
former Chairman and CEO Investment Bank4 | 2008 | 521,544 | 0.031 | 753,410 | 0.045 | lxviii: | 745,990 | ||||||||||||||||||
lxix: | 7,420 | ||||||||||||||||||||||||
Carsten Kengeter, | 2009 | 516,909 | 0.028 | 905,000 | 0.049 | lxxi: | 905,000 | ||||||||||||||||||
co-CEO Investment Bank | 2008 | – | – | ||||||||||||||||||||||
Ulrich Körner, | 2009 | 0 | 0.000 | 0 | 0.000 | ||||||||||||||||||||
Group Chief Operating Officer | 2008 | – | – | ||||||||||||||||||||||
Philip J. Lofts, | 2009 | 179,234 | 0.010 | 577,723 | 0.031 | iii: | 11,445 | ||||||||||||||||||
Group Chief Risk Officer | iv: | 11,104 | |||||||||||||||||||||||
vii: | 11,098 | ||||||||||||||||||||||||
xii: | 1,240 | ||||||||||||||||||||||||
xiii: | 5,464 | ||||||||||||||||||||||||
xvi: | 1,199 | ||||||||||||||||||||||||
xxi: | 9,985 | ||||||||||||||||||||||||
xxiii: | 9,980 | ||||||||||||||||||||||||
xxvi: | 9,974 | ||||||||||||||||||||||||
xxviii: | 1,833 | ||||||||||||||||||||||||
xxix: | 1,830 | ||||||||||||||||||||||||
xxx: | 1,830 | ||||||||||||||||||||||||
xxxviii: | 35,524 | ||||||||||||||||||||||||
xl: | 35,524 | ||||||||||||||||||||||||
xlii: | 35,521 | ||||||||||||||||||||||||
xlvii: | 117,090 | ||||||||||||||||||||||||
lvi: | 117,227 | ||||||||||||||||||||||||
lxiv: | 85,256 | ||||||||||||||||||||||||
lxvii: | 74,599 | ||||||||||||||||||||||||
2008 | 186,434 | 0.011 | 577,723 | 0.034 | iii: | 11,445 | |||||||||||||||||||
iv: | 11,104 | ||||||||||||||||||||||||
vii: | 11,098 | ||||||||||||||||||||||||
xii: | 1,240 | ||||||||||||||||||||||||
xiii: | 5,464 | ||||||||||||||||||||||||
xvi: | 1,199 | ||||||||||||||||||||||||
xxi: | 9,985 | ||||||||||||||||||||||||
xxiii: | 9,980 | ||||||||||||||||||||||||
xxvi: | 9,974 | ||||||||||||||||||||||||
xxviii: | 1,833 | ||||||||||||||||||||||||
xxix: | 1,830 | ||||||||||||||||||||||||
xxx: | 1,830 | ||||||||||||||||||||||||
xxxviii: | 35,524 | ||||||||||||||||||||||||
xl: | 35,524 | ||||||||||||||||||||||||
xlii: | 35,521 | ||||||||||||||||||||||||
xlvii: | 117,090 | ||||||||||||||||||||||||
lvi: | 117,227 | ||||||||||||||||||||||||
lxiv: | 85,256 | ||||||||||||||||||||||||
lxvii: | 74,599 | ||||||||||||||||||||||||
387
Table of Contents
Financial information
UBS AG (Parent Bank)
Share and option ownership of members of the GEB on 31 December 2008/2009 (continued) | ||||||||||||||||||||||||
Type and | ||||||||||||||||||||||||
For the | Number of | Voting rights | Number of | Potentially conferred | quantity of | |||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | ||||||||||||||||||
Robert J. McCann, | 2009 | 602,481 | 0.033 | 0 | 0.000 | |||||||||||||||||||
CEO Wealth Management Americas | 2008 | – | – | |||||||||||||||||||||
Franco Morra, | 2009 | 153,860 | 0.008 | 325,086 | 0.018 | lvi: | 43,911 | |||||||||||||||||
CEO UBS Switzerland | lxiv: | 66,866 | ||||||||||||||||||||||
lxvii: | 114,309 | |||||||||||||||||||||||
lxxii: | 100,000 | |||||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||
Walter H. Stürzinger, | 2009 | – | – | |||||||||||||||||||||
former Chief Operating Officer, Corporate Center4 | 2008 | 296,886 | 0.018 | 372,995 | 0.022 | xx: | 31,971 | |||||||||||||||||
xli: | 63,942 | |||||||||||||||||||||||
xlvii: | 85,256 | |||||||||||||||||||||||
lvi: | 95,913 | |||||||||||||||||||||||
lxiv: | 95,913 | |||||||||||||||||||||||
Rory Tapner, | 2009 | – | – | |||||||||||||||||||||
former Chairman and CEO Asia Pacific4 | 2008 | 827,809 | 0.049 | 1,379,533 | 0.082 | vii: | 281,862 | |||||||||||||||||
xix: | 213,140 | |||||||||||||||||||||||
xxxi: | 213,140 | |||||||||||||||||||||||
xli: | 170,512 | |||||||||||||||||||||||
xlvii: | 159,855 | |||||||||||||||||||||||
lvi: | 170,512 | |||||||||||||||||||||||
lxiv: | 170,512 | |||||||||||||||||||||||
Raoul Weil, | 2009 | – | – | |||||||||||||||||||||
former Chairman and CEO Global Wealth | 2008 | 315,698 | 0.019 | 432,409 | 0.026 | xix: | 53,285 | |||||||||||||||||
Management & Business Banking4 | xlvii: | 102,281 | ||||||||||||||||||||||
lvi: | 127,884 | |||||||||||||||||||||||
lxiv: | 148,959 | |||||||||||||||||||||||
Alexander Wilmot-Sitwell, | 2009 | 286,767 | 0.016 | 353,807 | 0.019 | xlvi: | 53,282 | |||||||||||||||||
co-CEO Investment Bank | xlix: | 2,130 | ||||||||||||||||||||||
liii: | 35,524 | |||||||||||||||||||||||
liv: | 35,524 | |||||||||||||||||||||||
lv: | 35,521 | |||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||
lxvii: | 85,256 | |||||||||||||||||||||||
2008 | 304,655 | 0.018 | 353,807 | 0.021 | xlvi: | 53,282 | ||||||||||||||||||
xlix: | 2,130 | |||||||||||||||||||||||
liii: | 35,524 | |||||||||||||||||||||||
liv: | 35,524 | |||||||||||||||||||||||
lv: | 35,521 | |||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||
lxvii: | 85,256 | |||||||||||||||||||||||
Robert Wolf, | 2009 | 785,631 | 0.043 | 948,473 | 0.051 | xxv: | 287,739 | |||||||||||||||||
Chairman and CEO, UBS Group Americas/ | xliii: | 213,140 | ||||||||||||||||||||||
President Investment Bank | xlviii: | 127,884 | ||||||||||||||||||||||
lvi: | 106,570 | |||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||
lxvii: | 106,570 | |||||||||||||||||||||||
2008 | 827,307 | 0.049 | 948,473 | 0.056 | xxv: | 287,739 | ||||||||||||||||||
xliii: | 213,140 | |||||||||||||||||||||||
xlviii: | 127,884 | |||||||||||||||||||||||
lvi: | 106,570 | |||||||||||||||||||||||
lxiv: | 106,570 | |||||||||||||||||||||||
lxvii: | 106,570 | |||||||||||||||||||||||
388
Table of Contents
Share and option ownership of members of the GEB on 31 December 2008/2009 (continued) | ||||||||||||||||||||||||
Type and | ||||||||||||||||||||||||
For the | Number of | Voting rights | Number | Potentially conferred | quantity of | |||||||||||||||||||
Name, function1 | year ended | shares held | in % | options held | voting rights in %2 | options3 | ||||||||||||||||||
Chi-Won Yoon, | 2009 | 367,573 | 0.020 | 623,253 | 0.034 | i: | 11,577 | |||||||||||||||||
Chairman and CEO Asia Pacific | v: | 11,229 | ||||||||||||||||||||||
viii: | 11,227 | |||||||||||||||||||||||
x: | 2,252 | |||||||||||||||||||||||
xiv: | 6,446 | |||||||||||||||||||||||
xvii: | 2,184 | |||||||||||||||||||||||
xxii: | 8,648 | |||||||||||||||||||||||
xxiv: | 8,642 | |||||||||||||||||||||||
xxvii: | 8,635 | |||||||||||||||||||||||
xxxiv: | 4,262 | |||||||||||||||||||||||
xxxv: | 3,374 | |||||||||||||||||||||||
xxxvi: | 3,371 | |||||||||||||||||||||||
xxxvii: | 3,371 | |||||||||||||||||||||||
xxxviii: | 6,200 | |||||||||||||||||||||||
xxxix: | 4,262 | |||||||||||||||||||||||
xl: | 6,198 | |||||||||||||||||||||||
xlii: | 6,195 | |||||||||||||||||||||||
xliv: | 10,659 | |||||||||||||||||||||||
xlv: | 10,657 | |||||||||||||||||||||||
xlvi: | 10,654 | |||||||||||||||||||||||
liii: | 21,316 | |||||||||||||||||||||||
liv: | 21,314 | |||||||||||||||||||||||
lv: | 21,311 | |||||||||||||||||||||||
lxi: | 8,881 | |||||||||||||||||||||||
lxii: | 8,880 | |||||||||||||||||||||||
lxiii: | 8,880 | |||||||||||||||||||||||
lxvi: | 42,628 | |||||||||||||||||||||||
lxxii: | 350,000 | |||||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||
Jürg Zeltner, | 2009 | 16,502 | 0.001 | 205,470 | 0.011 | iii: | 809 | |||||||||||||||||
CEO Wealth Management | iv: | 784 | ||||||||||||||||||||||
vii: | 784 | |||||||||||||||||||||||
xlii: | 4,972 | |||||||||||||||||||||||
xliv: | 7,106 | |||||||||||||||||||||||
xlv: | 7,103 | |||||||||||||||||||||||
xlvi: | 7,103 | |||||||||||||||||||||||
xlix: | 93 | |||||||||||||||||||||||
l: | 161 | |||||||||||||||||||||||
li: | 149 | |||||||||||||||||||||||
lii: | 127 | |||||||||||||||||||||||
liii: | 7,106 | |||||||||||||||||||||||
liv: | 7,103 | |||||||||||||||||||||||
lv: | 7,103 | |||||||||||||||||||||||
lvii: | 110 | |||||||||||||||||||||||
lviii: | 242 | |||||||||||||||||||||||
lix: | 230 | |||||||||||||||||||||||
lx: | 221 | |||||||||||||||||||||||
lxi: | 7,105 | |||||||||||||||||||||||
lxii: | 7,105 | |||||||||||||||||||||||
lxiii: | 7,103 | |||||||||||||||||||||||
lxv: | 223 | |||||||||||||||||||||||
lxvii: | 42,628 | |||||||||||||||||||||||
lxxii: | 90,000 | |||||||||||||||||||||||
2008 | – | – | ||||||||||||||||||||||
389
Table of Contents
Financial information
UBS AG (Parent Bank)
by members of the GEB on 31 December 2008/2009
Vested and unvested options held by independent members of the BoD and by members of the GEB on 31 December 2008/2009 | ||||||||||||||||||||||||
Type | Number of options | Year of grant | Vesting date | Expiry date | Subscription ratio | Strike price | ||||||||||||||||||
i | 11,577 | 2002 | 31.01.2002 | 31.01.2012 | 1:1 | USD 21.24 | ||||||||||||||||||
ii | 8,679 | 2002 | 31.01.2002 | 31.07.2012 | 1:1 | USD 21.24 | ||||||||||||||||||
iii | 33,616 | 2002 | 31.01.2003 | 31.01.2012 | 1:1 | CHF 36.49 | ||||||||||||||||||
iv | 32,619 | 2002 | 31.01.2004 | 31.01.2012 | 1:1 | CHF 36.49 | ||||||||||||||||||
v | 11,229 | 2002 | 31.01.2004 | 31.01.2012 | 1:1 | USD 21.24 | ||||||||||||||||||
vi | 8,421 | 2002 | 31.01.2004 | 31.07.2012 | 1:1 | USD 21.24 | ||||||||||||||||||
