Equity Research: BUY Case On UBS HOLD CS

10 January 2013
European Equity Research
Road to Damascus: Long Paul vs. Saul

Swiss Banks: BUY UBS; HOLD Credit Suisse
EUROPE | BANKS | UBSN VX | CSGN VX
We believe that UBSs decision to radically shrink the capital consumption of its value-destructive IB division by a further 57%, and cut IB headcount by some 7,000 will more than double the Groups capadjusted Return on Basel 3 Equity (RoB3E) from 11.2% in 2012 to 26.0% in 2015. With the capital released we expect dividends of at least CHF1.10 by 2015 implying a sustainable yield of 7.4% with special dividends taking the 2015-17e average yield to 11.9%. We believe that the effect of all this remains markedly underappreciated by the market. BUY with a price target of CHF18. By contrast, CS remains committed to its low-RoE IB division which by 2015 we estimate will still consume c60% of group capital whilst earning returns of just 5.2% - well below the cost of equity. An ongoing risk of cross-division subsidisation will depress the rating. On this basis we believe that CS trades at around fair value. HOLD but watch for any hint of shrinking and capital rationing at the IB, in which case there is the possibility of an immediate 8-15% upside.
Dramatic cost reduction for UBS, less so at CS: By 2015e we expect UBS will have cut operating expenses
by CHF3bn (13%) via a 15% reduction in headcount. CS will have reduced costs by a more mundane 4%, CHF0.9bn, with a 4% decline in head count.
Rapidly improving capital positions for both UBS and CS: By YE14e UBS will have a Basel 3 core equity
tier 1 of 13.6% (vs 3Q12: 9.3%), well in excess of its self imposed capital target. CS will have reached a less impressive 11.0% (3Q12: 7.5%), but ahead of fully implemented regulatory requirements.
Stable/falling RWAs by 2014/15 imply both UBS and CS will be strongly cash generative: By YE 15e UBS
will achieve returns of 26% (capital & regulation adj.) on RWAs of CHF200bn. Declining RWAs and improving capital ratios can allow for significant distributions eg. A potential dividend of CHF1.75 in 2015 (11.7% yield). Similar logic implies a 7.7% yield for CS (although it is likely to deploy much of this cash in its IB in our view).
UBS has CHF24.6bn of unrecognised potential deferred tax assets (UPDTAs) due to historic losses. We
estimate an NPV for these of CHF 7.5bn (13% mkt cap, or CHF2.0/share) which bolsters our valuation case.
Valuation: We use a SoTPs valuation approach taking account of UBSs superior capital position and UPDTAs
as well as the higher regulatory drag CS is likely to experience from coming regulatory changes. For a variety of reasons we apply a higher multiple to UBS WM business. We suggest 18% relative upside for UBS vs. CS.
Figure 1: Summary valuation and recommendations
Target price & ratings Target Rec Price Price % Upside EPS PEx CHF Buy 14.3 18.0 20% 1.22 12.3 CHF Hold 24.4 25.0 2% 2.40 10.2 11% 11.2 1) Underlying 2013E Div p/TCE RoTCE Yld6 1.2 10.9% 1.3% 1.1 11.0% 3.1% 1.2 10.9% 2.2% Cap Cap surp3 surplus2 %mkt cap 2.5bn 4% 0.5bn 2% 3% 2) U/L Reg&Cap adjusted 2013E4 Core EPS PEx5 TCE p/TCE5 RoTCE 1.34 10.0 10.1 1.2 13.2% 2.28 10.4 22.2 1.2 10.3% 10.2 1.2 11.7%
UBS CS Avg
TCE1 12.0 22.3
1. TCE=Tangible Common Equity per share ; 2. Surplus = equity capital surplus under fully loaded Basel III vs. 10% target; 3. surplus as % of market cap ; 4. 2013E Reg&CapAdj numbers are ex 1-offs, ex UBS legacy assets, and after buying back shares to eliminate capital surplus ; 5. ratios calculated after deducting 2012-13E announced dividends, UBS UPDTAs & value of capital allocated against legacy assets to increase comparability. 6. 2013e div yield. Share price data COB 7th January 2013. Source: Liberum Capital, Bloomberg
Cormac Leech
+44 (0)20 3100 2264 [email protected]
This document is a marketing communication and is not independent research prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to a prohibition on dealing ahead of the dissemination of investment research. For Reg-AC certification, see the end of the text. Liberum Capital does and seeks to do business with companies covered in this communication. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
10 January 2013
Contents
UBS Credit Suisse Appendix 22 33 44
www.liberumcapital.com
10 January 2013

We Swiss are farmers, not hunter-gatherers. The asset management business suits our character as well as our historical position. Your investment banking business, though, has never made a penny for your shareholders...1, Swiss National Bank to UBS Chairman in 2010
Both UBS and CS are reducing costs to address a weaker revenue environment. However UBS plans a considerably more aggressive 57% shrinkage in IB RWAs, vs 3Q12 level, via radical restructuring. By contrast CS still maintains committed to its IB division which will consume 63% of Group Capital by YE15e while generating returns on Basel 3 equity of only 5.2% (post Basel 3/ Dodd Frank/cost savings). As a result by 2015, UBS will have a capital and regulation adjusted RoB3E of 26.0% vs. only 13.3% for CS a divergence not yet fully discounted in our view. Over time we expect UBS share price outperformance may encourage CS to follow suit boosting fair value by 8-16% UBS and CS face a sluggish revenue environment. We estimate by 2015 revenues will be c 13-15% below 2010 levels. However both UBS and CS have credible plans to reduce costs (figure 15) to counter subdued revenue outlook. We estimate cost income ratios for both banks of 72-74% by 2015e from 2012e levels of 78-81%.
Figure 2: Summary underlying P&L excluding 1-offs*
% Ch CHF bn 2010 2011 2012e 2013e 2014e 2015e 2011 2012e 2013e Revenues UBS 31.1 27.9 27.9 27.5 27.4 27.0 -10% 0% -1% CS 30.4 24.4 25.7 25.6 25.5 25.9 -20% 5% 0% Costs UBS -23.9 -22.0 -22.5 -21.2 -20.3 -19.5 -8% 2% -6% CS -23.3 -21.2 -20.0 -19.6 -19.2 -19.2 -9% -5% -2% Cost change UBS 1.9 -0.5 1.3 0.9 0.8 CS 2.1 1.1 0.4 0.4 0.0 Revenue adj, cost change UBS -0.5 -0.5 1.1 0.8 0.5 CS -2.4 2.1 0.3 0.4 0.3 Cost Income UBS 77% 79% 81% 77% 74% 72% 2% 2% 2% CS 77% 87% 78% 77% 75% 74% 10% 10% -9% PBT UBS 7.1 5.8 5.2 6.3 7.0 7.4 -18% -10% 20% CS 7.2 3.1 5.5 5.7 6.1 6.5 -57% 80% 4% *Excluding UBS STAB option volatility, business realignment costs, exception litigation, 1-off rebound gains, gains on disposals and other 1-offs Source: Company Reports; Liberum Capital 2014e 0% 0% -4% -2% 2015e -1% 2% -4% 0% 2015/2010 -13% -15% -18% -18%
-4% -1% 13% 6%
-3% -1% 5% 7%
-5% -3% 4% -10%
UBS: 13% PBT CAGR 2013-15e: On a summary divisional basis UBS we expect the asset and wealth management business to grow at an average 11-17% over 2013-15e resulting in average underlying PBT growth for UBS of 13% despite only modest PBT growth in the IB due to exiting of certain FICC business. For full UBS divisional P&Ls, excluding 1-off items, see figures 36-43.
http://tinyurl.com/athw8tm , Martin Taylor (former Barclays CEO) FT op-ed 2Nov2012.
10 January 2013
Figure 3: UBS summary underlying divisional P&L

CHF bn 2010 2011 2012e Wealth Mgmt 2.4 2.3 2.3 Retail & Corporate 1.8 1.7 1.6 Global Asset Management 0.5 0.5 0.5 Investment Bank 2.2 1.1 0.9 Wealth Management USA 0.3 0.5 0.8 Centre Core 0.0 -0.2 -0.9 Total Underlying PBT ex legacy 7.1 5.8 5.2 Centre- Legacy 0.0 0.0 0.0 U/L PBT including legacy 7.1 5.8 5.2 1-offs 0.3 -0.4 -7.5 Reported PBT 7.4 5.4 -2.3 Group MI s -0.3 -0.3 -0.3 U/L Attributable 5.3 4.2 3.8 U/L EPS 1.4 1.1 1.0 Basel 3 RWAs 380 380 266 RoTCE at 10% CT1* 13.8% 11.2% 11.7% *not adjusted for financial regulation (e.g. Dodd Frank, ring-fencing etc) Source: Company Reports; Liberum Capital 2013e 2.8 1.8 0.6 0.8 1.1 -0.8 6.3 -3.5 2.8 0.0 2.8 -0.3 4.6 1.2 226 18.8% 2014e 3.0 1.8 0.7 1.0 1.3 -0.7 7.0 -3.5 3.5 0.0 3.5 -0.3 5.2 1.4 211 24.0% 2015e 3.1 1.8 0.7 1.0 1.3 -0.6 7.4 -1.0 6.4 0.0 6.4 -0.3 5.5 1.5 200 26.9% 2016e 3.3 1.8 0.8 1.0 1.4 -0.5 7.8 0.0 7.8 0.0 7.8 -0.3 5.8 1.5 192 29.6% 2017e 3.5 1.7 0.8 1.1 1.5 -0.5 8.1 0.0 8.1 0.0 8.1 -0.3 6.0 1.6 195 31.2% 2011 -3% -6% -12% -49% 86% -19% -19% 2012 -2% -3% 11% -15% 75% -10% -10% 2013 22% 12% 24% -15% 32% -12% 20% -47% 2014 8% 0% 11% 29% 14% -15% 13% 29% 2015 5% -1% 6% 0% 6% -17% 5% 81% 2016 6% 0% 4% 1% 6% -11% 5% 21% 2017 6% -3% 4% 1% 3% -11% 4% 4%
-19% -19%
-11% -11%
22% 23%
13% 13%
5% 5%
5% 5%
4% 4%
CS: 5% PBT CAGR 2013-15e: Similarly for CS in the asset and wealth management divisions we forecast average 2013-15 annual PBT growth of 9-26% resulting in group PBT growth of 5% despite flat PBT in the IB (due to sluggish FICC revenues). For full divisional P&L, ex 1-off items, see figures 51-57.
Figure 4: CS summary underlying divisional P&L
Wealth Mgmt Corporate & Institutional Investment Bank Asset Management Corporate Centre U/L Total PBT Rev 1-offs Cost 1-offs 1-offs Reported Total PBT Reported total check U/L PAT U/L Attributable Basel 3 RWAs U/L PBT/Avg RWAs Ro B3E @10% CT1* *not adjusted for financial regulation Source: Company Reports; Liberum Capital 2010 2.5 0.9 3.6 0.5 -0.3 7.2 0.2 -0.6 -0.4 6.8 6.8 5.6 4.9 398.7 1.8% 12.2% 2011 1.9 0.9 0.1 0.6 -0.3 3.1 1.0 -1.3 -0.3 2.7 2.7 2.3 2.0 330.0 0.8% 5.6% 2012e 2.2 0.9 2.7 0.3 -0.6 5.5 -1.8 -0.8 -2.6 3.0 3.0 4.5 3.9 298.7 1.8% 12.5% 2013e 2.5 0.9 2.6 0.5 -0.7 5.7 -0.5 -0.5 5.2 5.2 4.4 3.8 277.4 2.0% 13.3% 2014e 2.7 0.9 2.6 0.6 -0.7 6.1 -0.3 -0.3 5.8 5.8 4.7 4.1 284.7 2.2% 14.4% 2015e 2.9 0.9 2.6 0.6 -0.6 6.5 -0.3 -0.3 6.3 6.3 5.0 4.3 295.4 2.2% 15.0% 2011 -26% -2% nm 18% 19% -57% 2012e 19% 3% nm -43% 92% 80% 2013e 9% 0% -3% 47% 14% 4% 2014e 9% 0% 0% 23% 0% 6% 2015e 9% 3% 2% 9% -8% 7%
Below consensus for UBS and CS EPS by 2% and 8% respectively For UBS we are on average 2% above consensus EPS and 2% below on revenues. For CS we are on average 8% below consensus EPS and 10% below on revenues.
10 January 2013
Figure 5: Liberum revenue and EPS forecasts vs. Bloomberg consensus

