UBS » Topics » Lending and borrowing

This excerpt taken from the UBS 6-K filed Aug 4, 2009.
Lending and borrowing

Lending
“Cash and balances with central banks” was CHF 38 billion on 30 June 2009 – a slight decrease of CHF 1 billion from the prior quarter-end. “Due from banks” decreased by CHF 7 billion,

largely due to the lower variation margins deposited for derivative instruments, though these were partly offset by current account increases. “Loans” were reduced by CHF 28 billion to CHF 316 billion on 30 June 2009. The second quarter decreases in lending occurred predominantly in the Investment Bank, where they were spread across all major products, including fixed-term loans which were reduced mainly due to the final transfers under the SNB transaction in early April. Although UBS was no longer at risk from these assets they were still held on UBS’s balance sheet at the end of the first quarter. In addition, variation margins deposited by UBS for derivative instruments and the de-leveraging in the prime brokerage business reduced the loan volume. The loan book of Wealth Management & Swiss Bank declined by CHF 3 billion to CHF 203 billion, with the majority of the decline in lombard lending.

Borrowing
The Investment Bank reduced its reliance on unsecured funding by reducing its assets. Unsecured borrowings declined substantially in second quarter 2009, decreasing by CHF 61 billion to CHF 830 billion. Money market paper issuance was CHF 86 billion, a decrease of CHF 39 billion, due to lower funding needs. Customer deposits (“Due to customers”) amounted to CHF 446 billion on 30 June 2009, a decrease of CHF 20 billion, of which CHF 7 billion was attributable to currency movements. The outflows of client deposits occurred predominantly in the Investment Bank’s prime brokerage business and in Wealth Management & Swiss Bank’s fixed-term and fiduciary deposits, while Wealth Management & Swiss Bank recorded continued net inflows of CHF 3 billion in savings and personal accounts. “Due to banks” decreased by CHF 8 billion to CHF 109 billion on 30 June 2009, with the reduction driven by UBS’s central funding entity (the Investment Bank’s foreign exchange and money market desk) and decreased variation margins for derivative instruments. “Long-term debt issued” and “Financial liabilities designated at fair value” grew by CHF 6 billion to CHF 190 billion on 30 June 2009, related to valuation on equity-linked notes, credit-linked notes and benchmark bonds issued in the amounts of EUR 1.5 billion and CHF 0.7 billion. In addition UBS accessed more than CHF 2 billion of additional new medium- to long-term funds via the Mortgage Bond Bank of the Swiss Mortgage Institutions by pledging high-quality Swiss residential mortgages.

Repurchase / reverse repurchase agreements and securities borrowing / lending

In second quarter 2009, UBS increased its secured funding by CHF 5 billion to CHF 109 billion.



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Table of Contents

Balance sheet

The cash collateral on securities borrowed and reverse repurchase agreements declined by CHF 12 billion to CHF 303 billion on 30 June 2009. This was due to continued overall balance sheet reduction measures.

This excerpt taken from the UBS 20-F filed May 21, 2009.
Lending and borrowing

Lending

Cash and balances with central banks was CHF 33 billion on 31 December 2008, an increase of CHF 14 billion from the prior year-end. Due from banks and loans to customers both increased CHF 4 billion, rising to CHF 64 billion and CHF 340 billion, respectively. The customer loan increase stemmed mainly from the BlackRock collateralized funding transaction (a USD 11.25 billion eight-year amortizing loan; balance on 31 December 2008 USD 9.2 billion) in second quarter 2008 and the reclassification of illiquid trading assets from the trading portfolio in fourth quarter 2008, par-

tially offset by lower volumes from the Investment Bank prime brokerage business and from lombard lending in Global Wealth Management & Business Banking. The Swiss loan portfolio remained stable during 2008 at around CHF 163 billion.

Borrowing

The reduction of the Investment Bank’s assets led to lower unsecured borrowing needs during a continued difficult market environment for term debt issuance and decreasing client deposits. Money market paper issuance was CHF 112 billion in 2008, a considerable reduction of CHF 41 billion from the prior year, as UBS decreased its reliance on these funding sources (in line with the firm’s lower overall funding needs) amid a reduced access to these markets for issuers in general. Financial liabilities designated at fair value stood at CHF 102 billion on 31 December 2008, a drop of CHF 90 billion from 31 December 2007, as a lower demand for structured debt was accompanied by declining market values, in particular of equity-linked notes as major stock indices fell. Long-term debt grew CHF 16 billion to CHF 86 billion as new issues of senior straight bonds, the CHF 6 billion MCN issuance to the Swiss Confederation and around CHF 2 billion of mortgage bonds issued via the Swiss Mortgage Bond Bank combined to outweigh maturing senior straight bonds. Interbank borrowing (due to banks) was CHF 126 billion on 31 December 2008, down CHF 20 billion from 31 December 2007. Customer deposits (due to customers) amounted to CHF 475 billion on 31 December 2008, a decrease of CHF 167 billion for the year, or CHF 134 billion, on a currency-adjusted basis. Global Wealth Management & Business Banking client deposits declined CHF 109 billion with reductions in fixed deposits, fiduciary investments and current accounts. Savings and personal accounts dropped CHF 10 billion over the course of 2008, though the last quarter recorded net inflows of CHF 3 billion. Investment Bank deposits declined CHF 58 billion, mainly driven by lower business funding needs and a decline in the prime brokerage business.