vii | 314,469 | 2002 | 31.01.2005 | 31.01.2012 | 1:1 | CHF 36.49 | ||||||||||||||||||
viii | 87,607 | 2002 | 31.01.2005 | 31.01.2012 | 1:1 | USD 21.24 | ||||||||||||||||||
ix | 8,421 | 2002 | 31.01.2005 | 31.07.2012 | 1:1 | USD 21.24 | ||||||||||||||||||
x | 2,252 | 2002 | 28.02.2002 | 28.02.2012 | 1:1 | USD 21.70 | ||||||||||||||||||
xi | 8,823 | 2002 | 28.02.2002 | 28.08.2012 | 1:1 | USD 21.70 | ||||||||||||||||||
xii | 6,694 | 2002 | 28.02.2003 | 28.02.2012 | 1:1 | CHF 36.65 | ||||||||||||||||||
xiii | 10,758 | 2002 | 28.02.2004 | 28.02.2012 | 1:1 | CHF 36.65 | ||||||||||||||||||
xiv | 10,708 | 2002 | 29.02.2004 | 28.02.2012 | 1:1 | USD 21.70 | ||||||||||||||||||
xv | 8,563 | 2002 | 29.02.2004 | 28.08.2012 | 1:1 | USD 21.70 | ||||||||||||||||||
xvi | 6,491 | 2002 | 28.02.2005 | 28.02.2012 | 1:1 | CHF 36.65 | ||||||||||||||||||
xvii | 2,184 | 2002 | 28.02.2005 | 28.02.2012 | 1:1 | USD 21.70 | ||||||||||||||||||
xviii | 8,561 | 2002 | 28.02.2005 | 28.08.2012 | 1:1 | USD 21.70 | ||||||||||||||||||
xix | 394,309 | 2002 | 28.06.2005 | 28.06.2012 | 1:1 | CHF 37.90 | ||||||||||||||||||
xx | 31,971 | 2002 | 28.06.2005 | 28.12.2012 | 1:1 | CHF 37.90 | ||||||||||||||||||
xxi | 33,611 | 2003 | 01.03.2004 | 31.01.2013 | 1:1 | CHF 27.81 | ||||||||||||||||||
xxii | 8,648 | 2003 | 01.03.2004 | 31.01.2013 | 1:1 | USD 20.49 | ||||||||||||||||||
xxiii | 33,600 | 2003 | 01.03.2005 | 31.01.2013 | 1:1 | CHF 27.81 | ||||||||||||||||||
xxiv | 8,642 | 2003 | 01.03.2005 | 31.01.2013 | 1:1 | USD 20.49 | ||||||||||||||||||
xxv | 415,623 | 2003 | 31.01.2006 | 31.01.2013 | 1:1 | USD 22.53 | ||||||||||||||||||
xxvi | 33,586 | 2003 | 01.03.2006 | 31.01.2013 | 1:1 | CHF 27.81 | ||||||||||||||||||
xxvii | 8,635 | 2003 | 01.03.2006 | 31.01.2013 | 1:1 | USD 20.49 | ||||||||||||||||||
xxviii | 7,359 | 2003 | 01.03.2004 | 28.02.2013 | 1:1 | CHF 26.39 | ||||||||||||||||||
xxix | 7,354 | 2003 | 01.03.2005 | 28.02.2013 | 1:1 | CHF 26.39 | ||||||||||||||||||
xxx | 7,354 | 2003 | 01.03.2006 | 28.02.2013 | 1:1 | CHF 26.39 | ||||||||||||||||||
xxxi | 213,140 | 2003 | 31.01.2006 | 31.01.2013 | 1:1 | CHF 30.50 | ||||||||||||||||||
xxxii | 31,971 | 2003 | 31.01.2006 | 31.07.2013 | 1:1 | CHF 30.50 | ||||||||||||||||||
xxxiii | 42,628 | 2003 | 31.01.2006 | 31.07.2013 | 1:1 | USD 22.53 | ||||||||||||||||||
xxxiv | 4,262 | 2003 | 28.02.2005 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||
xxxv | 3,374 | 2003 | 01.03.2004 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||
xxxvi | 3,371 | 2003 | 01.03.2005 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||
xxxvii | 3,371 | 2003 | 01.03.2006 | 28.02.2013 | 1:1 | USD 19.53 | ||||||||||||||||||
xxxviii | 58,796 | 2004 | 01.03.2005 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||
xxxix | 4,262 | 2004 | 27.02.2006 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||
xl | 58,790 | 2004 | 01.03.2006 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||
xli | 532,850 | 2004 | 28.02.2007 | 27.02.2014 | 1:1 | CHF 48.69 | ||||||||||||||||||
xlii | 63,751 | 2004 | 01.03.2007 | 27.02.2014 | 1:1 | CHF 44.32 | ||||||||||||||||||
xliii | 436,937 | 2004 | 01.03.2007 | 27.02.2014 | 1:1 | USD 38.13 | ||||||||||||||||||
xliv | 31,975 | 2005 | 01.03.2006 | 28.02.2015 | 1:1 | CHF 47.58 | ||||||||||||||||||
xlv | 31,970 | 2005 | 01.03.2007 | 28.02.2015 | 1:1 | CHF 47.58 | ||||||||||||||||||
xlvi | 85,246 | 2005 | 01.03.2008 | 28.02.2015 | 1:1 | CHF 47.58 | ||||||||||||||||||
xlvii | 837,477 | 2005 | 01.03.2008 | 28.02.2015 | 1:1 | CHF 52.32 | ||||||||||||||||||
xlviii | 383,652 | 2005 | 01.03.2008 | 28.02.2015 | 1:1 | USD 44.81 | ||||||||||||||||||
xlix | 2,223 | 2005 | 04.03.2007 | 04.03.2015 | 1:1 | CHF 47.89 | ||||||||||||||||||
l | 161 | 2005 | 06.06.2007 | 06.06.2015 | 1:1 | CHF 45.97 | ||||||||||||||||||
li | 149 | 2005 | 09.09.2007 | 09.09.2015 | 1:1 | CHF 50.47 | ||||||||||||||||||
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Vested and unvested options held by independent members of the BoD and by members of the GEB on 31 December 2008/2009 (continued) | ||||||||||||||||||||||||
Type | Number of options | Year of grant | Vesting date | Expiry date | Subscription ratio | Strike price | ||||||||||||||||||
lii | 127 | 2005 | 05.12.2007 | 05.12.2015 | 1:1 | CHF 59.03 | ||||||||||||||||||
liii | 69,276 | 2006 | 01.03.2007 | 28.02.2016 | 1:1 | CHF 65.97 | ||||||||||||||||||
liv | 69,269 | 2006 | 01.03.2008 | 28.02.2016 | 1:1 | CHF 65.97 | ||||||||||||||||||
lv | 69,261 | 2006 | 01.03.2009 | 28.02.2016 | 1:1 | CHF 65.97 | ||||||||||||||||||
lvi | 1,376,036 | 2006 | 01.03.2009 | 28.02.2016 | 1:1 | CHF 72.57 | ||||||||||||||||||
lvii | 110 | 2006 | 03.03.2008 | 03.03.2016 | 1:1 | CHF 65.91 | ||||||||||||||||||
lviii | 242 | 2006 | 09.06.2008 | 09.06.2016 | 1:1 | CHF 61.84 | ||||||||||||||||||
lix | 230 | 2006 | 08.09.2008 | 08.09.2016 | 1:1 | CHF 65.76 | ||||||||||||||||||
lx | 221 | 2006 | 08.12.2008 | 08.12.2016 | 1:1 | CHF 67.63 | ||||||||||||||||||
lxi | 33,748 | 2007 | 01.03.2008 | 28.02.2017 | 1:1 | CHF 67.00 | ||||||||||||||||||
lxii | 33,747 | 2007 | 01.03.2009 | 28.02.2017 | 1:1 | CHF 67.00 | ||||||||||||||||||
lxiii | 33,743 | 2007 | 01.03.2010 | 28.02.2017 | 1:1 | CHF 67.00 | ||||||||||||||||||
lxiv | 1,415,142 | 2007 | 01.03.2010 | 28.02.2017 | 1:1 | CHF 73.67 | ||||||||||||||||||
lxv | 223 | 2007 | 02.03.2009 | 02.03.2017 | 1:1 | CHF 67.08 | ||||||||||||||||||
lxvi | 95,913 | 2008 | 01.03.2011 | 28.02.2018 | 1:1 | CHF 32.45 | ||||||||||||||||||
lxvii | 662,415 | 2008 | 01.03.2011 | 28.02.2018 | 1:1 | CHF 35.66 | ||||||||||||||||||
lxviii | 745,990 | 2008 | 01.03.2011 | 07.04.2018 | 1:1 | CHF 36.46 | ||||||||||||||||||
lxix | 7,420 | 2008 | 01.03.2011 | 06.06.2018 | 1:1 | CHF 28.10 | ||||||||||||||||||
lxx | 4,000,000 | 2009 | 26.02.2009 | 25.02.2014 | 1:1 | CHF 10.10 | ||||||||||||||||||
lxxi | 905,000 | 2009 | 01.03.2012 | 27.12.2019 | 1:1 | CHF 40.00 | ||||||||||||||||||
lxxii | 540,000 | 2009 | 01.03.2012 | 27.02.2019 | 1:1 | CHF 11.35 | ||||||||||||||||||
391
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Financial information
UBS AG (Parent Bank)
Loans granted to members of the BoD on 31 December 2008 / 2009 | ||||||||||||||
CHF, except where indicateda | ||||||||||||||
For the | Other loans | |||||||||||||
Name, function1 | year ended | Secured loans | granted | Total | ||||||||||
Kaspar Villiger, Chairman | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Sergio Marchionne, Senior Independent Director, Vice Chairman | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Ernesto Bertarelli, former member3 | 2009 | – | – | – | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Sally Bott, member | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Michel Demaré, member | 2009 | 850,000 | 0 | 850,000 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Rainer-Marc Frey, member | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Bruno Gehrig, member2 | 2009 | 798,000 | 0 | 798,000 | ||||||||||
2008 | 798,000 | 0 | 798,000 | |||||||||||
Ann F. Godbehere, member | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Gabrielle Kaufmann-Kohler, former member3 | 2009 | – | – | – | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Peter Kurer, former Chairman2,3 | 2009 | – | – | – | ||||||||||
2008 | 1,261,000 | 0 | 1,261,000 | |||||||||||
Axel P. Lehmann, member | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Helmut Panke, member | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
William G. Parrett, member2 | 2009 | 1,260,731 | 0 | 1,260,731 | ||||||||||
2008 | 1,167,659 | 0 | 1,167,659 | |||||||||||
David Sidwell, member | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Peter R. Voser, member | 2009 | 0 | 0 | 0 | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Joerg Wolle, former member3 | 2009 | – | – | – | ||||||||||
2008 | 0 | 0 | 0 | |||||||||||
Aggregate of all members of the BoD | 2009 | 2,908,731 | 0 | 2,908,731 | ||||||||||
Aggregate of all members of the BoD | 2008 | 3,226,659 | 0 | 3,226,659 | ||||||||||
Loans granted to members of the GEB on 31 December 2008 / 2009 | ||||||||||||||
CHF, except where indicateda | ||||||||||||||
For the | Other loans | |||||||||||||
Name, function1 | year ended | Secured loans | granted2 | Total | ||||||||||
Jürg Zeltner, CEO Wealth Management | 2009 | 5,800,202 | 0 | 5,800,202 | ||||||||||
Markus U. Diethelm, Group General Counsel | 2008 | 3,900,000 | 0 | 3,900,000 | ||||||||||
Aggregate of all members of the GEB3 | 2009 | 15,356,483 | 0 | 15,356,483 | ||||||||||
Aggregate of all members of the GEB4 | 2008 | 7,740,562 | 0 | 7,740,562 | ||||||||||
392
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Table of Contents
Financial information
UBS AG (Parent Bank)
394
Table of Contents
Table of Contents
Financial information
UBS AG (Parent Bank)
396
Table of Contents
397
Table of Contents
Table of Contents
Additional disclosure required
under SEC regulations
A – Introduction
The following pages contain additional disclosures about UBS Group which are required under SEC regulations.
