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UBS reports third quarter profit of CHF 296 million |
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| k poss | Results were impacted by realized and unrealized losses of USD 4.4 billion on legacy risk positions, mainly on exposures related to US residential real estate-related securities and other credit positions UBS continued to reduce exposures to risk positions throughout the quarter, largely through sales and to a lesser extent further writedowns. Exposures to US residential real estate-related positions were reduced by almost 50% by quarter end The transaction with the Swiss National Bank (SNB) announced on 16 October 2008 will result in a dramatic decrease of UBS's risk positions
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| Transaction with the Swiss National Bank | As announced on 16 October 2008, the SNB and UBS have reached an agreement to transfer up to USD 60 billion of currently illiquid securities and other assets from UBS’s balance sheet to a separate fund entity UBS's aim is to protect its shareholders from further impact of the crisis to the fullest extent possible and to provide clients an opportunity to renew their confidence in the bank With this transaction, UBS caps future potential losses from these assets, reduces its risk-weighted assets, materially de-risks and reduces its balance sheet and is no longer exposed to the funding risk of these assets UBS expects to transfer assets to the fund primarily over fourth quarter 2008 and first quarter 2009
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| Capital and balance sheet | Capital ratio remains strong with a tier 1 ratio of 10.8% and total capital adequacy ratio of 14.9% Balance sheet reduced by 4% from the previous quarter, with significant reductions in risk positions partly offset by an increase in positive replacement values and the appreciation of the US dollar against the Swiss franc over the quarter Total risk-weighted assets (RWA) under Basel II increased 2% from the previous quarter, to CHF 332.5 billion. The reductions in risk positions were offset by the impact of market volatility and the appreciation of the US dollar against the Swiss franc over the quarter As announced on 16 October, UBS is to raise CHF 6 billion of new capital in the form of mandatory convertible notes (MCNs), fully placed with the Swiss Confederation, subject to approval by UBS shareholders at the 27 November 2008 extraordinary general meeting (EGM). The MCNs will count as tier 1 capital for BIS capital adequacy purposes following approval at the EGM Combined with the reduction in RWAs, it is estimated that the impact of the transaction with the SNB and the issuance of MCNs would result in a 30 September 2008 pro forma tier 1 capital ratio of 11.9%
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| Liquidity and funding | Global funding markets were extremely difficult, particularly towards the end of the quarter. Against this background, the measures undertaken to safeguard UBS's liquidity position proved to be increasingly important UBS benefited from its diversity of funding sources and a substantial portfolio of unencumbered, high-quality assets in this period of unprecedented market stress
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| Cost reduction | Total operating expenses down by 26% to CHF 6,036 million from the previous quarter, which included a CHF 919 million provision related to auction rate securities Personnel expenses down 13% from the previous quarter, reflecting lower accruals for performance-based compensation Personnel numbers reduced to 79,565 on 30 September 2008, down by 1,887 from 30 June 2008
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| Risk renewal plan | Progress continues to be made in UBS's “Risk renewal plan”, which is supported and supervised by the Swiss Federal Banking Commission (SBFC) The plan will deliver a robust system of risk control; it is expected that material progress will have been achieved by the end of 2009, with some components running into 2010
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| Outlook | UBS expects that the conditions seen at the beginning of fourth quarter will continue to affect clients' assets, and therefore UBS's fee-earning businesses Operating expenses will continue to be trimmed where possible Fourth quarter results will be impacted by a possible reversal of own credit gains and a loss on the equity in the fund to be controlled by the SNB
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UBS reports a Group net profit attributable to UBS shareholders of CHF 296 million for third quarter 2008.
Third quarter 2008 remained difficult as the credit crisis broadened and intensified: Global financial markets came under increased stress as problems in the US residential mortgage market spread to the broader economy and the global financial sector. Fears of a global recession increased and were exacerbated by further declines in housing and credit markets in the US and Europe, which heightened concerns over the creditworthiness of some financial institutions. Equity markets were extremely volatile and trended sharply down over the quarter, driven by deleveraging and extreme risk aversion from investors.
In the Investment Bank, revenues generated by the advisory and capital markets business were down significantly, driven by a drop in capital markets revenues reflecting reduced market volumes across all geographical regions. Sales and trading results were affected by losses and writedowns on legacy risk positions. Revenues from equities were down despite a strong performance in derivatives. Fixed income, currencies and commodities were still negative due to losses and writedowns on legacy risk positions; however these were lower than in the previous quarter. Foreign exchange and money markets had a record quarter.