CHF bn UBS LC e u/l revenue bn LC e reported revenue Consensus LCe/ Consensus LC e Adj EPS Consensus LCe/ Consensus CS LC e u/l revenue bn LC e reported revenue Consensus LCe/ Consensus LC e Adj EPS Consensus LCe/ Consensus Source: Company Reports; Liberum Capital 2011 27.9 29.8 2012e 27.9 25.6 25.5 0% 0.99 1.03 -4% 2013e 27.5 27.5 27.3 1% 1.22 1.08 13% 2014e 27.4 27.4 28.2 -3% 1.38 1.34 3% 2015e 27.0 27.0 28.1 -4% 1.46 1.61 -9% 2016e 27.8 27.8 n/a 2017e 28.5 28.5 n/a % Ch 2012e 0% -14% 2013e -1% 7% 2014e 0% 3% 2015e -1% 0% 2016e 3% 2017e 3%
1.53 2.10 -27%
1.59 n/a
-11% -7%
23% 5%
13% 24%
5% 20%
5% 31%
4%
25.7 24.0 24.4 -2% 2.29 1.84 24%
25.6 25.6 27.0 -5% 2.40 2.51 -4%
25.5 25.5 28.4 -10% 2.54 2.90 -13%
25.9 25.9 30.6 -15% 2.73 2.99 -8%
5% -4%
0% 10%
0% 5%
2% 8%
86% 50%
5% 36%
6% 16%
8% 3%
For UBS sharp rise in RoB3E due to reduced Capital Consumption

Capital consumption change 2011-15: down 47% for UBS; down 13% for CS For Credit Suisse, the reduction in RWAs from YE11-YE15e is likely to be much less than for UBS. From YE11-15e, UBS will have reduced its RWAs by 47% to CHF200bn vs. a 13% decline for CS to CHF295bn.
UBSs Capital consumption will drop by 47% 2011-2015 vs. a drop of only 13% for CS
Figure 6: UBS and CS Basel 3 RWAs CHFbn 2010-2017e
450 400 350 300 250 200 150 2010 2011 UBS
Source:
2012e
2013e
2014e
2015e CS
2016e
2017e
UBS RWA shrinkage implies a reduction in required capital of CHF18bn by YE15e vs. YE11 equivalent (32% of mkt cap) vs. a decline in RWAs of only 14% for Credit Suisse (11% of mkt cap).
10 January 2013
2012-15e: UBS RoB3E will more than double; limited improvement for CS Despite both banks making significant improvements in attributable income, UBS will deliver a stronger increase in Cap&Reg adjusted RoB3E 2012-15e, rising from 11.2% to 26.0% compared to CSs more subdued rise from 9.8% to 13.3% for CS. This divergence explains much of expected TSR outperformance we expect for UBS.
Figure 7: Change in RWAs and impact on Return on Basel 3 equity at 10% gearing
2011 2012e 2013e 2014e 2015e RWAs Basel 3 UBS 380 266 226 211 200 CS 339 299 277 285 295 Capital requirement at 10% UBS 38 27 23 21 20 CS 34 30 28 28 30 Cumul. Chnge in Capital required UBS (11) (15) (17) (18) CS (4) (6) (5) (4) Cumulative capital release as % mkt cap UBS -20% -27% -30% -32% CS -10% -16% -14% -11% Attributable Income UBS 4.3 3.8 4.6 5.2 5.5 CS 1.5 3.6 3.8 4.1 4.4 Return on Basel 3 equity at 10% gearing to RWAs UBS 11.2% 11.7% 18.8% 24.0% 26.9% CS 4.0% 11.4% 13.3% 14.4% 15.1% Return on Basel 3 equity adjusted for regulation* UBS 10.7% 11.2% 18.1% 23.2% 26.0% CS 2.7% 9.8% 11.5% 12.6% 13.3% *assume minus CHF0.5bn net of tax impact for CS and minus CHF0.2bn impact for UBS due to Dodd Frank and Ring-Fencing etc Source: Liberum Capital
For UBS the underlying RoB3E will more than double from 20122015e vs. a much more muted 32% rise for CS mainly due to differences in divergence in capital consumption but also due to more rapid earnings growth due to business mix changes
Comparing Return on Basel 3 equity (RoB3E) is more meaningful than RoTCE due to differences in composition of TCE for both banks: As figure 8 illustrates due to items such as unrealised losses from cash flow hedges, TCE per share is 73% higher than Basel 3 equity regulatory capital for UBS vs. only 42% for CS which misleadingly depresses UBSs relative RoTCE. Since Basel 3 equity capital determines capital adequacy, RoB3E is a more meaningful
10 January 2013
Analysis of composition of TCE shows that a relatively large proportion of UBSs tangible book value is not eligible Basel 3 equity capital which tends to misleadingly understate relative returns on equity vs. CS.
Figure 8: Bridge from TCE to Basel 3 equity capital 3Q12

B3 equity = 100% UBS CS Per Share UBS CS 14.0 22.4 -1.8 -5.6 0.0 2.3 12.2 -0.9 -0.2 0.0 0.0 0.0 -1.0 10.1 0.0 -1.4 -1.0 -0.3 0.0 7.5 -0.4 7.1 19.1 0.0 0.0 -0.2 1.8 2.0 -1.1 21.6 -2.0 -4.5 0.0 0.0 -0.6 14.4 -0.9 13.5 % Basel 3 RWAs UBS CS
CHF bn Shareholders equity Goodwill Mandatory convert Tangible Common Equity Unrealised losses from Cash flow hedges Treasury shares ex Fair Value Own Debt (FVoD) Pension plan adjustments Qualifying non controlling interest Other Capital deductions Basel II core tier 1 Ex non controlling interests Deferred tax Pension StabFund Option Net Other deductions Basel III equity tier 1 co def Libor rigging litigations/fines Basel III equity tier 1 LCe def #shares outstanding diluted Basel 3 RWAs Attributable 2012e RoTCE Ratio of RoTCE for CS vs. UBS in 2012**
UBS 52.4 -6.6 0.0 45.8 -3.2 -0.7 -0.1 0.0 0.0 (3.7) 38.0 -5.3 -3.8 -1.0 0.0 28.0 (1.5) 26.5 3.7 301 3.8 8.3%
CS 35.7 (8.9) 3.6 30.4
(0.3) 2.8 3.2 (1.8) 34.4 (3.2) (7.2)
173% -12% -3% -1% 0% 0% -14% 144% 0% -20% -14% -4% 0% 106% -6% 100%
142% 0% 0% -1% 13% 15% -8% 160% -15% -34% 0% 0% -5% 107% -7% 100%
(1.0) 22.9 (1.5) 21.4 1.6 307 3.2 10.7 % 1.3x
15.2 % -1.1% -0.2% 0.0% 0.0% 0.0% -1.2% 12.6 % 0.0% -1.8% -1.3% -0.3% 0.0% 9.3% -0.5% 8.8%
9.9% 0.0% 0.0% -0.1% 0.9% 1.1% -0.6% 11.2 % -1.1% -2.3% 0.0% 0.0% -0.3% 7.5% -0.5% 7.0%
RoB3CT1 14.3% 15.1% Ratio of RoB3CT1 for CS vs. UBS in 1.1x 2012** *Fully loaded; CS returns are higher due to a lower capital ratio. Source: Company accounts; Liberum Capital
Figures 9 and 10 show our forecasted returns for UBS and CS on an i) underlying basis ii) After assuming a buyback/ special dividend to eliminate excess capital iii) After also adjusting for the earnings drag from more onerous regulation: By 2015 on a FinReg and Cap adjusted basis we expect UBS and CS to achieve a RoB3E of 26.0% and 13.3% respectively which is the most meaningful valuation metric in our view
Figure 9: UBS underlying return on Basel 3 equity
30% 25% 20% 15% 10% 5% 0% 2011 UBS underlying 2012 2013 UBS Cap Adj 2014 2015 UBS FinReg Cap Adj
Figure 10: CS underlying return on Basel 3 equity

30% 25% 20% 15% 10% 5% 0% 2011 CS underlying 2012 2013 CS Cap Adj 2014 2015 CS F inReg Cap Adj
*FinReg: Financial Regulation such as Dodd Frank and Ring Fencng Source: Liberum Capital
*FinReg: Financial Regulation such as Dodd Frank and Ring Fencng Source: Liberum Capital
10 January 2013
UBS could annually yield 11.9% 2015-17e; CS 8.6%

UBS has scope to pay significant dividends: 9.5% by 2015e (7.4% sustainable) Our base case forecasts UBS will pay a cash dividend equivalent to a 3.3% yield in 2014, rising to a 9.5% in 2015-2017e. Despite this substantial yield, the Basel 3 core tier 1 continues to climb reaching 15.8% in 2017e.
Limiting the UBS capital ratio to 13.6% implies a 11.9% yield 201517e of which 7.9% is sustainable and 4% special
Alternatively solving for a steady 13.6% Basel 3 equity ratio (the YE13e level)
implies an average annual 11.9% yield over 2015-17.
The maximum sustainable underlying yield over the same period assuming 5%
annual growth would be 7.9% (assuming 5% normalised RWA growth) implying a 4% annual special dividend from 2015-17e (i.e. 7.9%+4.0%=11.9%) as the business transitions.
Put differently from YE14-YE17e, UBS will generate distributable cash of

