Personnel expenses increased 3% compared with the prior year. Excluding restructuring costs, personnel expenses were up 1%, primarily reflecting a 4% increase in average headcount, which was partially offset by lower bonus accruals. General and administrative expenses were CHF 1,192 million compared with
CHF 1,264 million in 2010, which included a CHF 40 million litiga-
tion provision and a CHF 40 million charge to reimburse the Swiss government for costs incurred in connection with the US cross- border matter. Charges for services from other business divisions were down significantly to CHF 318 million from CHF 449 million, mainly due to higher charges to other businesses in relation to the Investment Products & Services unit. Depreciation was CHF 165
million compared with CHF 163 million one year earlier. Amortiza-
tion of intangible assets was CHF 37 million, up from CHF 19 million in 2010, mainly due to the impairment of intangible assets related to a past acquisition in the UK.
Development of invested assets
Net new money
Net new money improved significantly, with net inflows of CHF 23.5 billion compared with net outflows of CHF 12.1 billion in 2010, due to improvements in all regions and client segments. International wealth management net new money was CHF 22.4 billion compared with outflows of CHF 12.9 billion in the prior year. The strongest net inflows were recorded in Asia Pacific and emerging markets as well as globally from ultra high net worth clients. Europe reported net outflows, mainly related to the offshore business with countries neighboring Switzerland partly offset by net inflows from the European onshore business. Swiss wealth management reported net inflows of CHF 1.1 billion in 2011 compared with CHF 0.8 billion net inflows the year before.
Invested assets
Invested assets were CHF 750 billion on 31 December 2011, a decrease of CHF 18 billion from 31 December 2010. Negative equity market performance as well as adverse currency effects, mainly resulting from a 3% decline in the value of the euro against the Swiss franc, more than offset net new money inflows and positive bond market performance.
Gross margin on invested assets
The gross margin on invested assets was 101 basis points. When adjusted for the abovementioned sale of our strategic investment portfolio, the gross margin was 96 basis points, an improvement of 4 basis points from the prior year. The gross margin calculation excludes any effect on profit or loss from a property fund.
2011
Results
Pre-tax profit was CHF 2,676 million in 2011 compared with CHF 2,308 million in 2010, and included a gain of CHF 433 million
from the sale of our strategic investment portfolio and CHF 82 mil-
lion of restructuring charges associated with our cost reduction program. When adjusted for these two items, pre-tax profit was CHF 2,325 million, slightly up from the previous year as adverse currency effects and reduced client activity were more than offset by ongoing cost management.
➔Refer to the “Certain items affecting our results in 2011” sidebar for more information on our cost reduction program and the sale of our strategic investment portfolio
Operating income
Operating income was CHF 7,645 million compared with CHF
7,356 million. When adjusted for the sale of our strategic invest-
ment portfolio, total operating income declined 2% to CHF 7,212 million.
Net interest income increased 13% which included higher
treasury-related income, partially due to interest income stem-
ming from the strategic investment portfolio (which was acquired in late 2010) and an adjustment to the allocation of treasury-
related income between Wealth Management and Retail & Cor-
porate. Further, net interest income benefited from 10% higher average lending volumes. This was offset by margin pressure as a result of low market interest rates.
Net fee and commission income declined 12%. This was main-
ly due to lower asset-based fees, reflecting a CHF 44 billion lower
average invested asset base, primarily as a result of the strength-
ening Swiss franc and negative equity market performance. A de-
terioration in client activity, primarily in the second half of the year, impacted fee income. Trading income increased 36%, due to higher income linked to foreign exchange and precious metal client trading activities as well as changes in the revenue-sharing agreement related to the Investment Products & Services unit and higher treasury-related revenues. Other income was CHF 425 million in 2011 due to the abovementioned sale of our strategic investment portfolio.
Operating expenses
Operating expenses were down 2% from the prior year, or 3% excluding restructuring charges associated with our cost reduc- tion program.
Financial and operating performance
Results
In 2010, pre-tax profit increased 1% to CHF 2,308 million from
CHF 2,280 million in 2009, mainly due to a 3% decrease in operat-
ing expenses. Operating income was down 2%, and was nega-
tively affected by low market interest rates and the strengthening of the Swiss franc against major currencies.
Operating income
Total operating income was CHF 7,356 million, down 2% from CHF 7,471 million one year earlier. Interest income was down 6% due to pressure from the low interest rate environment and the decrease in value of the euro and US dollar against the Swiss franc. Fee income decreased 3% primarily due to lower asset-
based fees, reflecting a 4% lower average asset base. Lower inter-
est income was partly offset by a shift of treasury-related revenues from Retail & Corporate to Wealth Management in the second quarter of 2010, impacting interest and trading income. Other
income improved from negative CHF 189 million in 2009 to nega-
tive CHF 3 million in 2010 as CHF 155 million of revaluation ad-
justments on a property fund were included in 2009. Credit loss
recoveries were CHF 11 million in 2010, down from CHF 45 mil-
lion in 2009.
Operating expenses
Operating expenses declined 3% to CHF 5,049 million from CHF
5,191 million. Personnel expenses decreased 6% reflecting a re-
duction of average personnel levels by 9% and restructuring ex-
penses of CHF 190 million in 2009. General and administrative expenses, at CHF 1,264 million, were up CHF 82 million from CHF 1,182 million a year earlier, mainly due to a CHF 40 million charge to reimburse the Swiss government for costs incurred in
connection with the US cross-border matter, CHF 40 million liti-
gation provision, and higher sponsorship and branding costs re-
lated to the global re-launch of the UBS brand. Charges for ser-
vices from other business divisions, at CHF 449 million in 2010,
were slightly up from CHF 428 million in the previous year. De-
preciation was CHF 163 million compared with CHF 154 million
lion, down from CHF 67 million, mainly reflecting the impairment
of intangible assets related to invested asset outflows in UBS (Ba-
hamas) Ltd. in 2009.
➔Refer to “Note 1 Summary of significant accounting policies” in the “Financial information” section of our Annual Report 2010 for more information on allocation of additional
Corporate Center costs to the business divisions in 2010
Development of invested assets
Net new money
During 2010, all regions and client segments saw an improvement in net new money as net outflows declined to CHF 12.1 billion from CHF 87.1 billion in 2009. International wealth management net new money outflows declined significantly to CHF 12.9 billion from CHF 79.9 billion. While Europe saw ongoing net outflows, partially due to discussions regarding tax treaties, net inflows were recorded in the Asia Pacific region as well as globally from ultra high net worth clients. Swiss wealth management reported net inflows of CHF 0.8 billion in 2010 compared with CHF 7.2 billion net outflows the year before. Net new money for 2010 included inflows of CHF 3.7 billion resulting from transfers of Investment Bank clients to Wealth Management, as part of the Global Family Office initiative.
Invested assets
Invested assets were CHF 768 billion on 31 December 2010, a de-
crease of CHF 57 billion from 31 December 2009, as positive equity
market performance was more than offset by adverse currency ef-
fects including a 16% decline in value of the euro and an 11% decline in value of the US dollar against the Swiss franc, and net new money outflows in 2010. In Wealth Management, 31% of invested assets were denominated in euro and 31% in US dollars at the end of 2010.
Gross margin on invested assets
The gross margin on invested assets increased 1 basis point to 92 basis points, reflecting 3% lower income (excluding any effect
on profit or loss from a property fund), compared with a 4% de-
Wealth Management & Swiss Bank