Across the firm, total operating expenses were down 26% to CHF 6,036 million in third quarter 2008. Personnel expense decreased 13% to CHF 3,997 million, reflecting primarily lower accruals for performance-related compensation. At CHF 1,702 million, general and administrative expenses decreased CHF 1,129 million, mainly due to the provision of CHF 919 million made in second quarter 2008 in relation to auction rate securities. There was no goodwill impairment charge in third quarter 2008. A goodwill impairment charge of CHF 341 million was recorded in second quarter 2008, relating to the exiting of the municipal securities business by the Investment Bank.
The result for the quarter included a gain from own credit of CHF 2, 207 million, recorded in net trading income. UBS also recognized a net income tax benefit of CHF 913 million for third quarter 2008, which mainly reflects a net impact of CHF 930 million from the recognition of an incremental net deferred tax asset on available tax losses which arose in the quarter. Risk inventory reduced
Results were impacted by realized and unrealized losses of USD 4.4 billion on legacy risk positions, mainly on exposures related to US residential real estate-related securities and other credit positions. UBS continued to reduce exposures to significant risk concentrations. Exposures to US residential real estate-related positions were reduced by almost 50% by quarter end. This was achieved largely through sales and to a lesser extent further writedowns. Leveraged finance and commercial real estate positions were reduced through a combination of sales and writedowns, and further credit valuation adjustments were taken against credit default protection purchased from monoline insurers.
Transaction with the Swiss National Bank
As announced on 16 October 2008, the Swiss National Bank (SNB) and UBS have reached an agreement to transfer up to USD 60 billion of currently illiquid securities and other assets from UBS’s balance sheet to a separate fund entity. With this transaction, UBS caps future potential losses from these assets, reduces its risk-weighted assets, materially de-risks and reduces its balance sheet and is no longer exposed to the funding risk of the assets to be transferred.
The assets to be transferred to the fund include approximately USD 31 billion (as per valuation at 30 September 2008) of primarily cash securities, already disclosed as concentrated risk positions relating to US real estate-related securities, US student loan auction rate securities and other US student loan securities, and assets from the US reference-linked note program (RLN). Upon the completion of the transaction, UBS’s net exposure to these risk categories will be reduced to nearly zero (compared with USD 44 billion on 30 June 2008 and USD 32 billion at 30 September 2008), with residual long positions held by UBS in these asset classes hedged through existing short positions, including credit protection embedded in the RLN programs. UBS will continue to manage down these residual positions.
UBS expects to transfer assets to the fund primarily over fourth quarter 2008 and first quarter 2009. The impact of the transaction and related capital measures will be shown in the fourth quarter 2008 results, separately identified within operating performance.
Capital base and balance sheet
UBS's capital ratio remains strong with a tier 1 ratio of 10.8% and total capital adequacy ratio of 14.9%
UBS's balance sheet was reduced by 4% from the previous quarter, with significant reductions in risk positions partly offset by an increase in positive replacement values and the appreciation of the US dollar against the Swiss franc over the quarter.
Total risk-weighted assets (RWA) under Basel II increased 2% from the previous quarter, to CHF 332.5 billion. The reductions in risk positions were partly offset by the impact of market volatility and the appreciation of the US dollar against the Swiss franc over the quarter.
As announced on 16 October 2008, UBS is to raise CHF 6 billion of new capital in the form of mandatory convertible notes (MCNs), fully placed with the Swiss Confederation, subject to approval by UBS shareholders at the 27 November 2008 extraordinary general meeting (EGM). The MCNs will count as tier 1 capital for BIS capital adequacy purposes if following approval at the EGM.
Combined with the reduction in RWAs, it is estimated that the impact of the transaction with the SNB and the issuance of MCNs would result in a 30 September 2008 pro forma tier 1 capital ratio of 11.9%.
Liquidity and funding
Since the onset of the financial crisis, UBS has proactively undertaken a number of measures to safeguard its liquidity position. Combined with the broad diversity of its funding sources, its contingency planning processes and its global scope, these additional measures have proven extremely helpful in enabling UBS to maintain a balanced asset / liability profile, in spite of this period of unprecedented market dislocation. In particular, UBS was able to benefit from its substantial multi-currency portfolio of unencumbered high-quality short-term assets.