CHF20.3bn after which a sustainable c8.4% dividend (from 2018e) looks feasible equivalent to a payout ratio of c 80% growing broadly in line with invested assets, with improving operating leverage roughly offsetting likely margin pressure.
10 January 2013
Figure 11: UBS dividend scenarios: conservative; targeting stable Basel 3 equity 201417e; long run sustainable dividend
CHF bn RWAs Basel 3 equity Basel 3 equity as % RWAs base case Statutory Attributable CHF Underlying Attributable avg #shares bn Adj EPS i) Base case Payout ratio statutory Payout ratio underlying Dividend CHF bn Announced DPS Current share price Implied yield 2011 380 25 6.7% 4.2 4.3 3.8 1.11 2012e 266 25 9.3% -3.1 3.8 3.8 0.99 2013e 226 27 11.8% 2.1 4.6 3.8 1.22 2014e 211 29 13.6% 2.8 5.2 3.8 1.38 2015e 200 29 14.2% 5.2 5.5 3.796 1.46 2016e 192 30 15.4% 6.4 5.8 3.8 1.53 2017e 195 31 15.8% 6.6 6.0 3.8 1.59 Avg 2015-17e
For UBS, in our base case despite paying a dividend of CHF1.42 per share from 2015e, yield of 9.5%, the Basel 3 equity ratio continues to climb to 15.8% by 2017e.
9% 9% 0.4 0.10 15 0.7%
-18% 15% 0.6 0.15 1.0%
36% 16% 0.7 0.20 1.3%
68% 36% 1.9 0.50 3.3%
102% 96% 5.3 1.42 9.5%
84% 91% 5.3 1.42 9.5%
81% 88% 5.3 1.42 9.5% 9.5%
For UBS, solving for the dividend required to keep the equity capital ratio fixed at 13.6%, implies a dividend of CHF 1.75 in 2015e and an average yield 2015-17e of 11.9%
ii) DIV for unch. Capital from 2014 Basel 3 equity Basel 3 equity % Payout ratio underlying Dividend CHF bn DPS Implied yield iii) Sustainable Dividend Underlying Attributable RWAs Assumed RWAs Growth RWA Growth CHF bn Cap. Consumption @13% Implied Payout ratio Implied DPS Implied Yield Source: Liberum Capital estimates
25 6.7% 9.0% 0.4 0.10 0.7%
25 9.3% 15.1% 0.6 0.15 1.0%
27 11.8% 16.4% 0.7 0.20 1.3%
29 13.6% 36.2% 4.8 0.50 3.3%
27 13.6% 120% 6.6 1.75 11.7%
26 13.6% 127% 7.4 1.95 13.0%
25 13.0% 104% 6.3 1.66 11.1%
11.9%
Assuming long run RWA growth of 5% (c NGDP) implies a payout ratio of 79%, sustainable long term dividend yield of 7.9%, growing at perhaps 4-5% per annum
4.3
3.8
4.6
5.2
5.5 200 5% 10 1.3 76% 1.1 7.4%
5.8 192 5% 10 1.3 78% 1.2 8.0%
6.0 195 5% 10 1.3 79% 1.3 8.4%
7.9%
CS base case: cash dividend yield of 4.7% by 2015e For CS the capacity to distribute cash is less impressive due to lower returns and less reduction in capital requirements. That said, our base case forecast of 2015e DPS of CHF 1.15 (underlying payout ratio of 42%) is still equivalent to a 4.7% yield.
Alternatively solving for a steady 11.0% Basel 3 equity ratio (the YE13e level)
implies an average annual 8.6% yield over 2015-17.
For CS, we estimate the max sustainable yield to be 6.2% assuming 6% RWA
growth (higher RWA growth than UBS given higher IB mix).
10 January 2013
Figure 12: CS dividend scenarios: conservative; targeting stable Basel 3 equity 201417e; long run sustainable dividend
For CS, in our base case despite paying a dividend of CHF1.15 per share from 2015e, yield of 4.7%, the Basel 3 equity ratio continues to climb to 12.6% by 2017e
CHF bn RWAs Basel 3 equity Basel 3 equity % Statutory Attributable CHF Underlying Attributable avg #shares bn Adj EPS i) Base case Payout ratio statutory Payout ratio underlying Dividend CHF bn Announced DPS Current share price Implied yield 2011 339 12 3.6% 1.6 1.9 1.2 1.58 2012e 299 24 8.2% 3.1 3.8 1.6 2.37 2013e 277 28 10.2% 3.5 3.8 1.6 2.40 2014e 285 31 11.0% 3.9 4.1 1.6 2.54 2015e 295 34 11.6% 4.2 4.4 1.6 2.73 2016e 304.3 36.8 12.1% 4.4 4.4 1.6 2.87 2017e 313.4 39.4 12.6% 4.6 4.6 1.6 3.01 Avg 2015-17e
55% 48% 0.9 0.75 24.38 3.1%
32% 26% 1.0 0.75 3.1%
39% 35% 1.4 0.85 3.5%
41% 39% 1.6 1.00 4.1%
44% 42% 1.8 1.15 4.7%
43% 2.0 1.23 5.1%
43% 2.1 1.30 5.3% 5.0%
For CS, solving for the dividend to keep the Basel 3 capital ratio at 11.0% in 2015e implies a dividend of 1.88, yielding 7.7% and an average 2015-17e yield of 8.6%
ii) DIV for unch. Capital from 2014 Basel 3 equity Basel 3 equity % Payout ratio underlying Dividend CHF bn DPS Implied yield iii) Sustainable Dividend Underlying Attributable RWAs Assumed RWAs Growth RWA Growth CHF bn Cap. Consumption @11% Implied Payout ratio Implied DPS Implied Yield Source: Company Reports; Liberum Capital
12 3.6% 55% 0.9 0.75 3.1%
24 8.2% 32% 1.0 0.75 3.1%
28 10.2% 39% 1.4 0.85 3.5%
31 11.0% 79% 3.1 1.00 4.1%
32 11.0% 72% 3.0 1.88 7.7%
33 11.0% 78% 3.4 2.14 8.8%
34 11.0% 78% 3.6 2.26 9.3%
8.6%
Assuming RWA growth of 6% implies a payout ratio of 52% and a sustainable yield of 6.2% growing at perhaps 4%
1.6
3.1
3.5
0.75 3.1%
0.75 3.1%
0.85 3.5%
3.9 285 6% 17 1.9 51% 1.3 5.4%
4.2 295 6% 18 1.9 53% 1.5 6.0%
4.4 316.1 6% 19 2.1 52% 1.5 6.2%
4.6 338.2 6% 20 2.2 52% 1.6 6.4%
6.2%
As a summary comparison, Figures 13 and 14 illustrate that UBS is likely to return significantly more cash over the next 5 years under the various scenarios.
Figure 13: UBS dividend yield scenarios
15.0% 10.0% 5.0% 0.0% 2011 2012e 2013e 2014e 2015e 2016e 2017e base case maintain 13.6% capital sustainable
Figure 14: CS dividend yield scenarios

15.0% 10.0% 5.0% 0.0% 2011 base case 2012e 2013e 2014e 2015e 2016e 2017e maintain 11% capital sustainable
Source: Liberum Capital
UBS: Obvious future risk of substantial cash generation leading to complacency/ valuedilutive M&A; manageable risk in our view with the right management incentives
Given UBSs significant cash generation, we see downside risk from potentially
value destroying acquisitions. It remains to be seen whether management will distribute the maximum appropriate level of capital to shareholders.
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10 January 2013
Both UBS and CS undertaking significant cost save initiatives through 2015e likely to significantly improve PBT
For UBS we assume CHF3bn of cost reduction 2015e vs. 2012e
UBS cost reduction plan, 2013-2015e Limited efficiency gains in 2012e: On an underlying basis UBS will increase costs by CHF0.5bn in 2012 to CHF 22.5bn vs. 2011 adversely impacted by a CHF0.6bn adverse FX move.
Mgmt target CHF4bn of cost saves by 2015e: From the 2012e cost run-rate of
CHF22.5bn, Management have committed to a further CHF4bn reduction by 2015 to cCHF18.5bn in 2015e, or CHF2.5bn net of CHF1.5bn of investment spend.
We assume reduced investment spend due to weak revenues: Our own

forecasts assume underlying 2015e costs of 19.5bn (down CHF3.0bn from 2012e), CHF0.5bn lower than management guidance in effect we are forecasting that management will cut back on investment spend due to a weak revenue environment. Our 2015e revenues are CHF1.1bn below consensus and our 2015e EPS is conservatively 9% below Bloomberg consensus.
Our base case forecasts revenue-adjusted cost reduction of CHF2.3bn by

2015e after changes in costs are adjusted for changes in revenues assuming a marginal 75% cost income ratio vs. the 2012 run-rate.
Base case forecasted CHF3bn cost reduction looks achievable: equivalent

to 13% of cost base and seems feasible given the planned 15% reduction in headcount (10,000 staff) and also the IB business exits within credit and rates. See figure 24 below for detailed analysis costs per employee by division for UBS. CS cost reduction plan, 2013-2015e Improved efficiency in 2012e: On an underlying basis CS reduced costs by CHF0.8bn in 2012e to CHF 20.3bn vs. 2011, reducing the clean cost income ratio to 78% from the uncomfortably high 87% in 2011.
For CS we assume CHF0.9bn of cost reduction by 2015e vs. 2012e.
Our 2015e CS cost income ratio of 74% is below an estimated Bloomberg consensus 76%
Management guide for CHF2bn reduction by 2015 (excluding variable

compensation) vs. 9M12 level. This would imply 2015e costs of c CHF18.3bn. Our own forecasts assume underlying 2015e costs of 19.3bn down CHF0.9bn from 2012e or CHF1.1bn higher than management guidance as we expect investment spend and other factors (such as e.g. regulatory spend, PAF3/ Bond Plus etc) to significantly impact costs. As context, our 2015e revenues are CHF4.7bn below consensus (admittedly small Bloomberg sample) and our EPS is 8% below consensus. Reverse engineering this consensus implies consensus 2015e group costs of CHF23.2bn and a cost income ratio of 76% vs. our 74% implying consensus cost reduction expectations (even revenue adjusted) are lower than our own forecasts.
On a revenue adjusted basis where changes in costs are adjusted for changes
in revenues assuming a marginal 75% cost income ratio, we forecast CS will eliminate CHF1.0bn in costs by 2015e equivalent to 5% of total costs. This looks feasible given
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10 January 2013
opportunities to rationalise FICC, Underwriting and advisory business in
some geographies
scope to consolidate back office systems. high 2012e starting point cost income ratio of 78% progress being made: the CHF1.8bn of cost saving progress achieved in
2012 also point to further efficiency gains over 2013-2015.
Figure 15 summaries our cost forecasts for UBS and CS

