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Profitability maintained
 
In the financial year 2011 UBP recorded a consolidated profit of CHF 198 million (8% less than the previous year), not including the expenses related to the take-over of ABN AMRO Bank (Switzerland) AG. Taking into account those costs, the net earnings amount to CHF 176 million.

Income came in at CHF 763 million (USD 816 million) for the year, almost the same as in 2010 (CHF 766 million). Interest income was CHF 163 million (USD 174.3 million), in line with the previous year (CHF 162 million). Amid strong volatility, trading accounted for CHF 163 million (USD 174.3 million). UBP’s operating expenses were kept well under control (-4% on a like-for-like basis on the previous year) at CHF 508 million (USD 543.2 million), taking into account expenses related to the acquisition deal concluded in 2011. The consolidated cost/income ratio for the Group was 66.6%.
 
Sound financial base

The balance sheet total reached CHF 18 billion (USD 19.3 billion), and the return on shareholders’ equity for the 2011 financial year was 10.6%. Overall the balance sheet remained stable, with a high level of liquidity. By pursuing a conservative approach to risk management, UBP has maintained a solid financial base and a strong balance sheet. With a Tier 1 capital ratio of 22.1%, UBP is one of Switzerland’s best-capitalised banks.
 
Investment convictions

Having made some major changes to its business model in 2010, UBP continued to invest in Private Banking – through its acquisition of ABN AMRO Bank (Switzerland) AG and the creation of teams specialised in emerging markets – and in Asset Management with the creation of two joint ventures in Asia, a high-priority growth market for UBP.

Amid the uncertainty pervading the economy and financial markets, the Bank’s investment strategy has been to prioritise the preservation of its clients’ capital. With this in mind, UBP clearly defined its positioning from the very beginning of 2011, removing all its exposure to the sovereign bonds of some of the eurozone’s peripheral countries, underweighting equities and allocating a large proportion of its portfolios’ assets to gold.

For further information
Jérôme Koechlin – Head of Communications: Tel. +41 58 819 26 40, e-mail jko@ubp.ch  

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•  Press release

2011 was the year of black swans – those highly unlikely occurrences that turn the world economy on its head. The Fukushima disaster, the eurozone debt crisis and the ensuing unparalleled strength of the Swiss franc were all black swans, representing dark signs for the global economy. Of course, black swans can occasionally exert a positive influence on the economy as well – we need only think of the fall of the Berlin Wall or the advent of the internet. So what black swans could be in store for 2012? How about European growth in excess of 1.2%, a positive scenario that no economist is forecasting? Or, more significantly, how about central banks losing control over inflation, as a result of their policy of monetising sovereign debt to excess?

The end of a cycle
Ever since the 1950s it has been the US consumer that has driven the world economy, but in a car purchased on credit. As a result of this spending, US household debt is now greater than the gross domestic product (GDP) of what remains the world’s largest economy. The same has happened to national debt. We are now at the end of an economic cycle in which growth was based on excessive debt in both the public and the private spheres. When debt increases but GDP is rising faster, the debt/GDP ratio falls. Growing its way out of debt has been the key plank of the United States’ policy since 1950. The recessions that the US experienced during this time were generally linked to overproduction by businesses, which simple inventory correction was able to fix. But we have now switched from looking at the US economy’s P&L to analysing its balance sheet. The verdict leaves no room for doubt: household and national debt simply has to be reduced. Returning to more balanced growth and rebuilding savings is just as essential for the eurozone. Today, none of its member states – not even former model pupils such as Germany – are meeting the Maastricht criteria, particularly the requirement that government debt be no higher than 60% of GDP. If the euro is to stabilise, or possibly even continue to exist in its current form, eurozone governments must deleverage.

A world turned upside down  
It is normally the industrialised nations that need to offer up their savings to help developing countries develop, but now the opposite is happening. When it comes to debt, emerging countries boast much better figures. Their national debt averages 40% of GDP, and this figure is expected to fall over the coming years. Emerging countries have also run current account surpluses since 2004, whilst the G7 countries have been recording deficits. The upshot is that when the European Financial Stability Facility needs more funds, all eyes turn to China.

After the crisis comes the recovery
The greatest challenge for states and central banks in 2012 and beyond will be to implement austerity policies that are able to reassure the markets without plunging their economies into a deep recession. This is a monumental challenge, as is trying to reduce the debt burden by creating a little inflation, but without allowing prices to spiral out of control. Since 1870, the world has seen 148 economic crises in which the affected countries’ GDP decreased by more than 10%. After the crisis of 1997-98, emerging countries succeeded in rebuilding their savings and reducing their debt, and today they find themselves in the comfortable position of lender. Let us hope that industrialised countries can do the same.

Our convictions for 2012

•  We have entered another period of turbulence for the world economy and the financial markets.
   
• Deleveraging of government debt in the US and Europe will entail a period of lower growth which will last beyond 2012.
   
• The banking system remains weakened by its undercapitalisation, and the systemic risks remain intact.
   
• The monetisation of debt could produce uncontrolled inflationary pressure in the medium term.
   
• Sovereign debt will be damaging for government bonds. We prefer high-quality corporate bonds, except for financials.
   
• Given the strength of corporate balance sheets, high-yield bonds offer the chance of attractive returns, even in a low-growth environment.
   
• With sustained growth and low debt, emerging countries offer stronger fundamentals. Investments in their external debt remain an attractive option.
   
• Equity market valuations are fair, and there are some tactical opportunities on offer, particularly in Europe. Nevertheless, the markets could suffer in 2012 if, as is likely, there are disappointments on corporate earnings.
   
• In our view, gold remains the best asset to get us through the crisis. It is the ultimate shield against monetary chaos.
   
• We prefer the return of capital to a return on capital.  

Press release


Disclaimer
The present document is provided only for information purposes and your personal use. It should not be construed as an offer, recommendation or solicitation to enter into a relationship with the Bank or any entity of the UBP Group. This overview/presentation is not intended for distribution to, nor use by, any person or legal entity in any jurisdiction where such distribution, publication or use would be in breach of applicable regulations. The information contained herein is based on current sources deemed to be reliable, though the Bank offers no guarantee of its accuracy or completeness.