At the end of third quarter 2008, UBS’s funding profile was broadly similar to its funding profile at prior quarter end and at year-end 2007, in terms of diversification with respect to both currency and product type. Approximately 18% of funding continues to be raised on a secured basis and UBS's unsecured funding remains well diversified. UBS raised new long-term funds in third quarter 2008 through the issuance of approximately CHF 19.7 billion of long-term debt and structured notes.
Cost reduction
Across the firm, total operating expenses were CHF 6,036 million, down 26% compared with second quarter 2008. This decline was driven by lower accruals on performance-related compensation.
Personnel expense decreased 13% to CHF 3,997 million, reflecting primarily lower accruals for performance-related compensation. General and administrative expenses decreased 40% from the previous quarter, which included a provision of CHF 919 million in relation to auction rate securities. The reduction in third quarter 2008, which was 11% excluding the effect of this provision, reflected cost cuts in most categories in connection with UBS's ongoing cost reduction program.
The number of people employed at UBS was 79,565 on 30 September 2008, down by 1,887 compared with the end of second quarter 2008, with a reduction of 574 in the Investment Bank.
Risk renewal plan
Progress continues to be made in UBS's “Risk renewal plan”, which is supported and supervised by the Swiss Federal Banking Commission (SBFC). The plan was implemented in order to overhaul the approach UBS takes to risk management, strategy and planning, the processes used to value and estimate the risk of UBS's positions, the integrity of underlying data on UBS's holdings, and the system architecture needed to support all of these processes. The plan will deliver a robust system of risk control that fully addresses the weaknesses exposed in 2007. It is expected that material progress will have been achieved by the end of 2009, with some components running into 2010. Outlook
UBS expects that the conditions seen at the beginning of fourth quarter will continue to affect clients' assets, and therefore UBS's fee-earning businesses. Operating expenses will continue to be trimmed where possible.
UBS's results for fourth quarter 2008 will include two large accounting effects. Since the announcement of the SNB transaction, credit spreads on UBS's debts have narrowed. If this persists, some or most of the accumulated CHF 4.8 billion own credit gain will reverse. In addition, a loss will be recognized on the sale of the equity in the fund sold to the SNB – partly offset by recognition of the value of UBS's option to buy the equity back in the future. A possible reversal of own credit would not affect our tier 1 capital and tier 1 ratio. The transfer of assets into the SNB fund, and the loss recognized on the sale of the equity, will reduce UBS's risk-weighted assets and tier 1 capital balance. After the planned issuance of the MCNs to the Swiss Confederation, the tier 1 capital balance would be slightly higher than its value prior to the transaction and the tier 1 ratio would improve. Performance against targets
UBS focuses on four key performance indicators: return on equity (RoE), diluted earnings per share (EPS), cost / income ratio and net new money. These are designed to monitor the continuous delivery of adequate returns to shareholders and are calculated using results from continuing operations. UBS's annualized RoE from continuing operations was negative 44.4% in the first nine months of 2008 compared with positive 19.0% in the first nine months of 2007, following a substantial negative impact from Investment Bank losses on exposures related to the US residential mortgage market and other credit positions. Diluted EPS from continuing operations were CHF 0.09 in third quarter 2008, compared with negative CHF 0.17 in second quarter 2008. This change was mainly driven by reduced losses in the Investment Bank. The EPS calculation assumes the issuance of the shares issuable upon conversion of the mandatory convertible notes issued on 5 March 2008. The cost / income ratio was 102.1% in third quarter compared with 200.7% in the prior quarter. Income in third quarter was affected by the factors mentioned above. Total operating expenses were down 26% from the previous quarter, mainly due to lower accruals for performance-related compensation in third quarter and the provision of CHF 919 million made in second quarter in relation to auction rate securities. Third quarter 2008 saw net new money outflows of CHF 83.6 billion, compared with outflows of CHF 43.8 billion the prior quarter. At the end of third quarter, total invested assets stood at CHF 2,640 billion, of which CHF 1,932 billion were attributable to Global Wealth Management & Business Banking and CHF 708 billion were attributable to Global Asset Management. Global Wealth Management & Business Banking saw total net new money outflows of CHF 49.3 billion. Wealth Management International & Switzerland recorded net outflows of CHF 36.0 billion, Wealth Management US recorded net outflows of CHF 9.8 billion and Business Banking Switzerland recorded net outflows of CHF 3.5 billion. Global Asset Management saw total net new money outflows of CHF 34.4 billion. Institutional clients recorded net outflows of CHF 21.0 billion. Excluding money market flows, outflows increased to CHF 16.1 billion from CHF 8.1 billion. Net outflows were reported in equities, fixed income, multi-asset, alternative and quantitative investments and real estate mandates, with infrastructure reporting net inflows. Wholesale intermediary recorded net outflows of CHF 13.4 billion. Excluding money market flows, outflows of net new money decreased to CHF 13.1 billion from CHF 16.0 billion. During third quarter, outflows were reported in multi-asset, equities, fixed income and alternative and quantitative investments, while inflows were reported in real estate funds.