Figure 15: Cost reduction plans absolute and revenue adjusted.
2010 2011 2012 2013 2014 2015 2016 2017 Clean Revenues UBS CS Clean Costs UBS CS Cost income ratio UBS CS Clean PBT UBS CS Change in Clean PBT UBS CS Change in Revenues UBS CS Change in costs UBS CS Assumed incremental Cost income ratio UBS CS Cost change due to Revenue Change UBS CS 31.1 30.4 23.9 23.3 77% 77% 7.1 7.2 27.9 24.4 22.0 21.2 79% 87% 5.8 3.1 -1.3 -4.1 -3.1 -6.0 -1.9 -2.1 75% 75% 27.9 25.7 22.5 20.0 81% 78% 5.2 5.5 -0.6 2.5 -0.1 1.3 0.5 -1.1 75% 75% 27.5 25.6 21.2 19.6 77% 77% 6.3 5.7 1.0 0.2 -0.4 -0.1 -1.3 -0.4 75% 75% 27.4 25.5 20.3 19.2 74% 75% 7.0 6.1 0.8 0.3 -0.1 -0.1 -0.9 -0.4 75% 75% 27.0 25.9 19.5 19.2 72% 74% 7.4 6.5 0.4 0.4 -0.4 0.4 -0.8 0.0 75% 75% 27.8 28.5 Cumul. FY13-15 inclusive
19.9
20.4
72%
71%
7.8
8.1
0.4
0.3
2.2 1.0 -0.9 0.2 -3.0 -0.9
0.8
0.8
0.4
0.5
75% 75%
75% 75%
-2.3 -4.5
-0.1 1.0
-0.3 -0.1
-0.1 -0.1
-0.3 0.3
0.6
0.6
-0.6 0.1
Taking changes in revenue into consideration we are forecasting CHF2.3bn of cost reduction for UBS and CHF1.0bn for CS
Revenue adjusted cost reduction UBS CS Source: Company Reports; Liberum Capital
0.5 2.4
0.5 -2.1
-1.1 -0.3
-0.8 -0.4
-0.5 -0.3
-0.2
-0.1
-2.3 -1.0
By YE15e UBS will have only 16% more staff than CS down from 30% currently
By 2015E UBS plans to have reduced head count by 15% to 54,000 down from
the 3Q12 level of 63,700 mainly within the IB division where we estimate staff reduction from 16,500 to 9,500 by YE15e.
By contrast Credit Suisse has publicly committed to staff cuts of only 2,000 from
the 2Q11 levels, which were already largely complete by 3Q12 with a total staff level of 48,400.
We estimate that Credit Suisse will cut a further 2,000 jobs by YE15e implying
total headcount of 46,400 (although CS has not given staffing level guidance-
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apparently for legal reasons according to IR). We expect 1,500 of these cuts are likely to be in the IB division (front and back-office)
By YE15e UBS will have only 16% more staff than CS down from 63% at YE08
and 30% at 3Q12e.
UBSs headcount is trending towards that of CS: by 2015e UBS will have just 16% more staff down from 130% at 3Q12
Figure 16: UBS headcount by division

80 60 40 20 0 2008 IB 2009 WM 2010 WMA 2011 2012e 2013e 2014e 2015e R&C/ CIC GAM Centre
Figure 17: CS headcount by division

80 60 40 20 0 2008 2009 IB 2010 2011 2012e 2013e 2014e 2015e R&C/CIC AM Centre WM
Source: Company Reports; Liberum Capital
Focusing on the change 2015 vs. 2012 shows a dramatic shrinkage in the IB head count for UBS down 42% to 9,500 and down 7% for CS to 19,100.
UBS will IB staff by 42% by 2015 vs current levels. We expect only 7% cuts for CS
Figure 18: UBS headcount changes

70 60 50 40 30 20 10 0 G roup 2012 Non IB 2015 IB
Figure 19: CS headcount changes

70 60 50 40 30 20 10 0 Gr oup 2012 Non IB 2015 IB
Our divisional cost forecasts imply relatively stable revenues and costs per employee As the tables below illustrate our forecasts imply a modest 6% uptick in revenues per employee in 2015e vs. 2012e, for both UBS and CS to CHF0.57m and 0.55m respectively with costs/employee essentially flat at CHF 0.36m and CHF0.41m respectively. Staff costs/employee are up modestly (5% for UBS, 1% for CS) respectively.
Our assumed costs per employee are relatively stable 2015 vs. 2012 with most of the savings from headcount reduction
Figure 20: UBS Group revenue and cost per employee , CHF m
0.60 0.50 0.40 0.30 0.20 0.10 0.00 Revenue 2012 Cost Staff cost 2015
Figure 21: CS Group revenue and cost per employee, CHF m

0.60 0.50 0.40 0.30 0.20 0.10 0.00 Revenue 2012 Cost Staff cost 2015
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IB division revenue and costs per FTE are relatively stable Looking at the IB divisions in more detail, we expect cost per FTE will decline by 2% for UBS to CHF0.47m and decline by 1% for CS to CHF0.51m. IB Revenues per FTE are expected to rise by 6% for UBS to CHF0.57m as less profitable areas are exited and by 1% for CS to CHF0.65m.
In 2012 CS IB staff are 20% more productive than UBSs in revenue terms but also 7% more expensive in total cost terms and 4% more expensive in terms of average compensation
Figure 22: UBS IB division revenue and cost per employee

0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Revenue 2012 Cost Staff cost 2015
Figure 23: CS IB division revenue and cost per employee

0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Revenue 2012 Cost Staff cost 2015
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For completeness we include the full cost and revenue per FTE table for UBS:
Figure 24: UBS Divisional costs and revenues per FTE
Head count '000s IB WM WMA R&C/ CIC GAM Centre Total Clean Cost by Division CHF bn WM R&C/ CIC GAM IB WMA Centre Total Staff cost by division CHF bn WM R&C/ CIC GAM IB WMA Centre Total Implied loaded Cost per FTE CHFm WM R&C/ CIC GAM IB WMA Centre Total Implied staff cost per FTE CHFm WM R&C/ CIC GAM IB WMA Centre Total Revenue by division CHF bn WM R&C/ CIC GAM IB WMA Centre Total Implied revenue per FTE CHFm WM R&C/ CIC GAM IB WMA Centre Total Source: Liberum Capital 2010 16.9 15.7 16.3 12.1 3.5 0.2 64.6 2010 5.0 2.1 1.5 9.6 5.3 0.4 23.9 2010 3.2 1.6 1.1 6.5 4.2 0.1 16.8 2010 0.32 0.17 0.44 0.59 0.32 1.97 0.37 2010 0.20 0.13 0.32 0.40 0.25 0.13 0.26 2010 7.4 3.9 2.1 11.8 5.6 0.4 31.1 2010 0.47 0.33 0.59 0.72 0.33 nm 0.48 2011 17.3 15.9 16.2 11.4 3.8 0.3 64.8 2011 4.9 2.1 1.3 8.7 4.7 0.3 22.1 2011 3.3 1.7 1.0 5.6 3.8 0.1 15.4 2011 0.31 0.18 0.37 0.51 0.29 0.96 0.34 2011 0.21 0.14 0.26 0.33 0.24 0.30 0.24 2011 7.2 3.9 1.8 9.8 5.2 0.0 27.9 2011 0.46 0.33 0.50 0.57 0.32 nm 0.43 2012e 16.5 16.3 16.2 10.2 3.8 0.5 63.6 2012e 4.8 2.1 1.4 8.1 5.2 0.8 22.5 2012e 2.9 1.4 0.9 4.9 4.3 0.3 14.6 2012e 0.30 0.20 0.36 0.48 0.32 1.48 0.35 2012e 0.18 0.13 0.24 0.29 0.26 0.72 0.23 2012e 7.1 3.7 1.9 9.0 6.1 0.0 27.9 2012e 0.44 0.35 0.49 0.54 0.38 nm 0.43 2013e 14.4 15.3 16.3 9.6 3.6 0.5 59.7 2013e 4.7 1.9 1.3 7.1 5.3 0.9 21.2 2013e 2.9 1.3 0.9 4.3 4.4 0.3 14.1 2013e 0.30 0.19 0.36 0.46 0.33 1.58 0.36 2013e 0.18 0.14 0.24 0.28 0.27 0.54 0.23 2013e 7.4 3.7 1.9 7.9 6.4 0.0 27.5 2013e 0.47 0.38 0.53 0.51 0.40 nm 0.45 2014e 12.5 15.1 16.0 9.8 3.4 0.5 57.2 2014e 4.8 1.9 1.3 6.2 5.4 0.7 20.3 2014e 2.9 1.3 0.9 3.8 4.5 0.3 13.7 2014e 0.31 0.20 0.37 0.46 0.34 1.35 0.35 2014e 0.19 0.14 0.25 0.28 0.28 0.51 0.23 2014e 7.8 3.7 2.0 7.2 6.7 0.0 27.4 2014e 0.51 0.38 0.57 0.54 0.42 nm 0.47 2015e 9.5 15.6 15.2 9.8 3.4 0.5 54.0 2015e 4.9 1.9 1.3 5.2 5.6 0.6 19.5 2015e 3.0 1.3 0.9 3.2 4.6 0.3 13.3 2015e 0.32 0.20 0.39 0.47 0.37 1.13 0.36 2015e 0.20 0.14 0.26 0.29 0.29 0.49 0.24 2015e 8.0 3.7 2.0 6.3 6.9 0.0 27.0 2015e 0.52 0.38 0.60 0.57 0.45 nm 0.49 2015e/2012 -42% -5% -6% -4% -11% 0% -15% 2015e/2012 1% -10% -4% -36% 7% -24% -13% 2015e/2012 6% -2% -2% -36% 7% -10% -9% 2015e/2012 6% 0% 7% -2% 14% -24% 2% 2015e/2012 11% 9% 9% -1% 11% -32% 5% 2015e/2012 13% -1% 10% -31% 14% nm -3% 2015e/2012 18% 9% 22% 6% 19% nm 12%
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And similarly for CS:

