UBS Announces Strategic Acceleration from a Position of Strength

  UBS Announces Strategic Acceleration from a Position of Strength

  *UBS reinforces commitment to deliver more sustainable and attractive
    returns; significantly reshaping its Investment Bank
  *Group Basel III RWAs¹ targeted to be reduced further to below CHF 200
    billion by end 2017; Investment Bank will operate with Basel III RWAs of
    less than CHF 70 billion effective 1.1.13
  *Group-wide efficiencies targeting incremental CHF 3.4 billion annual cost
    savings with total savings of CHF 5.4 billion by 2015; UBS investing CHF
    1.5 billion across all of its business divisions
  *With immediate effect, Andrea Orcel to lead the Investment Bank; Carsten
    Kengeter to step down from Group Executive Board and lead management of
    exited Investment Bank businesses and positions

Business Wire

ZURICH & BASEL, Switzerland -- October 30, 2012

Regulatory News:

Today, UBS (NYSE:UBS)(SWX:UBSN) announced a significant acceleration in the
implementation of its strategy to transform the firm and create the UBS of the
future. Building on the progress it has made in the last 12 months, UBS will
achieve this transformation by further sharpening its focus in the Investment
Bank. By concentrating on its traditional strengths in advisory, research,
equities, FX and precious metals and by exiting business lines, predominantly
those in fixed income that have been rendered uneconomical by changes in
regulation and market developments, UBS will reduce costs significantly while
driving further efficiencies across the Group more rapidly. By 2015, UBS is
likely to have a headcount of around 54,000. As a result of these actions UBS
will be unique in the banking industry – it will be less capital and
balance-sheet intensive, highly cash flow generative, more focused on serving
its clients and capable of maximizing value for its employees and
shareholders.

UBS aims to deliver progressive capital returns to its shareholders until it
achieves its future capital plans. Thereafter, UBS believes it can sustain and
grow its businesses while maintaining a total payout ratio of 50% or more.

Group CEO Sergio P. Ermotti said, "The strong progress we have made over the
last 12 months allows us to begin implementing this next phase of our
strategy. We are ahead of schedule in our plans to build additional capital
strength and reduce both costs and risk-weighted assets. The opportunity we
have today to accelerate the transformation of our firm is one that I believe
is unique – and one that will allow us to continue to unlock the full
potential of our franchise."

Reshaping UBS Investment Bank by building on its core strengths

UBS's Investment Bank will be focused on its traditional strengths in
advisory, research, equities, FX and precious metals. In order to be
successful, the Investment Bank must first be strong and successful in meeting
the needs of its clients. It will continue to serve its corporate, sovereign,
institutional and financial sponsor clients. It must also support sustained
growth in the Group by acting as a strong partner to all of UBS's business
divisions including Wealth Management. Achieving this will give the Group a
competitive advantage.

The Investment Bank will continue to have a critical role and will consist of
two core client segments. The first is Corporate Client Solutions, which
includes all advisory and solutions businesses plus execution that involves
corporate, financial institutions and sponsor clients. UBS will continue to
add value through advice and delivery of bespoke solutions. This is expected
to generate around one-third of the Investment Bank's revenues and utilize
around 15% of its Basel III RWAs. Investor Client Solutions includes
execution, distribution and trading for institutional investors, and will
provide support to UBS's wealth management businesses. It will comprise UBS's
leading equities businesses, FX, and precious metals. In flow rates and
credit, we will maintain risk facilitation capabilities aligned to our Debt
Capital Market and wealth management franchises. Investor Client Solutions is
expected to generate two-thirds of the Investment Bank's revenues and utilize
around 85% of its Basel III RWAs. UBS's Investment Bank is the first
capital-light Basel III compliant bank and UBS expects it will deliver returns
well in excess of its cost of capital.

The lines of business to be exited will include many that do not meet their
cost of capital sustainably or are in areas with high operational complexity
or long tail risks likely to weigh on future returns. Exited businesses and
positions will be transferred to, and reported in, the Corporate Center from
the first quarter of 2013. An experienced team, led by Carsten Kengeter, has
been appointed to manage the exited businesses and positions to optimize risk
and returns over time. This team will manage the sale or exit of these
positions within the robust oversight structure that has successfully
supported our risk-weighted asset reduction in the Legacy Portfolio.

We remain fully committed to our clients and businesses in Switzerland and
they are unaffected by these announcements.

With immediate effect, Andrea Orcel will become the Chief Executive Officer of
UBS's Investment Bank. Carsten Kengeter will step down from the Group
Executive Board and will be responsible for the successful management of the
exited Investment Bank businesses and positions. He will report to the Group
CEO.