399
Table of Contents
Financial information
Additional disclosure required under SEC regulations
B – Selected financial data
The tables below set forth, for the periods and dates indicated, information concerning the noon buying rate for the Swiss franc, expressed in United States dollars, or USD, per one Swiss franc. The noon buying rate is the rate in New York
City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.
Average rate1 | ||||||||||||||||
Year ended 31 December | High | Low | (USD per 1 CHF) | At period end | ||||||||||||
2005 | 0.8721 | 0.7544 | 0.8010 | 0.7606 | ||||||||||||
2006 | 0.8396 | 0.7575 | 0.8034 | 0.8200 | ||||||||||||
2007 | 0.9087 | 0.7978 | 0.8381 | 0.8827 | ||||||||||||
2008 | 1.0142 | 0.8171 | 0.9298 | 0.9369 | ||||||||||||
2009 | 1.0016 | 0.8408 | 0.9260 | 0.9654 | ||||||||||||
Month | High | Low | ||||||||||||||
September 2009 | 0.9768 | 0.9387 | ||||||||||||||
October 2009 | 0.9936 | 0.9593 | ||||||||||||||
November 2009 | 0.9996 | 0.9703 | ||||||||||||||
December 2009 | 1.0016 | 0.9532 | ||||||||||||||
January 2010 | 0.9848 | 0.9472 | ||||||||||||||
February 2010 | 0.9472 | 0.9210 | ||||||||||||||
400
Table of Contents
Key figures | ||||||||||||||||||||
As of or for the year ended | ||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Balance sheet data | ||||||||||||||||||||
Total assets | 1,340,538 | 2,014,815 | 2,274,891 | 2,348,733 | 2,001,099 | |||||||||||||||
Equity attributable to UBS shareholders | 41,013 | 32,531 | 36,875 | 51,037 | 45,633 | |||||||||||||||
Average equity to average assets (%) | 1.9 | 1.5 | 1.8 | 2.0 | 1.9 | |||||||||||||||
Market capitalization | 57,108 | 43,519 | 108,654 | 154,222 | 131,949 | |||||||||||||||
Shares | ||||||||||||||||||||
Registered ordinary shares | 3,558,112,753 | 2,932,580,549 | 2,073,547,344 | 2,105,273,286 | 2,177,265,044 | |||||||||||||||
Treasury shares | 37,553,872 | 61,903,121 | 158,105,524 | 164,475,699 | 208,519,748 | |||||||||||||||
BIS capital ratios | ||||||||||||||||||||
Tier 1 (%) | 15.4 | 11.0 | 9.1 | 1 | 12.2 | 1 | 13.3 | 1 | ||||||||||||
Total BIS (%) | 19.8 | 15.0 | 12.2 | 1 | 15.0 | 1 | 14.5 | 1 | ||||||||||||
Risk-weighted assets | 206,525 | 302,273 | 374,421 | 1 | 344,015 | 1 | 312,532 | 1 | ||||||||||||
Invested assets (CHF billion) | 2,233 | 2,174 | 3,189 | 2,989 | 2,652 | |||||||||||||||
Personnel (full-time equivalents) | ||||||||||||||||||||
Switzerland | 24,050 | 26,406 | 27,884 | 27,022 | 26,029 | |||||||||||||||
United Kingdom | 6,204 | 7,071 | 8,813 | 8,243 | 7,135 | |||||||||||||||
Rest of Europe | 4,145 | 4,817 | 4,776 | 4,338 | 3,759 | |||||||||||||||
Middle East/Africa | 134 | 145 | 139 | 102 | 112 | |||||||||||||||
United States | 22,702 | 27,362 | 29,921 | 29,076 | 25,999 | |||||||||||||||
Rest of Americas | 1,132 | 1,984 | 2,054 | 1,743 | 1,137 | |||||||||||||||
Asia Pacific | 6,865 | 9,998 | 9,973 | 7,616 | 5,398 | |||||||||||||||
Total | 65,233 | 77,783 | 83,560 | 78,140 | 69,569 | |||||||||||||||
Long-term ratings2 | ||||||||||||||||||||
Fitch, London | A+ | A+ | AA | AA+ | AA+ | |||||||||||||||
Moody’s, New York | Aa3 | Aa2 | Aaa | Aa2 | Aa2 | |||||||||||||||
Standard & Poor’s, New York | A+ | A+ | AA | AA+ | AA+ | |||||||||||||||
401
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Financial information
Additional disclosure required under SEC regulations
Income statement data | ||||||||||||||||||||
For the year ended | ||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Interest income | 23,461 | 65,679 | 109,112 | 87,401 | 59,286 | |||||||||||||||
Interest expense | (17,016 | ) | (59,687 | ) | (103,775 | ) | (80,880 | ) | (49,758 | ) | ||||||||||
Net interest income | 6,446 | 5,992 | 5,337 | 6,521 | 9,528 | |||||||||||||||
Credit loss (expense)/recovery | (1,832 | ) | (2,996 | ) | (238 | ) | 156 | 375 | ||||||||||||
Net interest income after credit loss (expense)/recovery | 4,614 | 2,996 | 5,099 | 6,677 | 9,903 | |||||||||||||||
Net fee and commission income | 17,712 | 22,929 | 30,634 | 25,456 | 21,184 | |||||||||||||||
Net trading income | (324 | ) | (25,820 | ) | (8,353 | ) | 13,743 | 8,248 | ||||||||||||
Other income | 599 | 692 | 4,341 | 1,608 | 1,135 | |||||||||||||||
Total operating income | 22,601 | 796 | 31,721 | 47,484 | 40,470 | |||||||||||||||
Total operating expenses | 25,162 | 28,555 | 35,463 | 33,365 | 28,533 | |||||||||||||||
Operating profit from continuing operations before tax | (2,561 | ) | (27,758 | ) | (3,742 | ) | 14,119 | 11,937 | ||||||||||||
Tax expense | (443 | ) | (6,837 | ) | 1,369 | 2,998 | 2,270 | |||||||||||||
Net profit from continuing operations | (2,118 | ) | (20,922 | ) | (5,111 | ) | 11,121 | 9,667 | ||||||||||||
Net profit from discontinued operations | (7 | ) | 198 | 403 | 899 | 4,526 | ||||||||||||||
Net profit | (2,125 | ) | (20,724 | ) | (4,708 | ) | 12,020 | 14,193 | ||||||||||||
Net profit attributable to minority interests | 610 | 568 | 539 | 493 | 661 | |||||||||||||||
Net profit attributable to UBS shareholders | (2,736 | ) | (21,292 | ) | (5,247 | ) | 11,527 | 13,532 | ||||||||||||
Cost/income ratio (%)1 | 103.0 | 753.0 | 111.0 | 70.5 | 71.2 | |||||||||||||||
Per share data (CHF) | ||||||||||||||||||||
Basic earnings per share2 | (0.75 | ) | (7.63 | ) | (2.40 | ) | 5.15 | 5.93 | ||||||||||||
Diluted earnings per share2 | (0.75 | ) | (7.63 | ) | (2.41 | ) | 4.95 | 5.70 | ||||||||||||
Operating profit before tax per share | (0.70 | ) | (9.94 | ) | (1.71 | ) | 6.30 | 5.23 | ||||||||||||
Cash dividends declared per share (CHF)3,4 | N/A | N/A | N/A | 2.20 | 1.60 | |||||||||||||||
Cash dividend declared per share (USD)3,4 | N/A | N/A | N/A | 1.83 | 1.26 | |||||||||||||||
Dividend payout ratio (%)3,4 | N/A | N/A | N/A | 42.7 | 27.0 | |||||||||||||||
Rates of return (%) | ||||||||||||||||||||
Return on equity attributable to UBS shareholders5 | (7.8 | ) | (58.7 | ) | (10.5 | ) | 23.8 | 34.0 | ||||||||||||
Return on average equity | (7.9 | ) | (60.6 | ) | (10.6 | ) | 24.0 | 34.4 | ||||||||||||
Return on average assets | (0.1 | ) | (0.9 | ) | (0.2 | ) | 0.5 | 0.7 | ||||||||||||
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Balance sheet data | ||||||||||||||||||||
For the year ended | ||||||||||||||||||||
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Assets | ||||||||||||||||||||
Total assets | 1,340,538 | 2,014,815 | 2,274,891 | 2,348,733 | 2,001,099 | |||||||||||||||
Due from banks | 46,574 | 64,451 | 60,907 | 50,426 | 33,644 | |||||||||||||||
Cash collateral on securities borrowed | 63,507 | 122,897 | 207,063 | 351,590 | 288,435 | |||||||||||||||
Reverse repurchase agreements | 116,689 | 224,648 | 376,928 | 405,834 | 404,432 | |||||||||||||||
Trading portfolio assets | 188,037 | 271,838 | 660,182 | 648,346 | 499,297 | |||||||||||||||
Trading portfolio assets pledged as collateral | 44,221 | 40,216 | 114,190 | 230,168 | 154,759 | |||||||||||||||
Positive replacement values | 421,694 | 854,100 | 428,217 | 292,975 | 273,889 | |||||||||||||||
Loans | 306,828 | 340,308 | 335,864 | 297,842 | 279,910 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Due to banks | 65,166 | 125,628 | 145,762 | 203,689 | 124,328 | |||||||||||||||
Cash collateral on securities lent | 7,995 | 14,063 | 31,621 | 63,088 | 59,938 | |||||||||||||||
Repurchase agreements | 64,175 | 102,561 | 305,887 | 545,480 | 478,508 | |||||||||||||||
Trading portfolio liabilities | 47,469 | 62,431 | 164,788 | 204,773 | 188,631 | |||||||||||||||
Negative replacement values | 409,943 | 851,864 | 443,539 | 297,063 | 277,770 | |||||||||||||||
Financial liabilities designated at fair value | 112,653 | 101,546 | 191,853 | 145,687 | 117,401 | |||||||||||||||
Due to customers | 410,475 | 465,741 | 630,105 | 546,154 | 461,425 | |||||||||||||||
Debt issued | 131,352 | 197,254 | 222,077 | 190,143 | 160,710 | |||||||||||||||
Equity attributable to UBS shareholders | 41,013 | 32,531 | 36,875 | 51,037 | 45,633 | |||||||||||||||
The following table sets forth UBS’s ratio of earnings to fixed charges on an IFRS basis for the periods indicated. The ratios are calculated based on earnings from continuing operations. Ratios of earnings to combined fixed charges and preferred stock dividend requirements are not presented as there were no preferred share dividends in any of the periods indicated. | ||||||||||||||||||||
For the year ended | ||||||||||||||||||||
31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | ||||||||||||||||
0.82 | 0.53 | 0.96 | 1.17 | 1.23 | ||||||||||||||||
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Financial information
Additional disclosure required under SEC regulations
C – Information on the company
Property, plant and equipment
At 31 December 2009, UBS operated about 973 business and banking locations worldwide, of which about 42% were in Switzerland, 41% in the Americas, 12% in the rest of Europe, Middle East and Africa and 5% in Asia-Pacific. Of the business and banking locations in Switzerland, 37% were owned directly by UBS, with the remainder, along
with most of UBS’s offices outside Switzerland, being held under commercial leases.