Figure 25: CS Divisional costs and revenues per FTE
Head count '000s IB WM R&C/CIC AM Centre Total Clean Cost by Division CHF bn WM R&C/CIC PB AM IB Centre Total Staff cost by division CHF bn WM R&C/CIC PB AM IB Centre Total Implied loaded Cost per FTE CHFm WM R&C/CIC AM IB Centre Total Implied staff cost per FTE CHFm WM R&C/CIC AM IB Centre Total Revenue CHFbn WM R&C/CIC AM IB Centre Total Implied Revenue per FTE CHFm WM R&C/CIC AM IB Centre Total Source: Liberum Capital 2010 20.7 20.5 5.1 2.9 0.9 50.1 129% 2010 7.2 1.0 8.2 1.8 12.8 0.4 23.3 2010 4.2 0.6 4.7 1.1 8.0 0.3 18.9 2011 20.9 20.2 5.0 2.7 0.9 49.7 130% 2011 7.0 0.9 7.9 1.6 11.3 0.3 21.2 2011 4.0 0.6 4.6 0.9 6.7 0.1 16.9 2012e 20.6 19.3 4.8 2.8 0.9 48.4 131% 2012e 6.2 1.0 7.2 1.6 10.7 0.6 20.0 2012e 3.6 0.6 4.2 1.0 6.3 0.3 16.1 2013e 19.6 19.3 4.9 2.7 0.9 47.4 126% 2013e 6.2 1.0 7.2 1.5 10.2 0.8 19.6 2013e 3.6 0.6 4.2 0.9 6.0 0.5 15.8 2014e 19.6 19.1 4.9 2.5 0.9 47.1 122% 2014e 6.2 1.0 7.2 1.4 9.9 0.8 19.2 2014e 3.6 0.6 4.2 0.9 5.8 0.5 15.5 2015e 19.1 19.2 4.9 2.3 0.9 46.4 116% 2015e 6.2 1.0 7.2 1.4 9.9 0.7 19.2 2015e 3.6 0.6 4.2 0.9 5.8 0.4 15.5 2015e/2012 -7% 0% 2% -18% 0% -4%
2015e/2012 -1% 4% 0% -10% -8% 21% -4% 2015e/2012 -1% 6% 0% -14% -9% nm -4%
2010 0.36 0.19 0.61 0.64 0.52 0.46 2010 0.21 0.11 0.36 0.40 0.36 0.39 2010 9.8 1.8 2.3 16.3 0.2 30.4 2010 0.49 0.36 0.77 0.81 nm 0.62
2011 0.34 0.19 0.57 0.55 0.33 0.43 2011 0.20 0.11 0.33 0.32 0.12 0.34 2011 9.0 1.8 2.1 11.5 0.0 24.4 2011 0.44 0.36 0.77 0.55 nm 0.49
2012e 0.32 0.19 0.57 0.51 0.65 0.41 2012e 0.18 0.12 0.36 0.31 0.35 0.33 2012e 8.6 1.9 1.9 13.3 0.0 25.7 2012e 0.44 0.39 0.69 0.64 nm 0.52
2013e 0.32 0.20 0.55 0.51 0.84 0.41 2013e 0.19 0.12 0.34 0.30 0.50 0.33 2013e 8.8 1.9 2.0 12.8 0.1 25.6 2013e 0.46 0.40 0.72 0.64 nm 0.54
2014e 0.32 0.20 0.54 0.50 0.84 0.41 2014e 0.19 0.12 0.33 0.29 0.50 0.33 2014e 9.0 1.9 2.0 12.5 0.1 25.5 2014e 0.47 0.39 0.76 0.64 nm 0.54
2015e 0.32 0.20 0.59 0.51 0.79 0.41 2015e 0.19 0.12 0.36 0.30 0.44 0.33 2015e 9.2 2.0 2.0 12.6 0.1 25.9 2015e 0.48 0.40 0.85 0.65 nm 0.55
2015e/2012 2% 4% 3% -1% nm 0% 2015e/2012 2% 6% -1% -2% nm 1% 2015e/2012 7% 4% 8% -6% nm 1% 2015e/2012 11% 4% 23% 1% nm 6%
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Relatively poor disclosure on staff costs and RWAs from CS for the Corporate and Institutional division compared with UBSs for the Retail and Corporate division
Relatively poor cost and RWA disclosure for CS In analysing the differences in costs and revenues between CS and UBS, its notable that CS doesnt provide staff costs (or RWA detail) for the WM and CIC divisions within private banking. We have estimated the numbers to facilitate the analysis.
The IB divisions of both CS and UBS destroy economic value after fully loading divisions for cost savings, central costs, below the line items, and regulation
In terms of presentation, both UBS and particularly CS flatter their divisional
results by accumulating significant costs at the corporate centre and below the PBT line. Any meaningful sum of the parts (SoTP) valuation methodology has to allocate these centralised costs which are often at least partially ignored.
Both UBS and CS flatter their divisional RoB3Es by shifting expenses and RWAs to the corporate centre and by having expenses below the line such as preference share dividends and earnings for unvested equity.
In addition, a SoTP valuation should reflect the impact of regulation such as

Dodd Frank (negative for derivatives revenues as standardised derivatives move from relatively wide spread OTC trading to more transparent low margin exchange trading) and ring fencing (increased funding costs due to reduced implicit tax payer support) which will occur just beyond the explicitly forecasted earnings time horizon but clearly still impact valuation. In light of the above, we calculate 2013e fully adjusted divisional attributable earnings and RoB3E for UBS and CS. Since non equity minority interest charges relate to non equity regulatory capital, they are allocated in proportion to Basel 3 RWAs. We also allocate central costs in proportion to RWAs since these costs are largely proportional to balance sheet usage. We also allocate approximately half of the forecasted cost savings by 2015e to generate a more accurate normalised earnings run-rate for each division in 2013e- effectively estimating a fully normalised 2014e run-rate for attributable earnings.
Shutting UBSs IB entirely would be value accretive by about CHF0.9 per share
As figure 26 illustrates, for UBS the capital adjusted Group return on Basel 3 equity (RoB3E) improves slightly to 22.4% on a fully loaded basis (due to cost savings) from 20.4% unloaded, however the divisional RoB3Es decline. The investment bank RoB3E declines to 5.5% (from 8.9%). On these numbers, shutting the UBS IB division entirely would be value accretive for UBS (about CHF3.3bn of fair value CHF0.9 per share before shutdown costs). However, arguably, profitability in the wealth management and R&C divisions probably depend to some extent on the IB depending on transfer pricing although UBS maintains all inter divisional transactions are arms-length implying UBS could realistically close its IB without impacting the earnings of its other divisions.
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Figure 26: UBS 2013e fully loaded divisional returns on Basel 3 equity at 10% Basel 3 equity gearing
CHF bn YE13 Capital Capital U/L PBT Basel 3 gearing RWAs Attrib utable earnings Unloaded RoB3E Reallocate Adjusted Reallocate centre Allocated central capital capital cost, minorities etc 0.1 2.0 -0.1 0.1 4.2 -0.3 0.0 0.4 0.0 0.2 0.1 -0.6 0.0 7.2 2.7 6.1 22.6 2.5 25.1 -0.5 -0.2 1.1 0.0 0.0 0 0.0 Regulatory impact* Cost saves* Fully loaded attrib earnings 2.2 1.2 0.5 0.4 0.7 0.0 0.2 5.1 0.0 5.1 Loaded RoB3E
Wealth Mgmt Retail & Corporate GAM Investment Bank Wealth Mgmt USA Centre & MI** ex legacy Legacy runoff Subtotal
19.3 40.2 3.6 70.0 26.4 5.7 60.8 225.9
10% 10% 10% 10% 10% 10% 10% 10%
1.9 4.0 0.4 7.00 2.6 0.6 6.1 22.6 2.5 25.1
2.8 1.8 0.6 0.8 1.1 -1.4 0.2 5.9 0.0 5.9
2.2 1.4 0.5 0.6 0.9 -1.1 0.2 4.6 0.0 4.6
112.1% 34.7% 134.5% 8.9% 32.7% -195.4% 3.0% 20.4% 1.0% 18.4%
0.0 0.0 0.0 -0.2 0.0 0.0 0.0 -0.2 0 -0.2
0.1 0.1 0.0 0.4 0.0 0.0 0.0 0.6 0 0.6
107.8% 28.3% 123.1% 5.5% 24.9% nm 3.0% 22.4% 1.0% 20.2%
Excess capital Total 225.9 *Net tax ; **MI: Equity minorities interest charge Source: Company Reports; Liberum Capital
For CS, the fully loaded RoB3E declines to 13.0% vs. 13.8% as the regulatory impact of minus CHF0.5bn exceeds forecasted savings of CHF0.3bn.
Figure 27: CS 2013e fully loaded divisional returns on Basel 3 equity at 10% Basel 3 equity gearing
CHF bn YE13e Capital Basel 3 gearing RWAs Allocated U/L Capital PBT Attrib utable earnings Unloaded RoB3E Reallocate centre capital Adjusted Reallocate Regulatory Allocated central impact* capital cost, minorities etc 2.5 -0.1 0.0 5.1 -0.2 0.0 1.3 0.0 0.0 18.8 27.7 -0.71 1.0 0.0 0 0.0 -0.5 0.0 -0.5 0 -0.5 Cost saves* Fully loaded attrib earnings 1.8 0.5 0.4 1.0 0 3.6 0.0 3.8 Loaded RoB3E
Wealth Mgmt Corp and Institutions Asset management Investment Bank Centre & BTL** Subtotal
24.0 48.7 12.6 180.0 12.0 277.4
10% 10% 10% 10% 10% 10%
2.4 4.9 1.3 18.0 27.7 0.5 28.3
2.5 0.9 0.5 2.6 5.2 0.0 5.3
1.9 0.7 0.4 2.0 -1.0 3.8 0.0 3.8
77.6% 14.2% 27.8% 10.9% -86.8% 13.8% 1.0% 13.6%
0.1 0.2 0.1 0.8 -1.2 0.0
0.0 0.0 0.1 0.2 0.0 0.3 0 0.3
70.0% 9.3% 28.7% 5.2% nm 13.0% 1.0% 12.7%
1.2 -1.2
Excess capital Total 277.4 *Net tax; **BTL: Below the Line Source: Liberum Capital
On a fully attributed basis and after including future costs for regulatory changes and also future efficiency savings the implied IB RoB3E for UBS and CS are 5.5% and 5.2% respectively.
For CS, the loaded IB RoB3E of 5.2% implies the IB is destroying economic value. On these estimates, shutting Credit Suisses IB division would boost Group fair value by cCHF9.7bn (CHF6.1 per share). Net of shutdown costs we estimate restructuring or closing the IB could generate value in the range CHF 1.9-3.0 /share (8-15% of current share price)
Basel 3 capital calculation YE13 (for valuation purposes): small surplus for both UBS and CS
Libor risk: Our CS and UBS capital calculation used for valuation applies a
CHF1.5bn capital deduction to reflect potential LIBOR fines (for CS, UBS has already incurred CHF1.4bn in fines and disgorgement) and litigation risk (both UBS and CS) although CS is on only 3 Libor setting panels (USD, CHF and EUR) and therefore is arguably less exposed than for example BARC which is on at least 10 of the major LIBOR panels.
Our capital calculation implies a YE13e CHF2.5bn surplus for UBS and
CHF0.5bn for CS relative to our assumed 10% imposed capital ratio target used for valuation.
Although UBS will in reality will operate with a Basel 3 equity tier 1 in excess of
13.0%, our valuation methodology assumes that the excess capital relative to
18 www.liberumcapital.com
10 January 2013
peers will be manifested in a lower cost of equity essentially viewing UBS as operating with excess capital equivalent of c3% of RWAs or approximately CHF6bn.
Figure 28: YE13e Basel 3 equity position fully loaded
The YE13e fully loaded basel 3 capital level vs. a 10% target is a key input to our SoTPS valuation.
CHF Tier 1 capital Hybrids and Pref shares Basel II Core Tier 1 (LIB Defn) Deduct Minorities Include AFS reserves Deferred tax Shortfall in provisions vs. exp. losses Pension Reverse securitis. deductions 50% Impact Libor fines/ litigation Add back Basel 2 Fin Investments Other B3 CET1 pre fin invest deductions Financial Investments Max recognisable Fin Investments Deduction of Fin Investments Basel III equity tier 1 Basel 2.5 RWAs CVA RWA increase Securitisation gross up Mgmt mitigation Basel III RWAs Basel II Core Tier 1 Basel III Equity Tier 1 including Libor fine and litigation costs Bus mix required capital estimate Surplus capital Surplus Source: Company Reports; Liberum Capital UBS 41.8 -4.3 37.4 0 0 -4.8 0.0 -3.8 0.6 -1.5 0 -2.9 25.1 0 2.5 0.0 25.1 163.3 n/a n/a n/a 225.9 22.9% 11.1% 10.0% 1.1% 2.5 CS 48.0 -8.9 39.1 -3.2 0.0 -5.4 0.0 0.0 0.0 -1.5 0.0 -0.7 28.2 0 2.8 0.0 28.2 239.6 92.6 0.0 -55.0 277.2 16.3% 10.2% 10.0% 0.2% 0.5
We make a further adjustment to the fully loaded Basel 3 capital ratio of CHF1.5bn for both UBS and CS to reflect incremental costs related to Libor rigging both fines and litigation risk.
SoTPs Valuation: 20% upside for UBS; 2% for CS