Group CEO Sergio P. Ermotti said, "We will continue to deliver the very best
of UBS to all our clients and, to support this, over the next three years, we
will make investments totaling CHF 1.5 billion across all of our businesses.
The Investment Bank will continue to be a significant global player in its
core businesses, and we intend to forcefully compete to increase our market
share in these areas of strength."

UBS will expand its Group-wide efficiencies and free up resources to make
investments to support growth across the firm. These programs will enable UBS
to service its clients with greater agility and effectiveness, improving
product quality and speed to market. For the Group as a whole, UBS will
continue to strengthen its risk control, compliance and regulatory functions.
UBS is targeting total cost savings of CHF 5.4 billion including incremental
cost savings of CHF 3.4 billion above the CHF 2 billion cost savings program
announced in August 2011. These changes will take three years to fully
implement and UBS anticipates restructuring charges of CHF 3.3 billion over
the same period.

Savings will be achieved as a result of the actions UBS is taking in its
Investment Bank, as well as further Group wide efficiency measures. The
complete exit of business lines from the Investment Bank will eliminate
associated front-to-back costs. Further, the Investment Bank’s reduced
complexity and size will also enable a simplification of the Group as a whole,
including the Corporate Center, where excess management layers will be removed
and spans of control increased. A reduced real estate footprint and more
focused technology requirements will also lower costs. This will be supported
by the launch of an independent buying entity which will gain further
efficiencies. Finally, UBS will implement lean front-to-back processes across
the bank and simplify its product portfolio and production processes. As a
consequence, in 2015 UBS expects its headcount to be around 54,000 compared
with approximately 64,000 today.

Group CEO Sergio P. Ermotti said, "This decision has been a difficult one,
particularly in a business such as ours that is all about its people. Some
reductions will result from natural attrition and we will take whatever
measures we can to mitigate the overall effect. Throughout the process we will
ensure that our people will be supported and treated with care."

UBS is firmly committed to return capital to its shareholders. UBS began its
program with a dividend of CHF 0.10 per share for the financial year 2011.
Share dividend payouts are predicated on UBS meeting its capital targets. From
this point onwards, UBS will implement an attractive capital return program.
UBS will have the flexibility to determine a baseline dividend set at a
sustainable level, regardless of the normal economic fluctuations. In
addition, UBS intends to add supplementary capital returns, which take into
account its need for investment and any counter cyclical buffer it chooses to
maintain for a more challenging economic environment. UBS believes it can
sustain and grow its future business organically with a total payout ratio of
50% or more, taking into account the baseline dividend and any supplementary
payments it may make.

¹The calculation of our pro-forma Basel III RWA combines existing Basel 2.5
RWA, a revised treatment for low-rated securitization exposures which are no
longer deducted from capital but are risk-weighted at 1250%, and new
model-based capital charges. Some of these new models still require regulatory
approval and therefore our pro-forma calculations include estimates (discussed
with our primary regulator) of the effect of these new capital charges which
will be refined as models and the associated systems are enhanced.

Key performance targets¹

Group

  *Basel III RWAs reduced to CHF 200 billion by end 2017
  *Funded balance sheet² reduction: approximately CHF 300 billion by end of
    2015
  *Basel III common equity tier 1 ratio fully applied: 11.5% in 2013; 13% in
    2014
  *Cost / income ratio: 60-70% from 2015
  *Return on equity: at least 15% from 2015

Wealth Management

  *NNM growth rate: 3-5%
  *Gross margin: 95-105 bps
  *Cost / income ratio: 60-70%

Wealth Management Americas

  *NNM growth rate: 2-4%
  *Gross margin: 75-85 bps
  *Cost / income ratio: 80-90%

Retail & Corporate

  *Net new business volume growth: 1-4%
  *Net interest margin: 140-180 bps
  *Cost / income ratio: 50-60%

Global Asset Management

  *NNM growth rate: 3-5%
  *Gross margin: 32-38 bps
  *Cost / income ratio: 60-70%

Investment Bank

  *Annual pre-tax return on attributed equity: more than 15% effective 1.1.13
  *Cost / income ratio: 65-85% effective 1.1.13
  *Basel III risk-weighted assets: less than CHF 70 billion effective 1.1.13

Legacy Portfolio - Basel III risk-weighted assets

  *End 2013: approximately CHF 85 billion
  *End 2015: approximately CHF 55 billion
  *End 2017: approximately CHF 25 billion

¹Excluding own credit and significant non-recurring items (e.g., restructuring
costs) unless otherwise stated; target assumes constant FX rates; effective
immediately unless otherwise stated. ²Funded balance sheet defined as total
assets minus replacement values.

