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2004 Report
 

UBS Targets

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

Question to the Group Chief Financial Officer
Video: Clive Standish about the firm's key financial metrics/ targets

What are the firm's key financial metrics/ targets?

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Annual Review 2004 
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