Measurement and analysis of performance
UBS’s performance is reported in accordance with International
Financial Reporting Standards (IFRS). Additionally, for
several years, we have provided comments and analysis on an
adjusted basis which excludes from the reported amounts
certain items we term significant financial events (SFEs). An
additional adjustment we use in our results discussion is the
exclusion of the amortization of goodwill and other acquired
intangible assets.
We will in future change this approach as accounting standards
no longer require the amortization of goodwill, by far
the largest adjustment we have been making. From 2005 onwards,
we will no longer present current results and targets
on this adjusted basis.
Items have been treated as SFEs when they are eventspecific,
significant for the consolidated statements of UBS,
UBS-specific rather than industry-wide, and not indicative of
or relevant for future performance.
Reflecting that definition, we had no SFEs in 2004 and one
in 2003. In second quarter 2003, we recorded a net gain of
CHF 2 million (pre-tax CHF 161 million) from the sale of the
Wealth Management USA Business Group’s Correspondent
Services Corporation (CSC) clearing business. A substantial
portion of CSC’s net assets comprised goodwill stemming
from the PaineWebber acquisition. After deducting taxes of
CHF 159 million (based on the purchase price) and the writedown
of the goodwill associated with CSC, the net gain from
the transaction was CHF 2 million.
Performance against targets
At UBS, we focus on a consistent set of four long-term financial
targets defined across periods of varying market conditions
and designed to ensure that we deliver continuously improving
returns to our shareholders. We report our performance
against these targets each quarter:
we seek to increase the value of UBS by achieving a sustainable, after-tax return on equity of 15-20%, across periods of varying market conditions
we aim to increase shareholder value through double-digit average percentage growth in basic earnings per share (EPS), across periods of varying market conditions
through cost reduction and earnings enhancement initiatives we aim to reduce UBS’s cost/income ratio to a level that compares positively with best-in-class competitors
we aim to achieve a clear growth trend in net new money in our wealth management units.
The first three targets are all reported pre-goodwill amortization,
and adjusted for significant financial events.
Return on equity and earnings per share targets are calculated on a full UBS basis, whereas our cost/income ratio target is limited to our financial businesses, to avoid distortion from our industrial holdings.
UBS’s performance against financial targets shows:
Return on equity in 2004 was 27.7%, up from 20.5% a year earlier and well above the target range of 15 to 20%. The increase reflects the combined impact of the share buyback program and dividend outpacing retained
earnings.
Basic earnings per share were CHF 8.60 in 2004, an increase of CHF 2.17 or 34% from 2003, driven by the increase in net profit as well as the impact of share repurchases.
The cost/income ratio for UBS’s financial businesses was 70.2% in 2004, an improvement from 73.2% in 2003, and the lowest level since PaineWebber became part of UBS in 2000.
Our wealth management businesses continued to show strong inflows of net new money. For full-year 2004, net new money inflows into our wealth management businesses totaled CHF 59.4 billion, up 17% from CHF 50.8 billion in 2003, corresponding to an annual growth rate of 4.4% of the asset base at the end of 2003.
Performance against targets
| For the year ended |
---|
|
|
31.12.04
| 31.12.03 |
RoE (%)
| | |
as reported 1
|
24.7
| 17.8 |
before goodwill and adjusted for significant financial events 2
|
27.7
| 20.5 |
Basic EPS (CHF)
| | |
as reported 3
|
7.68
| 5.59 |
before goodwill and adjusted for significant financial events 4
|
8.60
| 6.43 |
Cost / income ratio of the Financial Businesses (%)
5
| | |
as reported 6
|
72.6
| 75.6 |
before goodwill and adjusted for significant financial events 7
|
70.2
| 73.2 |
Net new money, wealth management businesses (CHF billion)
8
| | |
Wealth Management |
42.3
| 29.7 |
Wealth Management USA |
17.1
| 21.1 |
Total
|
59.4
| 50.8 |