UBS raises bar for 2005

UBS has raised the bar even higher for 2005 Keystone

Switzerland’s largest bank has set itself a tough target to beat this year, after announcing a record net profit of SFr8.1 billion ($6.6 billion) for 2004.

CEO Peter Wuffli said on Tuesday that he expected Asia to be a key growth area in 2005 but he stressed that UBS was not dependent on any one region – or on any single business activity.

“Record results are easy to announce, but not so easy to beat. We have set ourselves a high bar for 2005,” said Wuffli, speaking at a news conference in Zurich, when the 29 per cent increase in net profit was revealed.

Wuffli told swissinfo that Asia – particularly Japan and the Greater China region – were top of the priority list in terms of future regional growth opportunities.

“The rate of growth [to date] is impressive, but [the region represents] an attractive opportunity, not a dependency,” he explained.

“The UBS Group is broad enough and diversified enough not to have a single dependency.

“The biggest dependency is [what happens on] the financial markets – something that we cannot directly influence.”

UBS incurs market risks primarily though its trading activities, which are centred on the Investment Bank business group.

Growth driver

Chief Financial Officer Clive Standish said revenue from the Asia-Pacific region had increased by 35 per cent in 2004, compared with a global revenue increase of 11 per cent.

He said all UBS businesses in the region had “outperformed”, adding that 40 per cent of new UBS staff in 2004 had been taken on in Asia.

The headcount in UBS’s financial businesses – excluding the recently consolidated industrial holding, Motor Colombus – rose to 67,425, an increase of 1,495 on 2003.

Standish admitted that brand recognition was still a relative weak point in Asia, but said all of UBS’s major competitors shared the same problem.

“One advantage we do have is that, as Europeans, we have a differentiated brand,” noted Standish.

“We are seen as a very strong alternative to the Americans, and that does give us a certain competitive advantage.”

Attractive business

In terms of individual business activities, Standish said investment banking would continue to be a key growth driver, particularly given new enthusiasm for merger and acquisition activities in the US and elsewhere.

UBS chairman Marcel Ospel has said in the past that he wants the Investment Bank division to become the biggest and most profitable global player in the sector by 2008.

However, Standish said wealth management – where UBS is already the biggest player worldwide – would remain the largest source of revenue worldwide in years to come.

He told journalists that it was an “attractive business to be in”, with people generally getting older and “the rich getting richer”.

Last year the bank spent a total of about SFr1 billion on targeted acquisitions in the wealth-management field worldwide.

UBS has four main business divisions: Wealth Management and Business Banking, Global Asset Management, Investment Banking, and Wealth Management USA.

Exceeding expectations

Financial analysts seemed suitably impressed with the 2004 results and said they were optimistic about the future growth prospects for the Swiss bank.

The verdict from Aargau Cantonal Bank was par for the course: “The results were impressive. Expectations were high and UBS managed to exceed even those.”

Shares in UBS, which have already reached their highest level in six and a half years, rose further in trading on Tuesday, crossing the SFr100 mark.

“What is impressive is that UBS beats the consensus each time. And expectations are high,” commented an analyst at Bordier & Cie.

Wuffli pointed out that UBS was now more profitable than it had been at the height of the “bull market” some five years ago.

And he added that profits would have been even higher were it not for the ongoing fall of the US dollar against the Swiss franc.

swissinfo, Chris Lewis in Zurich

Key facts

Net profit reached a record SFr8.1 billion (including SFr45 million from industrial holding Motor Colombus) – up 29% on 2003.
Revenues increased in all areas, pushing the key cost-income ratio down to 72.6%.
Other key financial targets were also surpassed, with return on equity totalling 24.7%, earnings per share up 37%, and net new money up 29%.

In brief

UBS has surpassed expectations with its record annual results – and now faces the tricky question of how to do as well next year.

CEO Wuffli says one promising area is Asia, particularly Japan and China, which saw revenues increase by 35% in 2004.

However, he stresses that UBS is not dependent on any one region, or any single business area.