- Excluding these accounting charges, the underlying pre-tax profit was CHF 1,557 million

. Third quarter 2009 results
Third quarter net loss attributable to UBS shareholders was CHF 564 million (CHF 593 million pre-tax)
. After adjusting the pre-tax loss for three substantial accounting charges totaling CHF 2,150 million, the underlying pre-tax profit was CHF 1,557 million, a further improvement compared with the prior quarter
. The improvement in underlying Group profitability was driven by better performance in the Investment Bank's fixed income, currencies and commodities business
. Capital and balance sheet
Strong capital position: BIS tier 1 capital ratio further improved to 15.0%; FINMA leverage ratio of 3.51% at 30 September 2009

Further reductions of risk exposures and balance sheet: total assets down 8% to CHF 1,476 billion and total risk-weighted assets under Basel II down 15% to CHF 211 billion at quarter-end

Net new money and invested assets
Net new money outflows were CHF 16.7 billion for Wealth Management & Swiss Bank, CHF 9.9 billion for Wealth Management Americas, and CHF 10.0 billion for Global Asset Management

Invested assets were CHF 2,258 billion at quarter-end, up from CHF 2,250 billion on 30 June 2009

Cost reduction
Cost reduction program is on track. Personnel down by 2,783 to 69,023 at 30 September 2009; 2010 headcount target adjusted to 65,000 to reflect divestments announced in 2009


Outlook
Having stabilized the bank’s financial condition and resized the business, UBS expects to see further progress in restoring the underlying profitability of the business in future quarters, particularly in 2010. However, this progress will depend on market and other factors.

Commenting on UBS's third quarter results, Group CEO Oswald J. Grübel said: "In the last two quarters, we have been addressing the bank's most critical problems. Business is steadily returning to normal: We see this in a clear improvement in our financial performance. Management actions are delivering visible results, and we are continuing to emphasize risk reduction and capital strength. Moreover, the settlement of the litigation with US tax authorities and the decision of the Swiss government to exit its investment in UBS are having a profound impact on our efforts to rebuild confidence in our company and on staff morale. Having stabilized the bank's financial condition and resized the business, I expect to see further progress in future quarters, particularly in 2010. However, this progress will depend on market and other factors."

Third quarter accounting charges of CHF 2,150 million

UBS reports a third quarter net loss attributable to UBS shareholders of CHF 564 million (CHF 1,402 million in second quarter), due to three substantial accounting charges.

In third quarter 2009, UBS incurred an own credit charge of CHF 1,436 million for financial liabilities designated at fair value (CHF 1,213 million in second quarter), largely reflecting the tightening of UBS's credit spreads in line with a significant improvement in the market's perception of the bank's creditworthiness. This charge does not impact the Group's regulatory capital.

In relation to the closing of the UBS Pactual sale, UBS recorded a net loss of CHF 409 million. This charge reflected foreign currency translation impacts on the carrying value of UBS Pactual and the impact of the translation of the US dollar-denominated sale consideration into Swiss francs. As a result of the sale of UBS Pactual, UBS's tier 1 capital increased by CHF 0.7 billion and risk-weighted assets decreased by CHF 2.0 billion.

The conversion of the mandatory convertible notes (MCNs) issued to the Swiss Confederation resulted in a loss of CHF 305 million.

Underlying profitability improved

Excluding the above mentioned charges, underlying pre-tax profitability increased to CHF 1,557 million. This was mainly due to better results in the Investment Bank's fixed income, currencies and commodities (FICC) business. The other business divisions contributed positively to the quarter’s results, although a decline in pre-tax profits from Wealth Management & Swiss Bank partly offset the improvement seen in the Investment Bank, Wealth Management Americas and Global Asset Management.

Total operating income decreased slightly to CHF 5,766 million from CHF 5,770 million. Operating income in third quarter 2009 included the effect of the accounting charges explained above. Net income from trading businesses was positively affected by the improvement in the Investment Bank's FICC business. Net fee and commission income was up slightly as higher portfolio management and advisory fees offset small decreases in other categories. UBS recorded lower credit loss expenses of CHF 226 million in third quarter 2009, compared with CHF 388 million in second quarter 2009.

Total operating expenses decreased 10% to CHF 6,359 million from CHF 7,093 million. Excluding the goodwill impairment charge of CHF 492 million in the second quarter related to the sale of UBS Pactual and restructuring charges in the second and third quarter, operating expenses would have been up 6%. This was driven by an increase in personnel expenses, partly reflecting a change in compensation policy, under which a higher proportion of variable compensation is to be paid in cash (and therefore expensed in the performance year 2009) than in share-based awards (which are amortized over the vesting period of the awards). All business divisions were affected by this change, but Wealth Management & Swiss Bank was the most heavily affected.

Outlook
UBS expects to see further progress in future quarters, particularly in 2010. However this progress will depend on market and other factors. UBS anticipates the early part of 2010 to reflect the full impact of 2009's cost reductions. The bank does not expect an immediate recovery in client net new money flows, and the impact of low interest rates on net interest income continues to hold back revenues, especially in Wealth Management & Swiss Bank. UBS expects the Investment Bank's performance to continue to improve into 2010, but fourth quarter results will likely reflect the early stage of its recovery. In addition, based on current conditions, UBS expects another own credit charge in the fourth quarter, as a result of further tightening of its credit spreads.