Significant additional disclosures

  *Group Basel III RWA - targeted to below CHF 250 billion by end 2013, below
    CHF 225 billion by end 2015 and below CHF 200 billion by end 2017. The
    Investment Bank will account for less than CHF 70 billion of this, a
    reduction of around CHF 90 billion from today
  *Basel III capital ratios - UBS expects to achieve fully applied Basel III
    CET 1 ratio of 11.5% in 2013
  *UBS's Basel III total capital requirements are expected to decline to
    17.5%, down from 19%^1 reflecting targeted reductions in risk-weighted
    assets and balance sheet^2
  *As a result of targeted balance sheet reductions UBS anticipates a 30%
    reduction in its funding requirements. Lower funding requirements will
    allow UBS to buy back debt
  *Group RoE expected to average in the mid-single digits in 2013 and 2014^3

¹Based on Swiss capital adequacy ordinance. ^2Balance sheet exposures net of
specific provisions, derivative exposure netting and repurchase agreements;
adjustments for OTC derivatives, off-balance sheet commitments and contingent
liabilities; estimated total capital requirement of 17.5% does not take into
account any potential rebate subject to measures taken to improve
resolvability. ³As reported.

News release available at www.ubs.com/media and www.ubs.com/investors.

Cautionary Statement Regarding Forward-Looking Statements

This document contains statements that constitute “forward-looking
statements”, including but not limited to management’s outlook for UBS’s
financial performance and statements relating to the anticipated effect of
transactions and strategic initiatives on UBS’s business and future
development. While these forward-looking statements represent UBS’s judgments
and expectations concerning the matters described, a number of risks,
uncertainties and other important factors could cause actual developments and
results to differ materially from UBS’s expectations. These factors include,
but are not limited to: (1) the degree to which UBS is successful in effecting
its announced strategic plans and related organizational changes, in
particular its plans to transform its Investment Bank, its efficiency
initiatives and its planned reduction in Basel III risk-weighted assets, and
whether in each case those plans and changes will, when implemented, have the
effects intended; (2) developments in the markets in which UBS operates or to
which it is exposed, including movements in securities prices or liquidity,
credit spreads, currency exchange rates and interest rates and the effect of
economic conditions and market developments on the financial position or
creditworthiness of UBS’s clients and counterparties; (3) changes in the
availability of capital and funding, including any changes in UBS’s credit
spreads and ratings; (4) changes in financial legislation and regulation in
Switzerland, the US, the UK and other major financial centers which may impose
constraints on or necessitate changes in the scope and location of UBS’s
business activities and in its legal and booking structures, including the
imposition of more stringent capital and liquidity requirements, incremental
tax requirements and constraints on remuneration; (5) changes in UBS’s
competitive position, including whether differences in regulatory capital and
other requirements among the major financial centers will adversely affect
UBS’s ability to compete in certain lines of business; (6) the liability to
which UBS may be exposed, or possible constraints or sanctions that regulatory
authorities might impose on UBS, due to litigation, contractual claims and
regulatory investigations, including those that may arise from the ongoing
investigations relating to the setting of LIBOR and other reference rates,
from market events and losses incurred by clients and counterparties during
the financial crisis of 2007 to 2009, and from the unauthorized trading
incident announced in September 2011; (7) the effects on UBS’s cross-border
banking business of tax treaties negotiated or under discussion between
Switzerland and other countries and future tax or regulatory developments; (8)
UBS’s ability to retain and attract the employees necessary to generate
revenues and to manage, support and control its businesses; (9) changes in
accounting standards or policies, and accounting determinations affecting the
recognition of gain or loss, the valuation of goodwill and other matters; (10)
limitations on the effectiveness of UBS’s internal processes for risk
management, risk control, measurement and modeling, and of financial models
generally; (11) whether UBS will be successful in keeping pace with
competitors in updating its technology, particularly in trading businesses;
(12) the occurrence of operational failures, such as fraud, unauthorized
trading and systems failures; and (13) the effect that these or other factors
or unanticipated events may have on our reputation and the additional
consequences that this may have on our business and performance. Our business
and financial performance could be affected by other factors identified in our
past and future filings and reports, including those filed with the SEC. More
detailed information about those factors is set forth in documents furnished
by UBS and filings made by UBS with the SEC, including UBS’s Annual Report on
Form 20-F for the year ended 31 December 2011. UBS is not under any obligation
to (and expressly disclaims any obligation to) update or alter its
forward-looking statements, whether as a result of new information, future
events, or otherwise.

Rounding

Numbers presented throughout this report may not add up precisely to the
totals provided in the tables and text. Percentages and percent changes are
calculated based on rounded figures displayed in the tables and text and may
not precisely reflect the percentages and percent changes that would be
derived based on figures that are not rounded.

Contact:

UBS AG
Investor contact
Switzerland: +41-44-234 41 00
Media contact
Switzerland: +41-44-234 85 00
UK: +44-207-567 47 14
Americas: +1-212-882 58 57
APAC: +852-297-1 82 00
www.ubs.com
 
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