Repurchase/reverse repurchase agreements
and securities borrowing/lending

Secured lending on the asset side of the balance sheet, the sums of cash collateral on securities borrowed and reverse repurchase agreements declined during 2008 to CHF 348 billion on 31 December 2008. The CHF 236 billion decline occurred almost entirely in the Investment Bank, where the matched book was reduced as part of its overall balance sheet reduction (the matched book is a repurchase agreement portfolio comprised of assets and liabilities with equal maturities and equal value so that the market risks substantially cancel each other out). Furthermore, as part of the Investment Bank’s balance sheet reduction measures, its trad-



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Strategy, performance and responsibility
Financial performance

ing short positions were reduced CHF 102 billion, which resulted in lower short-coverings via reverse repurchase agreements and securities borrowing transactions.

A significant amount of trading assets are funded via repurchase agreements, so, in addition to the matched book reduction, the yearly decrease in trading assets also contributed to the drop in repurchase agreements. These reductions are reflected on the liability side of the balance sheet, where repurchase agreements and securities lent against cash collateral declined CHF 221 billion, standing at CHF 117 billion on 31 December 2008.

This excerpt taken from the UBS 20-F filed Mar 11, 2009.
Lending and borrowing

Lending

Cash and balances with central banks was CHF 33 billion on 31 December 2008, an increase of CHF 14 billion from the prior year-end. Due from banks and loans to customers both increased CHF 4 billion, rising to CHF 64 billion and CHF 340 billion, respectively. The customer loan increase stemmed mainly from the BlackRock collateralized funding transaction (a USD 11.25 billion eight-year amortizing loan; balance on 31 December 2008 USD 9.2 billion) in second quarter 2008 and the reclassification of illiquid trading assets from the trading portfolio in fourth quarter 2008, par-

tially offset by lower volumes from the Investment Bank prime brokerage business and from lombard lending in Global Wealth Management & Business Banking. The Swiss loan portfolio remained stable during 2008 at around CHF 163 billion.

Borrowing

The reduction of the Investment Bank’s assets led to lower unsecured borrowing needs during a continued difficult market environment for term debt issuance and decreasing client deposits. Money market paper issuance was CHF 112 billion in 2008, a considerable reduction of CHF 41 billion from the prior year, as UBS decreased its reliance on these funding sources (in line with the firm’s lower overall funding needs) amid a reduced access to these markets for issuers in general. Financial liabilities designated at fair value stood at CHF 102 billion on 31 December 2008, a drop of CHF 90 billion from 31 December 2007, as a lower demand for structured debt was accompanied by declining market values, in particular of equity-linked notes as major stock indices fell. Long-term debt grew CHF 16 billion to CHF 86 billion as new issues of senior straight bonds, the CHF 6 billion MCN issuance to the Swiss Confederation and around CHF 2 billion of mortgage bonds issued via the Swiss Mortgage Bond Bank combined to outweigh maturing senior straight bonds. Interbank borrowing (due to banks) was CHF 126 billion on 31 December 2008, down CHF 20 billion from 31 December 2007. Customer deposits (due to customers) amounted to CHF 475 billion on 31 December 2008, a decrease of CHF 167 billion for the year, or CHF 134 billion, on a currency-adjusted basis. Global Wealth Management & Business Banking client deposits declined CHF 109 billion with reductions in fixed deposits, fiduciary investments and current accounts. Savings and personal accounts dropped CHF 10 billion over the course of 2008, though the last quarter recorded net inflows of CHF 3 billion. Investment Bank deposits declined CHF 58 billion, mainly driven by lower business funding needs and a decline in the prime brokerage business.

Repurchase/reverse repurchase agreements
and securities borrowing/lending

Secured lending on the asset side of the balance sheet, the sums of cash collateral on securities borrowed and reverse repurchase agreements declined during 2008 to CHF 348 billion on 31 December 2008. The CHF 236 billion decline occurred almost entirely in the Investment Bank, where the matched book was reduced as part of its overall balance sheet reduction (the matched book is a repurchase agreement portfolio comprised of assets and liabilities with equal maturities and equal value so that the market risks substantially cancel each other out). Furthermore, as part of the Investment Bank’s balance sheet reduction measures, its trad-



45


Table of Contents

Strategy, performance and responsibility
Financial performance

ing short positions were reduced CHF 102 billion, which resulted in lower short-coverings via reverse repurchase agreements and securities borrowing transactions.

A significant amount of trading assets are funded via repurchase agreements, so, in addition to the matched book reduction, the yearly decrease in trading assets also contributed to the drop in repurchase agreements. These reductions are reflected on the liability side of the balance sheet, where repurchase agreements and securities lent against cash collateral declined CHF 221 billion, standing at CHF 117 billion on 31 December 2008.

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