UBS results - 3Q08 vs 2Q08Global Wealth Management & Business Banking
The pre-tax profit for Global Wealth Management & Business Banking was CHF 1,861 million in third quarter 2008, an increase of 66% from the previous quarter. Second quarter 2008 included a provision of CHF 919 million related to auction rate securities.
Wealth Management International & Switzerland's pre-tax profit decreased by 12% to CHF 1,110 million in third quarter 2008. Total operating income fell by 9% to CHF 2,609 million. The lower average asset base caused recurring income to fall 6% to CHF 2,023 million. Additionally, lower client transaction activity, driving lower sales commissions, prompted non-recurring income to fall 13% to CHF 610 million. Credit loss expenses went up significantly to CHF 25 million compared with CHF 2 million, reflecting provisions arising from impaired collateral quality. Operating expenses declined 6% to CHF 1,499 million, driven by lower accruals for performance-related compensation.
Wealth Management US recorded a pre-tax profit of CHF 203 million, compared with a pre-tax loss of CHF 741 million in the previous quarter. Second quarter 2008 included a provision of CHF 919 million related to auction rate securities. Without these provisions in second quarter, the pre-tax result would have increased 14%. Total operating income decreased 1% to CHF 1,469 million. In US dollar terms, operating income declined 5% as a 14% decrease in non-recurring income – resulting from reduced transaction activity and therefore lower commission income – was only partly offset by a 2% rise in recurring income. Total operating expenses declined 43% to CHF 1,267 million. This decline primarily reflected the provision related to auction rate securities of CHF 919 million in second quarter 2008. Excluding this provision, operating expenses would have declined 2% due to lower personnel and non-personnel expenses. Personnel expenses decreased 3% to CHF 981 million. Excluding the impact of currency translation, personnel expenses would have declined 7%, mainly due to lower severance costs and reduced salary costs associated with fewer non-financial advisor personnel.
Business Banking Switzerland's pre-tax profit fell 8% to CHF 548 million. Total operating income decreased 3% to CHF 1,186 million, as both interest and non-interest income declined. Global Asset Management
Global Asset Management's pre-tax profit increased 18% to CHF 415 million in third quarter 2008. Excluding a gain from the sale of a minority stake in Adams Street Partners, pre-tax profit decreased CHF 105 million.
Total operating income rose 2% to CHF 827 million. Institutional revenues rose to CHF 525 million from CHF 472 million and included a gain of CHF 168 million from the sale of a minority stake in Adams Street Partners. Excluding this effect, institutional revenues decreased to CHF 357 million due to lower performance fees (from alternative and quantitative investments and the Brazilian asset management business), lower management fees (from the lower average invested assets base) and seed capital losses. Wholesale intermediary revenues declined to CHF 302 million, from CHF 336 million, with management fees impacted by the lower average invested assets base.
Total operating expenses declined 9% to CHF 413 million. Personnel expenses declined 11% to CHF 258 million, reflecting both reduced severance costs and accruals for performance-related compensation. Investment Bank
Pre-tax results were negative CHF 2,748 million in third quarter 2008 compared with a pre-tax loss of CHF 5,233 million the prior quarter. Writedowns on risk positions more than offset a gain from own credit of CHF 2,207 million and cost-cutting measures related to the repositioning of the division.
Total operating income was negative CHF 750 million compared with negative CHF 2,302 million.
Investment banking revenues declined 22% to CHF 786 million from CHF 1,008 million. The key contributor to this change was a 41% decline in capital markets revenues, reflecting reduced market volumes across all geographical regions. Equity capital markets revenues decreased 55% and fixed income, currencies and commodities capital markets revenues dropped 22%. These decreases were only partly offset by a 3% increase in advisory revenues, to CHF 448 million. Other fee income and risk management revenues were negative CHF 102 million in comparison with negative CHF 179 million.
Sales and trading revenues declined to negative CHF 3,426 million from negative CHF 3,178 million, driven by negative revenues of CHF 4,563 million in fixed income, currencies and commodities (FICC) that were only partly offset by a positive revenue contribution of CHF 1,136 million from equities.
