â¢ The Investment Bank will be more focused and less complex; Basel 3 risk-weighted assets in the Investment Bank of about CHF 300 billion today are targeted to be reduced by about CHF 145 billion, or almost 50%
â¢ Return on equity target of 12% to 17% for the Group from 2013
â¢ Common equity tier 1 ratio target of 13% under Basel 3
â¢ UBS intends to propose a dividend of CHF 0.10 per share for 2011 and a progressive capital return program thereafter
Today, UBS provides an update to investors following the completion of a joint strategic review by UBSâs Board of Directors and Group Executive Board.
UBS's strategy is centered on the long-standing leadership positions of its global wealth management businesses and its universal bank in Switzerland. Together with a focused, less complex and less capital-intensive Investment Bank and a strong Global Asset Management business, UBS will drive further growth and expand its premier wealth management franchise.
Group CEO Sergio Ermotti said âUBS is acting from a position of strength and we are adapting our strategy to deliver more attractive returns to shareholders and to reflect economic and regulatory change. We have chosen to substantially reduce the risk profile of the bank by exiting and downsizing businesses which are not value added to our client franchise or deliver unattractive risk-adjusted returns. The Board and I are convinced that this strategy plays to our strengths and is focused firmly on the needs of our clients. We will continue to invest in products and geographies where we see opportunities to grow, particularly in our wealth management businesses. We plan to generate a greater share of our profits from businesses that deliver more consistent results and, together with a reduction in risk and tighter cost management, we aim to deliver more attractive returns to our shareholders. We are confident that we can deliver a return on equity between 12% and 17% and we are determined to return capital to our shareholders.â
The growth and success of UBS will be driven by the firmâs longstanding leadership in its wealth management businesses, which together manage nearly CHF 1.4 trillion in invested assets. UBS plans to extend its leadership positions in Switzerland, Europe, Asia Pacific and the emerging markets and will continue to build on Wealth Management Americasâ successful execution track record.
UBSâs leading Retail & Corporate banking business in Switzerland is integral to the success of the Group. UBS intends to grow its market share by capturing additional banking and lending opportunities presented by existing clients and by investing in technology and infrastructure to expand corporate transaction banking capabilities.
The Investment Bank will be less complex, carry fewer risk-weighted assets and require substantially less capital to produce sustainable returns for shareholders. Its client-centric strategy will focus on serving the needs of its core clients across wealth management, institutional, corporates, sovereigns and sponsors and investing in its leading advisory, capital markets, and client flow and solutions businesses. It will exit or significantly downsize several businesses. The Investment Bank will work more closely with UBSâs wealth management businesses and increase its emphasis on the execution, advisory and research capabilities it provides to wealth management clients.
Global Asset Management will continue to deliver investment services to clients through its diversified investment capabilities. It will grow its third party wholesale business, building on established strengths in Asia Pacific and in Switzerland and continue to build its services to clients of UBSâs wealth management businesses.
UBSâs strong capital, liquidity and funding positions form the foundation of its strategy. UBS is determined to remain one of the worldâs best capitalized banks as it targets a common equity tier 1 ratio of 13% under Basel 3. UBS is confident it can deliver a return on equity between 12% and 17%. The management team intends to propose a dividend of CHF 0.10 per share for the financial year 2011 and thereafter implement a progressive capital return program.
Annual target performance ranges1
â¢ Basel 3 common equity tier 1 ratio: 13%2
â¢ Annual return on equity: 12-17%
â¢ Cost / income ratio: 65-75%
â¢ Annual NNM growth rate: 3-5%
â¢ Annual Gross margin: 95-105 bps
â¢ Cost / income ratio: 60-70%
Wealth Management Americas
â¢ Annual NNM growth rate: 2-4%
â¢ Annual Gross margin: 75-85 bps
â¢ Cost / income ratio: 80-90%
Retail & Corporate
â¢ Annual net new business volume: 1-4%
â¢ Annual net interest margin: 140-180 bps
â¢ Cost / income ratio: 50-60%
Global Asset Management
â¢ Annual NNM growth rate: 3-5%
â¢ Annual Gross margin: 32-38 bps
â¢ Cost / income ratio: 60-70%
Core Investment Bank3
â¢ Annual pre-tax return on attributed equity: 12-17%2,4
â¢ Cost / income ratio: 70-80%
â¢ Risk-weighted assets (RWAs): 5
Other significant disclosures
â¢ Legacy includes auction rate securities, monoline-protected assets, other asset-backed securities and some long-dated rates positions. Legacy will be reported in the Corporate Center starting in 2012.
â¢ Legacy pro forma Basel 3 RWAs of approximately CHF 70 billion on 30.9.11, representing approximately CHF 30 billion of balance sheet assets, are targeted to be reduced to about CHF 5 billion by 2016.
â¢ Core Investment Bank pro forma Basel 3 RWAs of approximately CHF 230 billion on 30.9.11 are targeted to be reduced to less than CHF 150 billion by 2016.
â¢ Personnel in the Investment Bank is expected to be approximately 16,500 by the end of 2013 and 16,000 by the end of 2016, compared with approximately 18,000 currently.
â¢ Group pro forma Basel 3 RWAs of approximately CHF 400 billion6 on 30.9.11 are targeted to be reduced to CHF 290 billion by 2013 and CHF 270 billion by 2016. These figures do not include any potential mitigation from UBSâs option to purchase the SNB StabFund equity (approximately CHF 20 billion pro forma Basel 3 RWAs on 30.9.11).
â¢ The management team of Wealth Management Americas remains confident that it can achieve an annual pre-tax profit of USD 1 billion.
â¢ UBS plans to issue non-dilutive loss-absorbing debt qualifying as capital.
1 Annual targets for the business divisions and cost/income ratios are targeted annual performance ranges for the period from 2012 through 2016; excluding any significant non-recurring items and own credit where applicable. The return on equity target for the Group and the return on attributed equity target for the Investment Bank apply from the beginning of 2013; 2012 is a transition year as the Investment Bank is targeting a substantial reduction in RWAs. All targets assume constant foreign exchange rates.
2 Targeted common equity tier 1 ratio to be achieved by 2013 under "phased-in" Basel 3 rules.
3 Refers to the Investment Bank as currently configured, excluding the Legacy businesses and positions that will be reported in the Corporate Center starting 2012 as described below.
4 The equity attributed to the Investment Bank is expected to be reduced as it is targeting a substantial reduction in RWAs. Legacy businesses and positions will be transferred to the Corporate Center.
5 Core Investment Bank RWA target to be achieved by 2016.
6 CHF 17 billion of stressed VaR related to the unauthorized trading incident is excluded as it will roll-off in 4Q11.