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D – Information required by industry guide 3
Selected statistical information
The tables below set forth selected statistical information regarding the Group’s banking operations extracted from the Financial Statements. Unless otherwise indicated, average balances for the years ended 31 December 2009, 31 December 2008 and 31 December 2007 are calculated from
monthly data. The distinction between domestic and foreign is generally based on the booking location. For loans, this method is not significantly different from an analysis based on the domicile of the borrower.
Average balances and interest rates
The following table sets forth average interest-earning assets and average interest-bearing liabilities, along with the average rates, for the years ended 31 December 2009, 2008 and 2007.
31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | |||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Due from banks | ||||||||||||||||||||||||||||||||||||
Domestic | 3,420 | 200 | 5.8 | 7,243 | 421 | 5.8 | 11,784 | 664 | 5.6 | |||||||||||||||||||||||||||
Foreign | 52,668 | 321 | 0.6 | 58,287 | 1,559 | 2.7 | 46,049 | 2,344 | 5.1 | |||||||||||||||||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | ||||||||||||||||||||||||||||||||||||
Domestic | 10,029 | 244 | 2.4 | 31,642 | 1,208 | 3.8 | 31,473 | 1,693 | 5.4 | |||||||||||||||||||||||||||
Foreign | 381,049 | 2,385 | 0.6 | 669,010 | 21,313 | 3.2 | 977,302 | 46,581 | 4.8 | |||||||||||||||||||||||||||
Trading portfolio assets | ||||||||||||||||||||||||||||||||||||
Domestic | 10,976 | 228 | 2.1 | 15,104 | 520 | 3.4 | 11,866 | 696 | 5.9 | |||||||||||||||||||||||||||
Foreign taxable | 270,674 | 6,915 | 2.6 | 522,804 | 21,494 | 4.1 | 861,923 | 38,206 | 4.4 | |||||||||||||||||||||||||||
Foreign non-taxable | 2,160 | 7 | 0.3 | 8,070 | 383 | 4.7 | 5,754 | 199 | 3.5 | |||||||||||||||||||||||||||
Foreign total | 272,834 | 6,922 | 2.5 | 530,874 | 21,877 | 4.1 | 867,677 | 38,405 | 4.4 | |||||||||||||||||||||||||||
Financial assets designated at fair value | ||||||||||||||||||||||||||||||||||||
Domestic | 548 | 0 | 945 | 0 | 588 | 0 | ||||||||||||||||||||||||||||||
Foreign | 11,674 | 316 | 2.7 | 11,024 | 404 | 3.7 | 9,114 | 298 | 3.3 | |||||||||||||||||||||||||||
Loans | ||||||||||||||||||||||||||||||||||||
Domestic | 179,680 | 5,532 | 3.1 | 188,950 | 6,840 | 3.6 | 187,073 | 6,565 | 3.5 | |||||||||||||||||||||||||||
Foreign | 151,584 | 4,946 | 3.3 | 147,034 | 8,304 | 5.6 | 146,040 | 9,359 | 6.4 | |||||||||||||||||||||||||||
Financial investments available-for-sale | ||||||||||||||||||||||||||||||||||||
Domestic | 991 | 21 | 2.1 | 1,599 | 72 | 4.5 | 3,930 | 66 | 1.7 | |||||||||||||||||||||||||||
Foreign taxable | 28,295 | 143 | 0.5 | 3,370 | 73 | 2.2 | 2,934 | 110 | 3.7 | |||||||||||||||||||||||||||
Foreign non-taxable | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||
Foreign total | 28,295 | 143 | 0.5 | 3,370 | 73 | 2.2 | 2,934 | 110 | 3.7 | |||||||||||||||||||||||||||
Total interest-earning assets | 1,103,748 | 21,258 | 1.9 | 1,665,082 | 62,591 | 3.8 | 2,295,830 | 106,781 | 4.7 | |||||||||||||||||||||||||||
Net interest on swaps | 2,203 | 3,088 | 2,331 | |||||||||||||||||||||||||||||||||
Interest income and average interest-earning assets | 1,103,748 | 23,461 | 2.1 | 1,665,082 | 65,679 | 3.9 | 2,295,830 | 109,112 | 4.8 | |||||||||||||||||||||||||||
Non-interest-earning assets | ||||||||||||||||||||||||||||||||||||
Positive replacement values | 654,651 | 600,073 | 373,229 | |||||||||||||||||||||||||||||||||
Fixed assets | 6,609 | 7,091 | 7,090 | |||||||||||||||||||||||||||||||||
Other | 86,133 | 82,357 | 82,739 | |||||||||||||||||||||||||||||||||
Total average assets | 1,851,141 | 2,354,603 | 2,758,888 | |||||||||||||||||||||||||||||||||
405
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Financial information
Additional disclosure required under SEC regulations
Average balances and interest rates (continued) | ||||||||||||||||||||||||||||||||||||
31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
CHF million, except where indicated | balance | Interest | rate (%) | balance | Interest | rate (%) | balance | Interest | rate (%) | |||||||||||||||||||||||||||
Liabilities and equity | ||||||||||||||||||||||||||||||||||||
Due to banks | ||||||||||||||||||||||||||||||||||||
Domestic | 36,278 | 219 | 0.6 | 51,027 | 1,503 | 2.9 | 60,858 | 2,477 | 4.1 | |||||||||||||||||||||||||||
Foreign | 76,305 | 457 | 0.6 | 88,798 | 3,423 | 3.9 | 146,286 | 8,008 | 5.5 | |||||||||||||||||||||||||||
Cash collateral on securities lent and repurchase agreements | ||||||||||||||||||||||||||||||||||||
Domestic | 11,321 | 200 | 1.8 | 31,269 | 1,026 | 3.3 | 47,041 | 1,902 | 4.0 | |||||||||||||||||||||||||||
Foreign | 195,991 | 1,979 | 1.0 | 397,453 | 15,097 | 3.8 | 752,616 | 38,680 | 5.1 | |||||||||||||||||||||||||||
Trading portfolio liabilities | ||||||||||||||||||||||||||||||||||||
Domestic | 1,411 | 55 | 3.9 | 5,525 | 256 | 4.6 | 5,561 | 328 | 5.9 | |||||||||||||||||||||||||||
Foreign | 58,091 | 3,823 | 6.6 | 132,901 | 8,906 | 6.7 | 214,326 | 15,484 | 7.2 | |||||||||||||||||||||||||||
Financial liabilities designated at fair value | ||||||||||||||||||||||||||||||||||||
Domestic | 934 | 17 | 1.8 | 1,444 | 69 | 4.8 | 1,503 | 79 | 5.3 | |||||||||||||||||||||||||||
Foreign | 106,690 | 2,838 | 2.7 | 151,324 | 7,229 | 4.8 | 173,162 | 7,580 | 4.4 | |||||||||||||||||||||||||||
Due to customers | ||||||||||||||||||||||||||||||||||||
Domestic demand deposits | 64,877 | 98 | 0.2 | 56,730 | 495 | 0.9 | 64,568 | 736 | 1.1 | |||||||||||||||||||||||||||
Domestic savings deposits | 68,042 | 521 | 0.8 | 65,073 | 604 | 0.9 | 75,587 | 502 | 0.7 | |||||||||||||||||||||||||||
Domestic time deposits | 13,075 | 451 | 3.4 | 35,575 | 1,081 | 3.0 | 41,056 | 1,206 | 2.9 | |||||||||||||||||||||||||||
Domestic total | 145,994 | 1,070 | 0.7 | 157,378 | 2,180 | 1.4 | 181,211 | 2,444 | 1.3 | |||||||||||||||||||||||||||
Foreign | 304,641 | 2,127 | 0.7 | 394,151 | 11,044 | 2.8 | 418,558 | 16,388 | 3.9 | |||||||||||||||||||||||||||
Short-term debt | ||||||||||||||||||||||||||||||||||||
Domestic | 689 | 27 | 3.9 | 1,735 | 63 | 3.6 | 2,228 | 98 | 4.4 | |||||||||||||||||||||||||||
Foreign | 86,186 | 2,234 | 2.6 | 134,920 | 6,216 | 4.6 | 144,546 | 8,643 | 6.0 | |||||||||||||||||||||||||||
Long-term debt | ||||||||||||||||||||||||||||||||||||
Domestic | 11,152 | 153 | 1.4 | 5,766 | 148 | 2.6 | 4,235 | 115 | 2.7 | |||||||||||||||||||||||||||
Foreign | 76,961 | 1,817 | 2.4 | 74,531 | 2,527 | 3.4 | 70,079 | 1,549 | 2.2 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 1,112,644 | 17,016 | 1.5 | 1,628,222 | 59,687 | 3.7 | 2,222,210 | 103,775 | 4.7 | |||||||||||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||
Negative replacement values | 641,028 | 605,990 | 382,115 | |||||||||||||||||||||||||||||||||
Other | 54,720 | 77,476 | 98,951 | |||||||||||||||||||||||||||||||||
Total liabilities | 1,808,392 | 2,311,688 | 2,703,276 | |||||||||||||||||||||||||||||||||
Total equity | 42,749 | 42,915 | 55,612 | |||||||||||||||||||||||||||||||||
Total average liabilities and equity | 1,851,141 | 2,354,603 | 2,758,888 | |||||||||||||||||||||||||||||||||
Net interest income | 6,446 | 5,992 | 5,337 | |||||||||||||||||||||||||||||||||
Net yield on interest-earning assets | 0.6 | 0.4 | 0.2 | |||||||||||||||||||||||||||||||||
The percentage of total average interest-earning assets attributable to foreign activities was 81% for 2009 (85% for 2008 and 89% for 2007). The percentage of total average interest-bearing liabilities attributable to foreign activities was 81% for 2009 (84% for 2008 and 86% for 2007). All assets and liabilities are translated into CHF at uniform month-end rates. Interest income and interest expense are translated at monthly average rates.