The equities business saw a 26% decline in revenues to CHF 1,136 million. Lower cash revenues were driven by seasonally lower August revenues, reduced commissions and higher client facilitation costs. Derivatives revenues increased due to a strong performance across all geographical regions, particularly Asia Pacific and the US. Revenues in equity-linked products were negative as all regions saw a decline from the previous quarter. Prime brokerage revenues decreased from a seasonally strong second quarter. Exchange-traded derivatives revenues increased across all asset classes. Proprietary trading had negative revenues in all regions. The Investment Bank is refocusing its proprietary trading activities as part of its more disciplined capital allocation methodology.
FICC revenues were negative CHF 4,563 million compared with negative CHF 4,720 million.
Losses and writedowns on risk positions were lower than in the prior quarter. The largest losses were recorded in positions related to the US residential real estate market, while further credit valuation adjustments were made on protection bought from monoline insurers. UBS marked down its positions in certain leveraged finance commitments and US student loan asset-backed securities. Losses were also recorded on the US reference-linked note program. During third quarter 2008, UBS further reduced its exposures related to the US residential real estate market and other risk positions.
The losses described above were only partially offset by income in other areas. Foreign exchange and money markets had a record quarter as key businesses benefited from strong client flow and successful trading strategies in times of extreme market volatility. Total credit revenue decreased quarter on quarter, with credit proprietary strategies underperforming due to volatile markets and the lack of liquidity in the cash markets. Rates reported a decrease in revenue despite a strong performance in Europe. Structured products posted solid revenues, though these were down on a record second quarter. Emerging markets revenues decreased in all regions except Latin America. Precious metals had a very strong quarter as flow was supported by clients seeking to invest in gold.
Total operating expenses declined 32% to CHF 1,998 million from CHF 2,931 million. A 29% decline in personnel expenses, to CHF 1,061 million, was driven by lower accruals for performance-related compensation. Salary costs also declined as personnel were reduced by 574 full-time equivalents over the quarter. General and administrative expenses decreased 18% to CHF 640 million, with the most notable reductions in provisions, administration charges and professional fees.
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UBS AG provides a range of financial services, including advisory services, underwriting, financing, market making, asset management, brokerage and retail banking on a global level. At 31 December 2006, UBS has over 175,000 individuals registered as Shareholders.
Latest News
27 November 2008, Lucerne, Switzerland In Lucerne, 2,395 shareholders of UBS AG attended the extraordinary general meeting held to vote on the proposed capital raising. Shareholders, generally supportive of the Chairman, Peter Kurer, still wanted the bank to pursue legal action against former executives even though a number of these executives have returned or rejected CHF 70 million in remuneration. Shareholders demanded details of payments made over the previous five years to the senior executives. They also demanded that the bank recover payments from the non-Swiss executives who have left the banks, referring to Hew Jenkins, the former head of the investment... Readmore | UBS has proposed a new compensation plan for its employees which will include an advisory vote on compensation by shareholders at each Annual General Meeting. It is also looking at legal remedies with regard to claiming back bonuses of executives who have left the company. In addition, it has established a working group to press for voluntary repayment of bonuses given to these executives. Readmore | k possResults were impacted by realized and unrealized losses of USD 4.4 billion on legacy risk positions, mainly on exposures related to US residential real estate-related securities and other credit positionsUBS continued to reduce exposures to risk positions throughout the quarter, largely through sales and to a lesser extent further writedowns. Exposures to US residential real estate-related positions were reduced by almost 50% by quarter end The transaction with the Swiss National Bank (SNB) announced on 16 October 2008 will result in a dramatic decrease of UBS's risk positionsTransaction with the Swiss National BankAs announced on 16 October 2008, the... Readmore | The Swiss government has provided UBS with SFr6bn injection of fresh capital through the purchase of a mandatory convertible note. In addition, the Swiss National Bank and UBS have reached an agreement which will enable UBS to offload transfer $60bn of illiquid assets into a separate fund entity to be controlled by the SNB. Readmore | 12 August 2008. UBS today announced a second quarter loss of CHF 358 million and plan to separate its business into three distinctive autonomous units. (see press release below)At its investor presentation, UBS stated that it had no intention to sell any of its businesses but many analysts present believe that the move would make any disposal far easier to achieve. The Chairman indicated that the Group had received approaches but stated that none of them were at a price that they would even remotely consider.UBS said there had been net new money outflows of almost CHF 44 billion in... Readmore | | Show options |