UBS has lower risk of Wealth management and asset management cash flow being malinvested in the IB (due to smaller size and management commitment to a max of CHF70bn in IB RWAs). Therefore we assume UBSs Wealth Management and Asset Businesses merit a higher multiple of 14.0x in the SoTPs vs. 12.5x for CSs equivalent businesses.
UBSs increased capital discipline implies re-rating: UBSs clear intention to

capital ration its value-destroying IB division to a maximum of CHF70bn in RWAs increases the SoTP value of its other businesses in our view since more of the value created is likely to reach shareholders justifying our 14.0x multiple for Wealth Management and Asset Management earnings
CSs ongoing IB ambitions imply a 12% PE multiple discount to 12.5x (vs. UBS
14.0x) for the Wealth Management and Asset Management divisions given the likelihood/risk that free cash flow is diverted to the IB.
Figure 29 shows the capital and regulation adjusted sum of the parts valuation
for UBS. The Attributable earnings are taken from figure 26 while the YE13e capital position is from Figure 28. The YE13e value per share is calculated and then discounted to the present (10 months). We also add the 2012e announced dividend paid in May 2013 as well as the announced 2013e dividend since its deducted from the YE13e capital position. All central and below the line earnings are allocated by division as well as capital held in the central division.
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For UBS we also apply a normalised tax rate of 22% (vs. the reported 15%
or lower) and separately add the PV of UBSs unrecognised potential deferred tax assets see figure 34.
Figure 29: UBS Sum of the Parts calculated at YE13e and discounted to present value
YE13e CHFbn Basel 3 Clean PE Equity attributabl Capital e earnings required 2.0 2.2 14.0 2.7 0.7 14.0 4.7 2.8 14.0 4.2 1.2 10.0 0.4 0.5 14.0 7.2 0.4 9.0 16.5 4.9 12.6 6.1 0.2 4.1 2.5 0.0 25.1 5.1 13.4 Clean Cost to UnYE13e achieve recognised Value * UPDTA 30.1 9.5 39.5 11.8 6.4 3.6 61.4 4.3 2.5 68.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -3.5 -3.5 0.5 5.4 5.9 0 0.0 1.6 7.5 0.0 0.0 7.5 YE13 value PV Per Share Basel 3 Equity Capital required 0.5 0.7 1.2 1.1 0.1 1.9 4.4 1.6 0.7 6.6 Clean attributable earnings 0.6 0.2 0.7 0.3 0.1 0.1 1.3 0.0 0.0 1.3 Clean YE13e Value 7.9 2.5 10.4 3.1 1.7 1.0 16.2 1.1 0.7 18.0 Restruc costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.9 0.0 -0.9 Un- recog- Present nised DTA Value /Share 0.1 1.4 1.6 0.0 0.0 0.4 2.0 0.0 0.0 2.0 7.5 3.7 11.1 2.9 1.6 1.3 16.9 0.2 0.6 17.7 0.3 18.0 15.0 20%
Wealth Mgmt Swiss Wealth Mgmt America Wealth Mgmt combined Retail & Corporate/ CIC Asset Management Investment Banking Core total Legacy Surplus/deficit (+/-) Total Dividends 12-13e Fair value Current market value Implied upside
30.6 14.9 45.5 11.8 6.4 5.2 68.9 0.7 2.5 72.2
28.4 13.9 42.3 11.0 6.0 4.8 64.2 0.7 2.3 67.2 1.2 68.4 56.9 20%
# shares bn 3.80 Ke 9% time (years) 0.8 Current share price 15.00 *Cost to achieve: restructuring costs after YE13e and hence not reflected in YE13e equity capital Source: Liberum Capital
For UBS we include CHF2.0 per share of value for unrecognised potential deferred tax assets, while normalising the tax charge to 22%
UBS SoTPs value by division: the Wealth and asset management business will
account for 68% of UBSs 2013e earnings and 75% of fair value in our SoTP (before considering unrecognised DTAs). The IB accounts for 32% of capital but only 5% of group value.
CS SoTPs value by division: the Wealth Management businesses account for

66% of value and 59% of earnings. The IB accounts for 68% of capital but only 22% of value.
Figure 30: Credit Suisse Sum of the Parts calculated at YE13e and discounted to present value
YE13e CHF bn Basel 3 Equity Capital required 2.5 5.1 1.3 18.8 27.7 0.5 28.3 Adjusted attributable earnings 1.8 0.5 0.4 1.0 3.6 3.6 YE13e PE Clean YE13e Value 22.0 4.7 4.7 8.9 40.3 0.5 40.9 Costs to YE13 achieve* value Present Value Per share Basel 3 Equity Capital required 1.6 3.2 0.8 11.8 17.3 0.3 17.7 Adjusted attributable earnings 1.10 0.30 0.24 0.62 2.25 0.00 2.25 PE Clean Costs YE13e to Value achieve 13.7 3.0 3.0 5.5 25.2 0.3 25.6 0.0 0.0 0.0 -0.2 -0.2 0.0 -0.2 YE13 value Present Value /Share 12.7 2.7 2.7 5.0 23.2 0.3 23.5 1.5 25.0 24.4 2%
Wealth Mgmt. Retail & Corp/ CIC Asset Management Investment Banking Total core Surplus/deficit (+/-) Total Dividends 12-13e Fair Value Current Market value Implied upside
12.5x 10.0x 12.5x 9.0x 11.2x 11.4x
0.0 -0.1 0.0 -0.3 -0.4 0.0 -0.4
21.9 4.7 4.7 8.6 39.9 0.5 40.5
20.4 4.3 4.4 8.0 37.0 0.5 37.6 2.4 40.0 39.0 2%
12.5x 10.0x 12.5x 9.0x 11.2x 11.4x
13.1 3.2 2.8 5.1 24.2 0.3 25.3
# shares bn 1.60 Ke 9% time (years) 0.8 Current share price 24.4 *Cost to achieve: restructuring costs after YE13e and hence not reflected in YE13e equity capital Source: Liberum Capital
20
10 January 2013
UBS has a fair value per share of CHF18.0, 20% upside. CS has a fair value
per share of CHF25.0, 2% upside.
PE multiples for selected WM peers: As a rough cross check for the 14.0x
multiple applied to wealth management and asset management for UBS, figure 31 shows the current PEx Julius Baer and Blackrock. While a highly limited sample, the current average multiple of 15.5x suggests our 14.0x multiple is not unreasonably high.
Wealth management peers trade on c15.5x current consensus earnings
Figure 31: Current PE multiples for Julius Baer and Blackrock

18.00 17.00 16.00 15.00 14.00 13.00 12.00 11.00 10.00 Sep-12 May-12 Nov-12 Mar- 11 Mar-12 Jul- 11 Sep- 11 Nov- 11 Jan-12 Jan- 11 Jul-12 May- 11 Jan- 13
BAER
BLK
Avg
*PEx calculate using Bloomberg consensus for next 12 month Rolling EPS and grossing up by 4% to estimate current PE Source: Bloomberg
21
10 January 2013
BUY
Stock Data
Target Price (CHF) 52-Week Range (CHF) Current price (CHF) Shares Outstanding (bn) Free Float (%) Market Cap (CHF bn) Avg daily volume (m) *E=Liberum Capital Estimates 18.00 9.69 - 15.62 15.00 3.75 91% 56.2 11
UBS
Addition by Subtraction
PRICE: 15.0 | SWITZERLAND | BANKS | UBSN.VX | UBSN VX
In contrast to Credit Suisse, UBS has committed to radically downsizing its FICC business with cuts in IB RWAs of 57% and cuts in IB headcount of 42%. A dividend yield of 9.5-11.9% looks feasible 2015-17e. Our Sum of the Parts implies 20% upside, with the WM businesses on a PE of 14.0x vs. WM peers on 15x. BUY.
Stock Performance
17.0 15.0 13.0
Improving cost efficiency: Analysis of costs per employee by

division shows that UBS is on track to achieve a CHF3bn reduction in operating expenses by 2015e via headcount reduction of 10,000 of which we estimate 7,000 will be in the investment bank. On that basis we believe a Group cost income ratio of 72% is feasible by 2015 vs. 81% in 2012e, and still above Managements target range of 60-70%.
11.0 9.0 7.0 Jan-12 Mar-12 UBS Jun-12 Sep-12 Dec-12
EURO Banks
Significant capital release 9.5+% dividend yield by 2015e: From