406
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Analysis of changes in interest income and expense
The following tables allocate, by categories of interest-earning assets and interest-bearing liabilities, the changes in interest income and expense due to changes in volume and interest rates for the year ended 31 December 2009 compared with the year ended 31 December 2008, and for the year ended 31 December 2008 compared with the year end-
ed 31 December 2007. Volume and rate variances have been calculated on movements in average balances and changes in interest rates. Changes due to a combination of volume and rates have been allocated proportionally. Refer to the appropriate section of Industry Guide 3 for a discussion of the treatment of impaired and non-performing loans.
2009 compared with 2008 | 2008 compared with 2007 | |||||||||||||||||||||||
Increase/(decrease) | Increase/(decrease) | |||||||||||||||||||||||
due to changes in | due to changes in | |||||||||||||||||||||||
Average | Average | Net | Average | Average | Net | |||||||||||||||||||
CHF million | volume | rate | change | volume | rate | change | ||||||||||||||||||
Interest income from interest-earning assets | ||||||||||||||||||||||||
Due from banks | ||||||||||||||||||||||||
Domestic | (222 | ) | 1 | (221 | ) | (254 | ) | 11 | (243 | ) | ||||||||||||||
Foreign | (152 | ) | (1,086 | ) | (1,238 | ) | 624 | (1,409 | ) | (785 | ) | |||||||||||||
Cash collateral on securities borrowed and reverse repurchase agreements | ||||||||||||||||||||||||
Domestic | (821 | ) | (143 | ) | (964 | ) | 9 | (494 | ) | (485 | ) | |||||||||||||
Foreign | (9,215 | ) | (9,713 | ) | (18,928 | ) | (14,798 | ) | (10,470 | ) | (25,268 | ) | ||||||||||||
Trading portfolio assets | ||||||||||||||||||||||||
Domestic | (140 | ) | (152 | ) | (292 | ) | 191 | (367 | ) | (176 | ) | |||||||||||||
Foreign taxable | (10,337 | ) | (4,242 | ) | (14,579 | ) | (14,921 | ) | (1,791 | ) | (16,712 | ) | ||||||||||||
Foreign non-taxable | (278 | ) | (98 | ) | (376 | ) | 81 | 103 | 184 | |||||||||||||||
Foreign total | (10,615 | ) | (4,340 | ) | (14,955 | ) | (14,840 | ) | (1,688 | ) | (16,528 | ) | ||||||||||||
Financial assets designated at fair value | ||||||||||||||||||||||||
Domestic | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Foreign | 24 | (112 | ) | (88 | ) | 63 | 43 | 106 | ||||||||||||||||
Loans | ||||||||||||||||||||||||
Domestic | (334 | ) | (974 | ) | (1,308 | ) | 66 | 209 | 275 | |||||||||||||||
Foreign | 255 | (3,613 | ) | (3,358 | ) | 64 | (1,119 | ) | (1,055 | ) | ||||||||||||||
Financial investments available-for-sale | ||||||||||||||||||||||||
Domestic | (27 | ) | (24 | ) | (51 | ) | (40 | ) | 46 | 6 | ||||||||||||||
Foreign taxable | 548 | (478 | ) | 70 | 16 | (53 | ) | (37 | ) | |||||||||||||||
Foreign non-taxable | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Foreign total | 548 | (478 | ) | 70 | 16 | (53 | ) | (37 | ) | |||||||||||||||
Interest income | ||||||||||||||||||||||||
Domestic | (1,544 | ) | (1,292 | ) | (2,836 | ) | (28 | ) | (595 | ) | (623 | ) | ||||||||||||
Foreign | (19,155 | ) | (19,342 | ) | (38,497 | ) | (28,871 | ) | (14,696 | ) | (43,567 | ) | ||||||||||||
Total interest income from interest-earning assets | (20,699 | ) | (20,634 | ) | (41,333 | ) | (28,899 | ) | (15,291 | ) | (44,190 | ) | ||||||||||||
Net interest on swaps | (885 | ) | 757 | |||||||||||||||||||||
Total interest income | (42,218 | ) | (43,433 | ) | ||||||||||||||||||||
407
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Financial information
Additional disclosure required under SEC regulations
Analysis of changes in interest income and expense (continued) | ||||||||||||||||||||||||
2009 compared with 2008 | 2008 compared with 2007 | |||||||||||||||||||||||
Increase/(decrease) | Increase/(decrease) | |||||||||||||||||||||||
due to changes in | due to changes in | |||||||||||||||||||||||
Average | Average | Net | Average | Average | Net | |||||||||||||||||||
CHF million | volume | rate | change | volume | rate | change | ||||||||||||||||||
Interest expense on interest-bearing liabilities | ||||||||||||||||||||||||
Due to banks | ||||||||||||||||||||||||
Domestic | (428 | ) | (856 | ) | (1,284 | ) | (403 | ) | (571 | ) | (974 | ) | ||||||||||||
Foreign | (487 | ) | (2,479 | ) | (2,966 | ) | (3,162 | ) | (1,423 | ) | (4,585 | ) | ||||||||||||
Cash collateral on securities lent and repurchase agreements | ||||||||||||||||||||||||
Domestic | (658 | ) | (168 | ) | (826 | ) | (631 | ) | (245 | ) | (876 | ) | ||||||||||||
Foreign | (7,656 | ) | (5,462 | ) | (13,118 | ) | (18,113 | ) | (5,470 | ) | (23,583 | ) | ||||||||||||
Trading portfolio liabilities | ||||||||||||||||||||||||
Domestic | (189 | ) | (12 | ) | (201 | ) | (2 | ) | (70 | ) | (72 | ) | ||||||||||||
Foreign | (5,012 | ) | (71 | ) | (5,083 | ) | (5,863 | ) | (715 | ) | (6,578 | ) | ||||||||||||
Financial liabilities designated at fair value | ||||||||||||||||||||||||
Domestic | (24 | ) | (28 | ) | (52 | ) | (3 | ) | (7 | ) | (10 | ) | ||||||||||||
Foreign | (2,142 | ) | (2,249 | ) | (4,391 | ) | (961 | ) | 610 | (351 | ) | |||||||||||||
Due to customers | ||||||||||||||||||||||||
Domestic demand deposits | 73 | (470 | ) | (397 | ) | (86 | ) | (155 | ) | (241 | ) | |||||||||||||
Domestic savings deposits | 27 | (110 | ) | (83 | ) | (74 | ) | 176 | 102 | |||||||||||||||
Domestic time deposits | (675 | ) | 45 | (630 | ) | (159 | ) | 34 | (125 | ) | ||||||||||||||
Domestic total | (575 | ) | (535 | ) | (1,110 | ) | (319 | ) | 55 | (264 | ) | |||||||||||||
Foreign | (2,506 | ) | (6,411 | ) | (8,917 | ) | (952 | ) | (4,392 | ) | (5,344 | ) | ||||||||||||
Short-term debt | ||||||||||||||||||||||||
Domestic | (38 | ) | 2 | (36 | ) | (22 | ) | (13 | ) | (35 | ) | |||||||||||||
Foreign | (2,242 | ) | (1,740 | ) | (3,982 | ) | (578 | ) | (1,849 | ) | (2,427 | ) | ||||||||||||
Long-term debt | ||||||||||||||||||||||||
Domestic | 140 | (135 | ) | 5 | 41 | (8 | ) | 33 | ||||||||||||||||
Foreign | 83 | (793 | ) | (710 | ) | 98 | 880 | 978 | ||||||||||||||||
Interest expense | ||||||||||||||||||||||||
Domestic | (1,772 | ) | (1,732 | ) | (3,504 | ) | (1,339 | ) | (859 | ) | (2,198 | ) | ||||||||||||
Foreign | (19,962 | ) | (19,205 | ) | (39,167 | ) | (29,531 | ) | (12,359 | ) | (41,890 | ) | ||||||||||||
Total interest expense | (21,734 | ) | (20,937 | ) | (42,671 | ) | (30,870 | ) | (13,218 | ) | (44,088 | ) | ||||||||||||
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The following table analyzes average deposits and the average rates on each deposit category listed below for the years ended 31 December 2009, 2008 and 2007. The geographic allocation is based on the location of the office or branch
where the deposit is made. Deposits by foreign depositors in domestic offices were CHF 55,171 million, CHF 45,082 million and CHF 72,849 million at 31 December 2009, 31 December 2008 and 31 December 2007, respectively.
31.12.09 | 31.12.08 | 31.12.07 | ||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||
CHF million, except where indicated | deposit | rate (%) | deposit | rate (%) | deposit | rate (%) | ||||||||||||||||||
Banks | ||||||||||||||||||||||||
Domestic offices | ||||||||||||||||||||||||
Demand deposits | 1,154 | 0.1 | 2,341 | 0.5 | 2,474 | 0.6 | ||||||||||||||||||
Time deposits | 2,266 | 0.9 | 4,902 | 3.8 | 9,310 | 5.1 | ||||||||||||||||||
Total domestic offices | 3,420 | 0.6 | 7,243 | 2.7 | 11,784 | 4.2 | ||||||||||||||||||
Foreign offices | ||||||||||||||||||||||||
Interest-bearing deposits1 | 52,668 | 0.6 | 58,287 | 3.9 | 46,049 | 5.5 | ||||||||||||||||||
Total due to banks | 56,088 | 0.6 | 65,530 | 3.7 | 57,833 | 5.2 | ||||||||||||||||||
Customer accounts | ||||||||||||||||||||||||
Domestic offices | ||||||||||||||||||||||||
Demand deposits | 64,877 | 0.2 | 56,730 | 0.9 | 64,568 | 1.1 | ||||||||||||||||||
Savings deposits | 68,042 | 0.8 | 65,073 | 0.9 | 75,587 | 0.7 | ||||||||||||||||||
Time deposits | 13,075 | 3.4 | 35,575 | 3.0 | 41,056 | 2.9 | ||||||||||||||||||
Total domestic offices | 145,994 | 0.7 | 157,378 | 1.4 | 181,211 | 1.3 | ||||||||||||||||||
Foreign offices | ||||||||||||||||||||||||
Demand deposits | 93,520 | 0.4 | 111,168 | 2.4 | 110,839 | 1.1 | ||||||||||||||||||
Time and savings deposits1 | 211,121 | 0.8 | 282,983 | 2.9 | 307,719 | 4.9 | ||||||||||||||||||
Total foreign offices | 304,641 | 0.7 | 394,151 | 2.8 | 418,558 | 3.9 | ||||||||||||||||||
Total due to customers | 450,635 | 0.7 | 551,529 | 2.4 | 599,769 | 3.1 | ||||||||||||||||||
At 31 December 2009, the maturity of time deposits exceeding CHF 150,000, or an equivalent amount in other currencies, was as follows:
CHF million | Domestic | Foreign | ||||||
Within 3 months | 27,398 | 82,800 | ||||||
Over 3 up to 6 months | 773 | 9,315 | ||||||
Over 6 up to 12 months | 655 | 3,242 | ||||||
Over 1 up to 5 years | 358 | 827 | ||||||
Over 5 years | 160 | 80 | ||||||
Total time deposits | 29,344 | 96,264 | ||||||
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Financial information
Additional disclosure required under SEC regulations
The following table presents the period-end, average and maximum month-end outstanding amounts for short-term borrowings, along with the average rates and period-end rates at and for the years ended 31 December 2009, 2008 and 2007.