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Recent Events
1st Quaret 2008 Expected Net Loss of CHF 12 billion UBS has pe-announced its first quarter 2008 results stating that it expects a net loss of CHF 12 billion mainly due to US$ 19 billion of write-downs on its US real estate and related structured credit positions. This brings the total write-downs (2007 to first quarter 2008) to US$ 37 billion. The announcement also stated that it has undertaken a rights issue of CHF 15 billion (fully underwritten) in addition to the already agreed CHF 13 billion capital raising. The announcement also stated that the current Chairman, Marcel Ospel, will not stand for re-election at the 2008 Annual General meeting. The Board proposed the appointment of Peter Kurer as Ospel's successor. The Board stated that the appointment was part of an extensive process, which was already underway, whereby the Board is reviewing the root causes of and lessons learned from its subprime losses. In particular, the Board is thoroughly examining governance, strategy implementation, risk management, monitoring, and control systems, incentive plans and succession planning and is committed to making all necessary adaptations and changes to ensure it establishes best practices in these areas. Sub-prime Losses US$ 18 billion UBS has announced a net loss attributable to shareholders for the full year of CHF 4.384 billion. During 2007, UBS was forced to writedown its US sub-prime holdings by US$ 18 bn. The writedown was far higher than expected and has dented the Group's conservative Swiss reputation. According to its Finance Director, Marco Suter, the sub-prime losses were incurred in a few trading books which even in the past were only marginal revenue contributors. Full details were provided on 14 February 2008 when its final full year results were published. Recapitalisation At the request of UBS, the Government of Singapore Investment Corporation and an undisclosed Middle Eastern investor have agreed to buy CHF 13 billion (US$11.5 billion) of UBS mandatory convertible notes with a 9% coupon. The notes will eventually convert into approximately a 10% stake in UBS, depending on the conversion ratio used at maturity. The action was taken to strengthen its capital position. The recapitalisation will be voted on at a special shareholder's meeting in February. The Swiss National Bank has supported the recapitalisation but many individual and institutional shareholders believe the solution disadvantages current shareholders. A number of other financial institutions have approached sovereign funds for investment but most have allowed current shareholders the opportunity to invest on the same or similar terms. At the February EGM, shareholders will also be asked to approve the creation additional authorized capital to allow for the replacement of the cash dividend with a stock dividend for the current year. The Board has already approved the rededication for sale of 36.4 million Treasury Shares previously intended for cancellation. Management Changes Following on from the ealier statements on losses in the sub-prime market, UBS in October 2007 announced management changes and the loss of 1500 jobs. Mr Ospel, the UBS Chairman, had already removed Peter Wuffli, the chief executive officer. Others, including,the chief executive of the investment banking division, the group chief financial officer and the head of the fixed income business have also left. The group chief risk officer has been transferred to another role. But after UBS announced at the end of January 2008 that the total losses from the meltdown in the US sub-prime mortgage market have reached US$ 18 billion, many believe that the changes are not sufficient and that Ospel should also leave or at least announce his retirement date. If this were to happen, many believe that UBS will have a greater chance of obtaining the requested approvals to the resolutions to be put at the EGM in February. Risk Management In their letter to shareholders, included in the 2006 Annual Report, the UBS Chairman and the then current CEO, highlighted the banks approach to risk management and also their short term concern for the markets. Extract from-
Fourth Quarter 2006 Report
13 February 2007
Letter to shareholders
Our approach to risk has been critical to our current growth. UBS's average risk-weighted assets are today at a similar level to 1998, just after the UBS-SBC merger, although our underlying risk profile is very different. We are now a more integrated firm - our business model has evolved, and the way we view, manage and control our risks has changed.
The primary focus in our risk-taking activities is to ensure the adequate diversification of risk in order to avoid illiquid and concentrated positions, and to ensure that we are rewarded for the risks we take.
We have transferred resources from businesses in illiquid markets into more liquid ones, and have actively pursued risk distribution strategies. Portfolios with poor returns on risk have been cut back and the quality of other portfolios has been enhanced…….
Outlook……… In the short term, as the economic cycle matures, investors might become more sensitive to any disappointing political or economic developments, so our top-class risk control remains paramount.
With such an apparent focus on risk management and concern regarding a possible market downturn in the short term, how could things go so wrong (US$ 37 bn) in such a short period?
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