YE12e-YE15e, UBS will reduce its Basel 3 RWAs by CHF 66bn releasing 8.6bn of capital (at a 13% equity ratio) while also achieving statutory earnings of CHF 10.1bn implying aggregate capital release of CHF18.7bn - equivalent to 33% of the current market cap. We expect UBS will exceed the 13.0% Basel 3 target by YE14e implying increased capital distributions from 2015 onwards- equiv. to a c9-10% yield while further increasing its Basel 3 equity to 15.8% by YE17e.
Price Performance Price Absolute Rel SMI Rel Eurobanks Source: Bloomberg
1M 15.0 0% -2% -6%
3M 12.0 25% 19% 13%
12M 11.1 35% 18% 1%
Summary Financials & Valuation

Dec y/e (CHF bn) Revenue Op Costs Impairments PBT Adj EPS, CHF P/Adj EPS DPS, CHF Yield % TCE/share, CHF RoTCE % P/TCE FY11A 29.8 -22.4 -0.1 7.3 1.11 13.6 0.1 0.7 11.4 10.5% 1.31 FY12E 25.6 -27.7 -0.1 -2.3 0.99 15.1 0.2 1.0 11.4 8.7% 1.31 FY13E FY14E 27.5 27.4 -21.2 -20.3 -0.1 -0.1 6.3 7.0 1.22 12.3 0.2 1.3 11.9 10.4% 1.26 225.9 17.8% 11.8% 1.38 10.9 0.5 3.3 12.5 11.3% 1.20 210.9 20.8% 13.6%
Unrecognised Potential Deferred Tax Assets (UPDTAs) of

CHF24.6bn with an est. present value of CHF7.5bn equivalent to 13% of the current market cap. Our SoTPS assumes a normalised 22% tax rate and adds the CHF7.5bn separately (note: CS has no UPDTAs).
UBSs 4Q12 profit warning offset by accelerated balance sheet

shrinkage: The statement on 19th Dec guided to a CHF2.0-2.5bn 4Q12 attributable loss mainly due to Libor-rigging fines. However the Basel 3 equity capital ratio stayed at c9.3% implying a cCHF35bn shrinkage in RWAs thereby broadly offsetting the valuation impact and suggesting that UBS may reach the targeted CHF200bn of Basel 3 RWAs well ahead of the YE17e guidance.
Basel 3 RWAs 380.0 266.0 B3CET1* reportd (%) 10.7% 13.6% B3CET1* full load (%) 6.7% 9.3% Source: Liberum Capital estimates
UBS looks optically expensive on basic valuation metrics: 2013e

PE 12.3x for p/TCE of 1.2x for RoTCE 10.9%; yielding 1.3% (UK banks PE only 10.6x).
..but UBS is cheap on an adjusted basis: Adjusted for capital,

regulation, UPDTAs and ex legacy assets, UBS trades on 2013e PE 10.0x; p/TCE 1.2x for RoTCE of 13.2% implying good relative value. Our capital and regulation adjusted SoTPs target price of CHF18.00 implies 20% upside. BUY.
22
10 January 2013
UBS
Valuing UBS is relatively complex given that i) the group has a diverse group of businesses ii) is currently undergoing a radical restructuring iii) has hidden value due to Unrecognised Potential Deferred Tax Assets (UPDTAs).
We address the business mix via a sum of the parts approach see main section
Figure 29. i) The restructuring is outlined below followed by ii) our estimate of the present value of the UPDTAs iii) some comment on the 4Q12 profit warning related to the libor rigging fines and iv) some brief commentary on the divisional outlooks.
i) Summary of UBS restructuring plans: shrinking balance sheet, capital consumption and headcount
UBS has committed to closing many of its least profit IB businesses thereby boosting economic profit for Shareholders and more than doubling returns on regulatory equity capital
By way of background context, UBS plans to Shrink its group funded balance sheet by 30% to CHF600bn by YE15e. Reduce Basel 3 RWAs by 1/3
: from CHF301bn to below CHF 250bn by YE13e and below CHF 200bn by YE17
rd
Reduce headcount by 10,000 to 54,000 (-16%) with majority of the cuts
in the investment bank division. We estimate investment bank headcount will decline from 16,500 at YE12e to 9,500 by YE15e (-42%).
Reduce operating costs by a further CHF4bn from the 9M12 annualised
run rate, CHF2.5bn net of CHF1.5bn in planned increased investment. Our own forecasts assume net cost cuts of CHF3.0bn by YE15e to CHF19.5bn, a 13% decline, forecasting curtailed investment due to weaker than expected revenues- we are CHF1.1bn below consensus on 2015e revenues and 9% below consensus EPS.
Exit FICC businesses within credit and rates which are unlikely to beat
2
their cost of capital under the new Basel 3 regulatory framework. As a consequence of this restructuring, UBS guides that the reported Group RoE will be in the 3-7% range in 2013 and 2014e implying annual 1-off restructuring costs of CHF3.5bn (assuming a c 5% reported RoE) relating to redundancy payments, losses on asset disposals etc. We factor this into our valuation (2013e impact included in YE13e capital and 2014/15 impact included in SoTPs separately net of tax). Smaller UBS balance sheet implies lower regulatory risk for UBS: The planned shrinkage of UBS funded balance sheet from CHF900bn to CHF600bn by 2015e will significantly reduce the valuation impact of any increase in RWA/Asset due to revised regulatory guidance on RWA calculation e.g. moving to standardised RWAs. This represents a key advantage vs. Credit Suisse in our view which will operate with CHF300bn of RWAs (vs. UBSs CHF200bn). UBS Cap-adjusted RoB3E rises to 26.0% by 2015e: As a consequence of these changes we estimate that by 2015e, adjusted for regulation and after allocating
FICC: Fixed Income Currency and Commodities

23
10 January 2013
capital at 10% of Basel 3 RWAs, UBS will achieve an underlying return on Basel 3 equity capital (RoB3E) of 26.0% up from 11.2% in 2012e; rising further to 30.3% in 2017e due to further capital shrinkage under conservative operational leverage assumptions within the wealth management businesses. Of course on an actual reported basis returns will be more lacklustre due to the groups intention to operate at a 13% Basel 3 equity capital ratio, or higher, rather than the 10% gearing discussed above. In addition looking at profitability in terms of RoTCE further depresses returns due to several items included within equity (see figure 8). So the underlying RoTCE without adjusting for capital will increase only modestly from 8.7% in 2012e to 11.6% in 2017e.
In our base case, by 2017e, UBS will have a Basel 3 equity capital ratio of
15.8%, implying a CHF11.2bn capital surplus vs. our 10% requirement.
Critical to our BUY investment case, is the assumption that equity investors will
take account of UBSs excess capital in the valuation and will assess its capital position relative to international norms (we assume a 10% target) rather than relative to UBSs own 13% target capital run rate.
The primary risk to our Buy case is the risk that UBS loses capital discipline once
it becomes highly cash-flow positive. We anticipate the tendency to expand the business via M&A or via RWAs credit growth will be considerable which could jeopardise our attractive dividend projections.
For sake of comparison, UBSs restructuring of its IB is more radical than

the substantial changes made by RBS with RWAs down -57% vs. 31% for RBS and Staff levels down 42% vs. 25% for RBS.
UBSs IB restructuring is more aggressive than that of RBS
Figure 32: RWAs Pre and Post IB restructuring, reporting CCY bn

200 150 100 50 0 RBS Before UBS After
Figure 33: IB Headcount Pre and Post IB restructuring, 000s

20 15 10 5 0 RBS Before UBS After
Source: Liberum , Company reports
Source: Liberum , Company reports
ii) Off balance sheet UPDTAs worth CHF7.5bn

UBS has large Unrecognised Potential Deferred Tax Assets (UPDTAs) of CHF24.6bn (3Q12), 43% of market cap, generated as a result of net operating losses incurred during the 2007-2008 financial crisis. While not all of the UPDTAs are likely to be successfully utilised before expiration, we estimate that CHF 14.7bn, c60%, will be utilised. We estimate a present value for these of CHF7.5bn, or CHF2 per share, equivalent to 13% of current market cap. Credit Suisse investor has no UPDTAs according to their investor relations team making this an often overlooked relative valuation factor in UBSs favour.
10 January 2013
Due to large historical losses UBS has more potential deferred tax assets than it can recognise under conservative accounting standards. We estimate a PV of CHF7.5bn for the off balance potential deferred tax assets
Under the IAS 12 accounting standards, deferred tax assets (DTAs) can only be recognised against probable future profits. UBS uses a 5 year time horizon for recognition. Without unrecognised DTAs, UBS would have a normalised tax rate in the range 20-25%. Our Sum of the parts assumes a 22% tax rate and then adds the CHF7.5bn present value of the UPDTAs. Over 2010 and 2011, recognising more DTAs enabled UBS to pay an average tax rate of only 6.1% resulting in a per annum boost to attributable earnings of c CHF1bn.
Figure 34 summarises our valuation of the UPDTAs: In the US the average

remaining life of the CHF18.8bn of UPDTAs is 16 years as of 3Q12. We estimate the remaining life in Switzerland is 3 years (given a 7 year time limit and an assumed 2008 inception). In the UK there is no time limit on utilisation. We apply a relatively high discount rate in the US of 7.5% to reflect the constrained time limit. By contrast in the UK, with no time limit on utilisation we apply a discount rate of 3%. For the smaller RoW (rest of world) amounts of CHF 0.8bn we use a higher 10% discount rate to reflect lack of information/uncertainty.
Figure 34: Estimating value of UBS Unrecognised Potential Deferred Tax Assets
CHF bn Unrecognise Relevant Tax rate Annual d potential annual PBT relevant DTAs 2014e payable tax Estimated Amount Est. date of Amount utilised pre full utilised expiration utilisation before expiration 11.2 59% 2028 0.5 22% 2015 2.63 101% 2039 0.4 50% 2020 14.7 60% Remaining life Assumed PV of discount unrecognise rate d DTAs PV/ Max Potential DTAs Value per share
US 18.8 Switzerland 2.4 UK 2.6 RoW 0.8 Total 24.6 Source: Liberum Capital
1.4 4.8 0.4 1 7.6
35% 20% 21% 22% 23%
0.5 1.0 0.1 0.2 1.7
16 3 Unlimited n/a
8% 2% 3% 10%
5.1 0.5 1.6 0.3 7.5
27% 21% 61% 42% 31%
1.3 0.1 0.4 0.1 2.0
By way of illustration we show the more detailed workings for the largest,
CHF18.8n, of US Unrecognised Potential Deferred Tax Assets: Beyond the current 5 year measurement horizon which have already translated into onbalance sheet DTAs (albeit at conservative levels), we estimate US taxable earnings of CHF1.9bn (mainly from Wealth Management America but also the IB) from 2018e, growing at 4% per annum.
In addition, prior to 2018e, we also consider the incremental PBT relative to