Money market papers issued | Due to banks | Repurchase agreements1 | ||||||||||||||||||||||||||||||||||
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.09 | 31.12.08 | 31.12.07 | |||||||||||||||||||||||||||
Period-end balance | 51,579 | 111,619 | 152,256 | 18,560 | 61,155 | 84,826 | 136,811 | 140,039 | 487,455 | |||||||||||||||||||||||||||
Average balance | 86,875 | 136,655 | 146,774 | 56,495 | 74,295 | 149,311 | 195,613 | 404,512 | 739,138 | |||||||||||||||||||||||||||
Maximum month-end balance | 125,812 | 170,503 | 167,637 | 74,044 | 87,233 | 175,233 | 272,443 | 591,005 | 848,401 | |||||||||||||||||||||||||||
Average interest rate during the period (%) | 2.6 | 4.6 | 6.0 | 0.6 | 3.5 | 5.1 | 0.7 | 3.5 | 5.0 | |||||||||||||||||||||||||||
Average interest rate at period-end (%) | 0.9 | 2.9 | 6.1 | 0.6 | 2.3 | 4.5 | 0.3 | 1.4 | 4.9 | |||||||||||||||||||||||||||
Contractual maturities of debt investments available-for-sale1,2 | ||||||||||||||||||||||||||||||||
Within 1 year | Over 1 up to 5 years | Over 5 up to 10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 2009 | ||||||||||||||||||||||||||||||||
Swiss national government and agencies | 209 | 0.47 | 16 | 2.27 | 6 | 1.11 | 1 | 4.00 | ||||||||||||||||||||||||
Swiss local governments | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
US Treasury and agencies | 3,475 | 0.05 | 1,831 | 0.02 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Foreign governments and official institutions | 2,861 | 0.98 | 96 | 2.75 | 25 | 1.88 | 18 | 3.66 | ||||||||||||||||||||||||
Corporate debt securities3 | 5,227 | 0.11 | 5,021 | 0.10 | 0 | 21.80 | 3 | 21.80 | ||||||||||||||||||||||||
Mortgage-backed securities | 27 | 0.00 | 3 | 4.87 | 25 | 3.75 | 752 | 0.43 | ||||||||||||||||||||||||
Other debt instruments | 98 | 2.80 | 3 | 1.21 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Total fair value | 11,898 | 6,970 | 56 | 774 | ||||||||||||||||||||||||||||
Within 1 year | Over 1 up to 5 years | Over 5 up to 10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 2008 | ||||||||||||||||||||||||||||||||
Swiss national government and agencies | 0 | 0.00 | 2 | 3.46 | 0 | 0.00 | 1 | 4.00 | ||||||||||||||||||||||||
Swiss local governments | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
US Treasury and agencies | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Foreign governments and official institutions | 33 | 1.31 | 0 | 0.00 | 33 | 2.81 | 34 | 5.22 | ||||||||||||||||||||||||
Corporate debt securities | 3 | 23.35 | 88 | 3.38 | 38 | 3.12 | 12 | 1.74 | ||||||||||||||||||||||||
Mortgage-backed securities | 0 | 0.00 | 0 | 0.00 | 42 | 4.00 | 455 | 5.28 | ||||||||||||||||||||||||
Other debt instruments | 188 | 9.06 | 3 | 13.47 | 0 | 0.00 | 37 | 7.42 | ||||||||||||||||||||||||
Total fair value | 224 | 93 | 113 | 539 | ||||||||||||||||||||||||||||
Within 1 year | Over 1 up to 5 years | Over 5 up to 10 years | Over 10 years | |||||||||||||||||||||||||||||
CHF million, except percentages | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | Amount | Yield (%) | ||||||||||||||||||||||||
31 December 2007 | ||||||||||||||||||||||||||||||||
Swiss national government and agencies | 0 | 0.00 | 2 | 2.02 | 0 | 0.00 | 1 | 4.00 | ||||||||||||||||||||||||
Swiss local governments | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
US Treasury and agencies | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Foreign governments and official institutions | 50 | 1.87 | 2 | 2.54 | 75 | 4.48 | 0 | 0.00 | ||||||||||||||||||||||||
Corporate debt securities | 50 | 5.66 | 44 | 4.11 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Mortgage-backed securities | 0 | 0.00 | 0 | 0.00 | 3 | 4.48 | 561 | 5.28 | ||||||||||||||||||||||||
Other debt instruments | 14 | 4.20 | 216 | 12.41 | 0 | 0.00 | 0 | 0.00 | ||||||||||||||||||||||||
Total fair value | 114 | 264 | 78 | 562 | ||||||||||||||||||||||||||||
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Table of Contents
The Group’s lending portfolio is widely diversified across industry sectors with no significant concentrations of credit risk. CHF 152.8 billion (42.4% of the total) consists of loans to thousands of private households, predominantly in Switzerland, and mostly secured by mortgages, financial collateral or other assets. Exposure to Banks and Financial institutions amounted to CHF 132.6 billion (36.8% of the total). This includes cash posted as collateral by UBS against negative replacement values on derivatives or other positions,
which, from a risk perspective, is not considered lending but is a key component of the measurement of counterparty risk taken in connection with the underlying products. Exposure to Banks includes money market deposits with highly rated institutions. Excluding Banks and Financial institutions, the largest industry sector exposure as of December 2009 is CHF 16.3 billion (4.5% of the total) to Public authorities. For further discussion of the loan portfolio, refer to credit risk in the “Risk and treasury management” section.
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks1 | 819 | 1,734 | 1,237 | 561 | 1,407 | |||||||||||||||
Construction | 1,381 | 1,377 | 1,393 | 1,535 | 1,816 | |||||||||||||||
Financial institutions | 7,458 | 8,113 | 5,525 | 5,542 | 4,213 | |||||||||||||||
Hotels and restaurants | 1,882 | 1,811 | 1,824 | 1,957 | 2,044 | |||||||||||||||
Manufacturing | 3,374 | 4,020 | 3,887 | 3,643 | 4,134 | |||||||||||||||
Private households | 119,432 | 119,285 | 121,536 | 117,852 | 111,549 | |||||||||||||||
Public authorities | 3,785 | 4,042 | 4,734 | 4,972 | 5,494 | |||||||||||||||
Real estate and rentals | 11,745 | 12,097 | 11,691 | 11,356 | 11,792 | |||||||||||||||
Retail and wholesale | 4,299 | 4,818 | 5,138 | 4,569 | 4,808 | |||||||||||||||
Services2 | 5,702 | 6,172 | 6,170 | 6,758 | 8,088 | |||||||||||||||
Other3 | 3,520 | 3,329 | 3,300 | 4,345 | 3,119 | |||||||||||||||
Total domestic | 163,397 | 166,798 | 166,435 | 163,090 | 158,464 | |||||||||||||||
Foreign | ||||||||||||||||||||
Banks1 | 46,452 | 63,708 | 60,333 | 50,124 | 32,287 | |||||||||||||||
Chemicals | 2,403 | 2,816 | 635 | 1,321 | 2,716 | |||||||||||||||
Construction | 741 | 448 | 624 | 522 | 295 | |||||||||||||||
Electricity, gas and water supply | 1,024 | 2,995 | 1,888 | 951 | 1,637 | |||||||||||||||
Financial institutions | 77,838 | 100,779 | 96,370 | 67,676 | 62,344 | |||||||||||||||
Manufacturing | 3,606 | 5,026 | 4,678 | 3,006 | 3,784 | |||||||||||||||
Mining | 3,177 | 4,394 | 4,509 | 3,177 | 3,431 | |||||||||||||||
Private households | 33,392 | 33,242 | 42,828 | 35,031 | 38,283 | |||||||||||||||
Public authorities | 12,472 | 11,094 | 4,172 | 2,175 | 1,686 | |||||||||||||||
Real estate and rentals | 1,305 | 4,240 | 5,056 | 4,360 | 2,707 | |||||||||||||||
Retail and wholesale | 1,772 | 2,515 | 2,239 | 1,815 | 1,257 | |||||||||||||||
Services | 8,629 | 9,816 | 9,294 | 16,436 | 5,593 | |||||||||||||||
Transport, storage and communication | 3,085 | 3,894 | 1,752 | 1,528 | 1,419 | |||||||||||||||
Other4 | 797 | 1,073 | 1,105 | 564 | 272 | |||||||||||||||
Total foreign | 196,693 | 246,040 | 235,483 | 188,686 | 157,711 | |||||||||||||||
Total gross | 360,090 | 412,838 | 401,918 | 351,776 | 316,175 | |||||||||||||||
The table above also includes loans designated at fair value.
411
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Financial information
Additional disclosure required under SEC regulations
The following table analyzes the Group’s mortgage portfolio by geographic origin of the client and type of mortgage at 31 December 2009, 2008, 2007, 2006 and 2005. Mortgag-
es are included in the industry categories mentioned on the previous page.
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Mortgages | ||||||||||||||||||||
Domestic | 136,029 | 134,700 | 135,341 | 134,468 | 130,880 | |||||||||||||||
Foreign | 4,972 | 8,381 | 8,152 | 10,069 | 15,619 | |||||||||||||||
Total gross mortgages | 141,001 | 143,081 | 143,493 | 144,537 | 146,499 | |||||||||||||||
Mortgages | ||||||||||||||||||||
Residential | 121,031 | 121,811 | 122,435 | 124,548 | 127,990 | |||||||||||||||
Commercial | 19,970 | 21,270 | 21,058 | 19,989 | 18,509 | |||||||||||||||
Total gross mortgages | 141,001 | 143,081 | 143,493 | 144,537 | 146,499 | |||||||||||||||
Due from banks and loan maturities (gross)1 | ||||||||||||||||||||
CHF million | Within 1 year | Over 1 up to 5 years | Over 5 years | Total | ||||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 728 | 90 | 0 | 818 | ||||||||||||||||
Mortgages | 53,436 | 58,961 | 23,632 | 136,029 | ||||||||||||||||
Other loans | 20,405 | 4,832 | 1,314 | 26,551 | ||||||||||||||||
Total domestic | 74,569 | 63,883 | 24,946 | 163,398 | ||||||||||||||||
Foreign | ||||||||||||||||||||
Banks | 45,444 | 212 | 132 | 45,788 | ||||||||||||||||
Mortgages | 2,845 | 1,611 | 516 | 4,972 | ||||||||||||||||
Other loans | 93,955 | 12,491 | 35,467 | 141,923 | 2 | |||||||||||||||
Total foreign | 142,254 | 14,314 | 36,115 | 192,683 | ||||||||||||||||
Total gross | 216,823 | 78,197 | 61,061 | 356,081 | ||||||||||||||||
At 31 December 2009, the total amount ofDue from banks and Loansdue after one year granted affixed and floating rates is as follows:
CHF million | 1 to 5 years | Over 5 years | Total | |||||||||
Fixed-rate loans | 75,064 | 27,623 | 102,687 | |||||||||
Adjustable or floating-rate loans | 3,132 | 33,439 | 36,571 | |||||||||
Total | 78,196 | 61,062 | 139,258 | |||||||||
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Table of Contents
Impaired and non-performing loans
A loan (included inDue from banks or Loans)is classified as non-performing: 1) when the payment of interest, principal or fees is overdue by more than 90 days and there is no firm evidence that it will be made good by later payments or the
liquidation of collateral; 2) when insolvency proceedings have commenced; or 3) when obligations have been restructured on concessionary terms.
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.05 | 31.12.05 | |||||||||||||||
Gross interest income that would have been recorded on non-performing loans: | ||||||||||||||||||||
Domestic | 13 | 16 | 39 | 50 | 81 | |||||||||||||||
Foreign | 9 | 3 | 4 | 10 | 8 | |||||||||||||||
Interest income included in net profit for non-performing loans: | ||||||||||||||||||||
Domestic | 41 | 32 | 40 | 56 | 72 | |||||||||||||||
Foreign | 9 | 4 | 2 | 8 | 9 | |||||||||||||||
The table below provides an analysis of the Group’s non-performing loans. For further information see credit risk in the “Risk and treasury management” section.
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.05 | 31.12.05 | |||||||||||||||
Non-performing loans: | ||||||||||||||||||||
Domestic | 1,462 | 1,431 | 1,349 | 1,744 | 2,106 | |||||||||||||||
Foreign | 3,940 | 3,272 | 132 | 174 | 257 | |||||||||||||||
Total non-performing loans | 5,402 | 4,703 | 1,481 | 1,918 | 2,363 | |||||||||||||||
UBS does not, as a matter of policy, typically restructure loans to accrue interest at rates different from the original contractual terms or reduce the principal amount of loans. For more information see the “Credit risk” section of this report. Instead, specific loan allowances are established as necessary. Unrecognized interest related to restructured loans was not material to the results of operations in 2009, 2008, 2007, 2006 or 2005.
413
Table of Contents
Financial information
Additional disclosure required under SEC regulations
Cross-border outstandings
Cross-border outstandings consist of general banking products such as loans and deposits with third parties, credit equivalents of over-the-counter (OTC) derivatives and securities financing, and the market value of the inventory of debt securities. Outstandings are monitored and reported on an ongoing basis by the credit risk control organization with a dedicated country risk information system. With the exception of the 32 most developed economies, these exposures are rigorously limited. The following analysis excludesDue from banks and Loansfrom Industrial Holdings.
the country where the asset could be liquidated. This follows the “Guidelines for the Management of Country Risk”, which are applicable to all banks that are supervised by the Swiss Financial Market Supervisory Authority (FINMA).
31.12.09 | ||||||||||||||||||||
CHF million | Banks | Private sector | Public sector | Total | % of total assets | |||||||||||||||
United States | 14,915 | 52,305 | 62,224 | 129,444 | 9.7 | |||||||||||||||
Germany | 14,612 | 9,114 | 12,648 | 36,374 | 2.7 | |||||||||||||||
Japan | 625 | 4,280 | 22,888 | 27,793 | 2.1 | |||||||||||||||
France | 9,672 | 5,672 | 10,848 | 26,192 | 2.0 | |||||||||||||||
United Kingdom | 4,700 | 9,293 | 7,310 | 21,303 | 1.6 | |||||||||||||||
Netherlands | 4,425 | 7,023 | 2,940 | 14,388 | 1.1 | |||||||||||||||
Italy | 1,694 | 2,296 | 8,729 | 12,719 | 0.9 | |||||||||||||||
Luxembourg | 3,950 | 8,509 | 20 | 12,479 | 0.9 | |||||||||||||||
31.12.08 | ||||||||||||||||||||
CHF million | Banks | Private sector | Public sector | Total | % of total assets | |||||||||||||||
United States | 13,869 | 71,584 | 14,234 | 99,687 | 4.9 | |||||||||||||||
Japan | 2,093 | 13,159 | 38,922 | 54,174 | 2.7 | |||||||||||||||
Germany | 19,098 | 10,418 | 6,010 | 35,526 | 1.8 | |||||||||||||||
France | 11,469 | 7,048 | 6,807 | 25,324 | 1.3 | |||||||||||||||
United Kingdom | 9,599 | 8,608 | 2,625 | 20,832 | 1.0 | |||||||||||||||
Luxembourg | 2,883 | 17,586 | 0 | 20,469 | 1.0 | |||||||||||||||
31.12.07 | ||||||||||||||||||||
CHF million | Banks | Private sector | Public sector | Total | % of total assets | |||||||||||||||
United States | 13,110 | 192,049 | 16,545 | 221,704 | 9.8 | |||||||||||||||
Japan | 1,761 | 12,883 | 36,717 | 51,361 | 2.3 | |||||||||||||||
Germany | 21,384 | 12,354 | 2,249 | 35,988 | 1.6 | |||||||||||||||
United Kingdom | 6,624 | 14,647 | 8,552 | 29,823 | 1.3 | |||||||||||||||
Cayman Islands | 173 | 27,715 | 74 | 27,963 | 1.2 | |||||||||||||||
France | 10,620 | 7,075 | 4,605 | 22,300 | 1.0 | |||||||||||||||
414
Table of Contents
Summary of movements in allowances and provisions for credit losses
The following table provides an analysis of movements in allowances and provisions for credit losses.
ing assets and/or in case of debt forgiveness. Under Swiss law, a creditor can continue to collect from a debtor who has emerged from bankruptcy, unless the debt has been forgiven through a formal agreement.
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Balance at beginning of year | 3,070 | 1,164 | 1,332 | 1,776 | 2,802 | |||||||||||||||
Domestic | ||||||||||||||||||||
Write-offs | ||||||||||||||||||||
Banks | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Construction | (16 | ) | (6 | ) | (9 | ) | (14 | ) | (16 | ) | ||||||||||
Financial institutions | (2 | ) | (37 | ) | (8 | ) | (11 | ) | (14 | ) | ||||||||||
Hotels and restaurants | (2 | ) | (3 | ) | (7 | ) | (16 | ) | (26 | ) | ||||||||||
Manufacturing1 | (21 | ) | (31 | ) | (45 | ) | (40 | ) | (39 | ) | ||||||||||
Private households | (61 | ) | (112 | ) | (68 | ) | (89 | ) | (131 | ) | ||||||||||
Public authorities | 0 | 0 | (1 | ) | 0 | 0 | ||||||||||||||
Real estate and rentals | (19 | ) | (10 | ) | (27 | ) | (44 | ) | (56 | ) | ||||||||||
Retail and wholesale | (41 | ) | (4 | ) | (62 | ) | (20 | ) | (25 | ) | ||||||||||
Services2 | (3 | ) | (7 | ) | (20 | ) | (47 | ) | (35 | ) | ||||||||||
Other3 | (12 | ) | 0 | (21 | ) | (2 | ) | (4 | ) | |||||||||||
Total domestic write-offs | (177 | ) | (210 | ) | (268 | ) | (283 | ) | (346 | ) | ||||||||||
Foreign | ||||||||||||||||||||
Write-offs | ||||||||||||||||||||
Banks | (8 | ) | (13 | ) | (1 | ) | (3 | ) | (164 | ) | ||||||||||
Chemicals | (111 | ) | (1 | ) | 0 | 0 | 0 | |||||||||||||
Construction | (10 | ) | 0 | 0 | 0 | 0 | ||||||||||||||
Electricity, gas and water supply | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Financial institutions | (685 | ) | (623 | ) | (15 | ) | 0 | (50 | ) | |||||||||||
Manufacturing4 | (138 | ) | (6 | ) | (21 | ) | (11 | ) | (8 | ) | ||||||||||
Mining | (5 | ) | 0 | 0 | (1 | ) | (23 | ) | ||||||||||||
Private households | (40 | ) | (5 | ) | (14 | ) | (7 | ) | (21 | ) | ||||||||||
Public authorities | (25 | ) | (2 | ) | (2 | ) | (58 | ) | (22 | ) | ||||||||||
Real estate and rentals | (196 | ) | 0 | 0 | 0 | (3 | ) | |||||||||||||
Retail and wholesale | (121 | ) | 0 | 0 | 0 | (9 | ) | |||||||||||||
Services | (413 | ) | 0 | 0 | 0 | 0 | ||||||||||||||
Transport, storage and communication | (37 | ) | (7 | ) | 0 | 0 | 0 | |||||||||||||
Other5 | (80 | ) | (1 | ) | 0 | 0 | (5 | ) | ||||||||||||
Total foreign write-offs | (1,869 | ) | (658 | ) | (53 | ) | (80 | ) | (305 | ) | ||||||||||
Total write-offs | (2,046 | ) | (868 | ) | (321 | ) | (363 | ) | (651 | ) | ||||||||||
Recoveries | ||||||||||||||||||||
Domestic | 44 | 43 | 52 | 51 | 53 | |||||||||||||||
Foreign | 8 | 1 | 3 | 11 | 10 | |||||||||||||||
Total recoveries | 52 | 44 | 55 | 62 | 63 | |||||||||||||||
Net write-offs | (1,994 | ) | (824 | ) | (266 | ) | (301 | ) | (588 | ) | ||||||||||
Increase/(decrease) in credit loss allowance and provision | 1,806 | 3,007 | 242 | (108 | ) | (298 | ) | |||||||||||||
Collective loan loss provisions | 26 | (11 | ) | (4 | ) | (48 | ) | (76 | ) | |||||||||||
Other adjustments | (88 | ) | (266 | ) | (140 | ) | 13 | (64 | ) | |||||||||||
Balance at end of year | 2,820 | 3,070 | 1,164 | 1,332 | 1,776 | |||||||||||||||
Net foreign exchange | (37 | ) | (43 | ) | (9 | ) | 10 | 50 | ||||||||||||
Other adjustments | (51 | )6 | (223 | )6 | (131 | ) | 3 | (114 | ) | |||||||||||
Total adjustments | (88 | ) | (266 | ) | (140 | ) | 13 | (64 | ) | |||||||||||
415
Table of Contents
Financial information
Additional disclosure required under SEC regulations
Allocation of the allowances and provisions for credit losses
The following table provides an analysis of the allocation of the allowances and provisions for credit loss by industry sector and geographic location at 31 December 2009, 2008,
2007, 2006 and 2005. For a description of procedures with respect to allowances and provisions for credit losses, see credit risk in the “Risk and treasury management” section.
CHF million | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks | 1 | 16 | 10 | 10 | 10 | |||||||||||||||
Construction | 27 | 39 | 43 | 72 | 91 | |||||||||||||||
Financial institutions | 126 | 18 | 52 | 61 | 75 | |||||||||||||||
Hotels and restaurants | 6 | 8 | 10 | 27 | 49 | |||||||||||||||
Manufacturing1 | 104 | 71 | 113 | 155 | 174 | |||||||||||||||
Private households | 119 | 121 | 190 | 187 | 262 | |||||||||||||||
Public authorities | 20 | 1 | 1 | 3 | 8 | |||||||||||||||
Real estate and rentals | 21 | 50 | 57 | 99 | 168 | |||||||||||||||
Retail and wholesale | 221 | 262 | 247 | 311 | 330 | |||||||||||||||
Services2 | 99 | 78 | 112 | 113 | 196 | |||||||||||||||
Other3 | 43 | 92 | 76 | 107 | 61 | |||||||||||||||
Total domestic | 787 | 756 | 911 | 1,145 | 1,424 | |||||||||||||||
Foreign | ||||||||||||||||||||
Banks4 | 31 | 6 | 18 | 20 | 35 | |||||||||||||||
Chemicals | 1,037 | 960 | 1 | 4 | 5 | |||||||||||||||
Construction | 1 | 8 | 1 | 2 | 2 | |||||||||||||||
Electricity, gas and water supply | 0 | 2 | 3 | 8 | 16 | |||||||||||||||
Financial institutions | 414 | 542 | 112 | 9 | 8 | |||||||||||||||
Manufacturing5 | 83 | 25 | 20 | 37 | 57 | |||||||||||||||
Mining | 0 | 4 | 0 | 0 | 1 | |||||||||||||||
Private households | 171 | 233 | 15 | 26 | 30 | |||||||||||||||
Public authorities | 87 | 19 | 20 | 21 | 72 | |||||||||||||||
Real estate and rentals | 36 | 208 | 8 | 4 | 3 | |||||||||||||||
Retail and wholesale | 17 | 80 | 4 | 4 | 1 | |||||||||||||||
Services | 100 | 19 | 4 | 7 | 27 | |||||||||||||||
Transport, storage and communication | 7 | 185 | 1 | 1 | 0 | |||||||||||||||
Other6 | 0 | 0 | 12 | 6 | 8 | |||||||||||||||
Total foreign | 1,984 | 2,291 | 219 | 149 | 265 | |||||||||||||||
Collective loan loss provisions7 | 49 | 23 | 34 | 38 | 86 | |||||||||||||||
Total allowances and provisions for credit losses8 | 2,820 | 3,070 | 1,164 | 1,332 | 1,775 | |||||||||||||||
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Due from banks and loans by industry sector (gross)
The following table presents the percentage of loans in each industry sector and geographic location to total loans. This table can be read in conjunction with the preceding table
showing the breakdown of the allowances and provisions for credit losses by industry sectors to evaluate the credit risks in each of the categories.
ln % | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Domestic | ||||||||||||||||||||
Banks1 | 0.2 | 0.4 | 0.3 | 0.2 | 0.4 | |||||||||||||||
Construction | 0.4 | 0.3 | 0.3 | 0.4 | 0.6 | |||||||||||||||
Financial institutions | 2.1 | 2.0 | 1.4 | 1.6 | 1.3 | |||||||||||||||
Hotels and restaurants | 0.5 | 0.4 | 0.5 | 0.6 | 0.6 | |||||||||||||||
Manufacturing | 0.9 | 1.0 | 1.0 | 1.0 | 1.3 | |||||||||||||||
Private households | 33.2 | 28.9 | 30.2 | 33.5 | 35.3 | |||||||||||||||
Public authorities | 1.0 | 1.0 | 1.2 | 1.4 | 1.7 | |||||||||||||||
Real estate and rentals | 3.3 | 2.9 | 2.9 | 3.2 | 3.7 | |||||||||||||||
Retail and wholesale | 1.2 | 1.2 | 1.3 | 1.3 | 1.5 | |||||||||||||||
Services2 | 1.6 | 1.5 | 1.5 | 1.9 | 2.6 | |||||||||||||||
Other3 | 1.0 | 0.8 | 0.8 | 1.3 | 1.1 | |||||||||||||||
Total domestic | 45.4 | 40.4 | 41.4 | 46.4 | 50.1 | |||||||||||||||
Foreign | ||||||||||||||||||||
Banks1 | 12.9 | 15.4 | 15.0 | 14.2 | 10.2 | |||||||||||||||
Chemicals | 0.7 | 0.7 | 0.2 | 0.4 | 0.9 | |||||||||||||||
Construction | 0.2 | 0.1 | 0.2 | 0.1 | 0.1 | |||||||||||||||
Electricity, gas and water supply | 0.3 | 0.7 | 0.5 | 0.3 | 0.5 | |||||||||||||||
Financial institutions | 21.6 | 24.4 | 24.0 | 19.2 | 19.7 | |||||||||||||||
Manufacturing | 1.0 | 1.2 | 1.2 | 0.9 | 1.2 | |||||||||||||||
Mining | 0.9 | 1.1 | 1.1 | 0.9 | 1.1 | |||||||||||||||
Private households | 9.3 | 8.1 | 10.7 | 10.0 | 12.1 | |||||||||||||||
Public authorities | 3.4 | 2.7 | 1.0 | 0.6 | 0.5 | |||||||||||||||
Real estate and rentals | 0.4 | 1.0 | 1.3 | 1.2 | 0.9 | |||||||||||||||
Retail and wholesale | 0.5 | 0.6 | 0.6 | 0.5 | 0.4 | |||||||||||||||
Services | 2.4 | 2.4 | 2.3 | 4.7 | 1.8 | |||||||||||||||
Transport, storage and communication | 0.8 | 0.9 | 0.4 | 0.4 | 0.4 | |||||||||||||||
Other4 | 0.2 | 0.3 | 0.1 | 0.2 | 0.1 | |||||||||||||||
Total foreign | 54.6 | 59.6 | 58.6 | 53.6 | 49.9 | |||||||||||||||
Total gross | 100.0 | 100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||||
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Financial information
Additional disclosure required under SEC regulations
Loss history statistics
The following is a summary of the Group’s loan loss history (relating to Due from banks and Loans). The table below does not include loans designated at fair value.
CHF million, except where indicated | 31.12.09 | 31.12.08 | 31.12.07 | 31.12.06 | 31.12.05 | |||||||||||||||
Gross loans1 | 356,081 | 407,685 | 397,802 | 349,524 | 315,210 | |||||||||||||||
Impaired loans | 6,865 | 9,145 | 2,392 | 2,628 | 3,434 | |||||||||||||||
Non-performing loans | 5,402 | 4,703 | 1,481 | 1,918 | 2,363 | |||||||||||||||
Allowances and provisions for credit losses2 | 2,820 | 3,070 | 1,164 | 1,332 | 1,776 | |||||||||||||||
Net write-offs | 1,994 | 824 | 266 | 301 | 588 | |||||||||||||||
Credit loss (expense)/recovery | (1,832 | ) | (2,996 | ) | (238 | ) | 156 | 375 | ||||||||||||
Ratios | ||||||||||||||||||||
Impaired loans as a percentage of gross loans | 1.9 | 2.2 | 0.6 | 0.8 | 1.1 | |||||||||||||||
Non-performing loans as a percentage of gross loans | 1.5 | 1.2 | 0.4 | 0.5 | 0.7 | |||||||||||||||
Allowances and provisions for credit losses as a percentage of: | ||||||||||||||||||||
Gross loans | 0.8 | 0.8 | 0.3 | 0.4 | 0.6 | |||||||||||||||
Impaired loans | 41.1 | 33.6 | 48.7 | 50.7 | 51.7 | |||||||||||||||
Non-performing loans | 52.2 | 65.3 | 78.6 | 69.4 | 75.2 | |||||||||||||||
Allocated allowances as a percentage of impaired loans3 | 38.3 | 31.8 | 41.7 | 46.3 | 46.4 | |||||||||||||||
Allocated allowances as a percentage of non-performing loans4 | 41.6 | 41.8 | 58.9 | 58.0 | 59.0 | |||||||||||||||
Net write-offs as a percentage of: | ||||||||||||||||||||
Gross loans | 0.6 | 0.2 | 0.1 | 0.1 | 0.2 | |||||||||||||||
Average loans outstanding during the period | 0.5 | 0.2 | 0.0 | 0.1 | 0.1 | |||||||||||||||
Allowances and provisions for credit losses | 70.7 | 26.8 | 22.9 | 22.6 | 33.1 | |||||||||||||||
Allowance and provisions for credit losses as a multiple of net write-offs | 1.41 | 3.73 | 4.38 | 4.43 | 3.02 | |||||||||||||||
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Cautionary statement regarding forward-looking statements| This report 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. These factors include, but are not limited to: (1) future developments in the markets in which UBS operates or to which it is exposed, including movements in securities markets, credit spreads, currency exchange rates and interest rates; (2) the effect of the current economic environment or other developments on the financial position or creditworthiness of UBS’s customers and counterparties; (3) changes in the availability of capital and funding, including any changes in UBS’s credit spreads and ratings; (4) the consequences of the recent Swiss court decision relating to the provision of certain UBS client data to the US Internal Revenue Service, including possible effects on UBS’s 2009 settlements with US authorities and on its businesses; (5) the outcome and possible consequences of pending or future actions or inquiries concerning UBS’s cross-border banking business by tax or regulatory authorities in various other jurisdictions; (6) the degree to which UBS is successful in effecting organizational changes and implementing strategic plans, and whether those changes and plans will have the effects intended; (7) UBS’s ability to retain and attract the employees that are necessary to generate revenues and to manage, support and control its businesses; (8) possible political, legal and regulatory developments, including the effect of more stringent capital and liquidity requirements, constraints on remuneration and the imposition of additional legal or regulatory constraints on UBS’s activities; (9) changes in accounting standards or policies, and accounting determinations affecting the recognition of gain or loss, the valuation of goodwill and other matters; (10) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (11) changes in the size, capabilities and effectiveness of UBS’s competitors; (12) the occurrence of operational failures, such as fraud, unauthorized trading and systems failures, either within UBS or within a counterparty; and (13) technological developments. In addition, actual results could depend on other factors that we have previously indicated could adversely affect our business and financial performance which are contained in our past and future filings and reports, including those filed with the SEC. More detailed information about 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 20-F for the year ended 31 December 2009. 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 report 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.
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