the current balance sheet DTA measurement assumptions. We understand from previous CFO guidance (John Cryan) that the DTA measurement process is highly conservative- taking substantial discounts to the actual management business plan. On that basis, we assume that there will be incremental US taxable annual earnings of CHF0.2-0.3bn within the current 5 year time horizon. Discounting all the savings at 7.5% gives us a present value of CHF5.8bn for the CHF18.8bn of US UPDTAs. An area of further investigation would be to what extent UBS could utilise more of these US UPDTAs by enhancing US taxable via M&A, incremental investment in its US franchise or other restructuring.
25
10 January 2013
To the extent UBS can boost its US pre tax earnings, it will be able to maximise its CHF18.8bn of US UPDTAs which we value currently at CHF5.1bn
Figure 35: Estimating present value of Unrecognised potential DTAs in United States
Years FWD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Fin Yr Discount factor Assumed taxable earnings Tax saving PV @7% discount rate 2013e 0.93 0.2 0.1 0.07 2014e 0.87 0.3 0.1 0.09 2015e 0.80 0.3 0.1 0.08 2016e 0.75 0.3 0.1 0.08 2017e 0.70 0.3 0.1 0.07 2018e 0.65 1.9 0.7 0.44 2019e 0.60 2.1 0.7 0.44 2020e 0.56 2.2 0.8 0.43 2021e 0.52 2.4 0.8 0.43 2022e 0.49 2.5 0.9 0.43 2023e 0.45 2.7 1.0 0.43 2024e 0.42 2.9 1.0 0.43 2025e 0.39 3.1 1.1 0.42 2026e 0.36 3.3 1.2 0.42 2027e 0.34 3.6 1.2 0.42 2028e 0.31 3.8 1.3 0.42 Total utilised Unrecognised potential DTAs Assumed % utilised Source: Company Reports; Liberum Capital 32.0 11.2 18.8 59% 5.1
iii) 4Q12 profit warning related to the Libor Rigging fines offset by higher than expected RWA shrinkage
On 19Dec12, UBS announced an agreement to pay CHF1.4bn in fines and
disgorgement (of illegal profits) to US, UK and Swiss authorities. We estimate reported 4Q12 PBT of minus CHF2bn, as a result of this fine (not tax deductible) as well as other litigation provisions of CHF0.7bn, restructuring costs of CHF0.5bn as well as fair value own debt losses CHF0.4bn (due to tightening credit spreads).
Excluding these items we estimate underlying 4Q12 PBT of positive CHF993m

implying an underlying adjusted EPS for full year 2012e of CHF0.99 after normalising the tax rate to 22% and excluding STAB option gains of CHF337m in 9M12.
We estimate UBSs RWAs declined by CHF35bn in 4Q12 which could indicate faster than expected capital release going forward.
Unchanged capital adequacy despite 4Q12 reported attributable loss of

CHF 2.25bn: The UBS statement referred to a roughly unchanged fully Basel 3 equity tier 1 in 4Q12 vs. the reported 9.3% 3Q12 level. Assuming a 9.3% ratio at end 4Q12 which implies a significant 4Q12 drop in Basel 3 RWAs of CHF35bn.
Accelerated restructuring: Based on the implied 4Q12 RWA shrinkage we

expect that UBSs balance sheet shrinkage will occur faster than 3Q12 guidance with positive implications for capital release and dividends
iv) Group and Divisional P&L trends

Underlying EPS trend: We expect 23% and 13% underlying EPS growth to
CHF1.22 and CHF1.38 in 2013e and 2014e respectively primarily driven by strong PBT growth in the wealth and asset management divisions. We are 3% above Bloomberg adjusted consensus in 2014e- see figure 5- (however Bloomberg consensus has considerable noise with some estimates apparently including restructuring costs, where as we have excluded CHF3.5bn of 1-off costs in 2013e and 2014e from adj. EPS so its likely in our view that underlying consensus is considerably above the Bloomberg reported levels)
10 January 2013
Figure 36: UBS summary divisional PBT-underlying

CHF bn Wealth Mgmt Retail & Commercial Global Asset Management Investment Bank Wealth Management USA Centre Core Total Underlying PBT ex legacy Corporate centre legacy assets Total U/L PBT 1-offs Reported PBT Group MI s U/L Attributable EPS Basel 3 RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2011 2.3 1.7 0.5 1.1 0.5 -0.2 5.8 0.0 5.8 -0.4 5.4 -0.3 4.2 1.11 380 11.2% 2012e 2.3 1.6 0.5 0.9 0.8 -0.9 5.2 0.0 5.2 -7.5 -2.3 -0.3 3.8 0.99 266 11.7% 2013e 2.8 1.8 0.6 0.8 1.1 -0.8 6.3 -3.5 2.8 0.0 2.8 -0.3 4.6 1.22 226 18.8% 2014e 3.0 1.8 0.7 1.0 1.3 -0.7 7.0 -3.5 3.5 0.0 3.5 -0.3 5.2 1.38 211 24.0% 2015e 3.1 1.8 0.7 1.0 1.3 -0.6 7.4 -1.0 6.4 0.0 6.4 -0.3 5.5 1.45 200 26.9% 2016e 3.3 1.8 0.8 1.0 1.4 -0.5 7.8 0.0 7.8 0.0 7.8 -0.3 5.8 1.53 192 29.6% 2017e 3.5 1.7 0.8 1.1 1.5 -0.5 8.1 0.0 8.1 0.0 8.1 -0.3 6.0 1.59 195 31.2% 2011 -3% -6% -12% -49% 86% -19% -19% 2012 -2% -3% 11% -15% 75% -10% -10% 2013 22% 12% 24% -15% 32% -12% 20% -47% % Ch 2014 8% 0% 11% 29% 14% -15% 13% 29% 2015 5% -1% 6% 0% 6% -17% 5% 81% 2016 6% 0% 4% 1% 6% -11% 5% 21% 2017 6% -3% 4% 1% 3% -11% 4% 4%
-19%
-11%
23%
13%
5%
5%
4%
At a group P&L level we expect broadly flat revenues in 2012-2014e with

declines in investment banking revenues broadly offset by increases in the wealth and asset management divisions.
Group expenses: We forecast a CHF3bn decline in expenses by 2015e vs.

2012e slightly ahead of the guided net of CHF2.5bn (CHF4bn of reductions and CHF 1.5bn of investment spend) as we are relatively pessimistic on the revenue outlook vs. consensus and we suspect management plans.
Figure 37: UBS Group P&L- underlying
CHF bn Revenues Total expenses PIP Loan losses PBT (ex legacy) Rev 1-offs Cost 1-offs 1-offs PBT (ex legacy) U/L Attributable Cost Income Basel 3 RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2011 27.9 -22.0 5.9 -0.1 5.8 1.9 -0.4 1.5 7.3 4.2 79% 380 11.2% 2012e 27.9 -22.5 5.4 -0.1 5.2 -2.3 -5.2 -7.5 -2.3 3.8 81% 266 11.7% 2013e 27.5 -21.2 6.3 -0.1 6.3 1.3 0.0 0.0 0.0 6.3 4.6 77% 226 18.8% 2014e 27.4 -20.3 7.1 -0.1 7.0 0.9 0.0 0.0 0.0 7.0 5.3 74% 211 24.0% 2015e 27.0 -19.5 7.5 -0.1 7.4 0.8 0.0 0.0 0.0 7.4 5.5 72% 200 26.9% 2016e 27.8 -19.9 7.9 -0.1 7.8 0.0 0.0 0.0 7.8 5.8 72% 192 29.6% 2017e 28.5 -20.4 8.1 -0.1 8.1 0.0 0.0 0.0 8.1 6.0 71% 195 31.2% 2011 -10% -8% -18% -18% 2012e 0% 2% -9% -10% 2013e -1% -6% 18% 20% % Ch 2014e 0% -4% 13% 13% 2015e -1% -4% 5% 5% 2016e 3% 2% 5% 5% 2017e 3% 2% 4% 4%
-19%
-11%
22%
13%
5%
5%
4%
0%
-30%
-15%
-7%
-5%
-4%
1%
In wealth management we conservatively assume just 3.0% asset performance

in 2013e (despite equity markets strong start YTD of 3-4%) and 2% in subsequent years (which includes reinvested dividends and coupons) and also conservatively assume net new money growth of only CHF25bn per annum (c3% of invested assets) down from CHF30bn in 2012e.
We assume ongoing margin erosion down to 85bps vs. 2012e 90bps due to the
ongoing low yield environment and subdued client activity.
27
10 January 2013
We assume relatively tight cost control with the cost income ratio towards the
bottom end of managements guided range of 60-70%.
Figure 38: UBS Wealth Management Division Underlying
CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses Underlying PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT PAT Underlying attributable Net new Assets Performance Invested Assets Margin (bps) Cost Income Basel 3 RWAs PBT/Avg RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2011 7.2 -3.3 -1.6 -4.9 2.3 0.0 2.3 0.4 -0.1 0.4 2.7 1.8 1.7 24 -5.4% 750 101 68% 16.6 14.0% 99% 2012e 7.1 -2.9 -2.0 -4.8 2.3 0.0 2.3 0.0 0.2 0.2 2.5 1.8 1.6 30 6.7% 830 90 68% 18.2 13.1% 93% 2013e 7.4 -2.9 -1.8 -4.7 2.8 0.0 2.8 0.0 0.0 0.0 2.8 2.2 2.0 25 3.0% 880 87 63% 19.3 14.8% 105% 2014e 7.8 -2.9 -1.8 -4.8 3.0 0.0 3.0 0.0 0.0 0.0 3.0 2.3 2.1 25 2.0% 923 86 61% 19.9 15.3% 108% 2015e 8.0 -3.0 -1.9 -4.9 3.1 0.0 3.1 0.0 0.0 0.0 3.1 2.4 2.2 26 2.0% 967 85 61% 20.5 15.5% 110% 2016e 8.4 -3.1 -1.9 -5.1 3.3 0.0 3.3 0.0 0.0 0.0 3.3 2.6 2.4 26 2.0% 1,012 85 61% 21.1 15.9% 113% 2017e 8.8 -3.3 -2.0 -5.3 3.5 0.0 3.5 0.0 0.0 0.0 3.5 2.7 2.5 26 2.0% 1,058 85 60% 22.4 16.1% 114% 2011 -2% 3% -9% -2% -3% -3% 2012e -1% -12% 22% -1% -2% -2% 2013e 4% 1% -11% -4% 22% 22% % Ch 2014e 4% 2% 2% 2% 8% 8% 2015e 4% 3% 3% 3% 5% 5% 2016e 5% 4% 4% 4% 6% 6% 2017e 5% 4% 4% 4% 6% 6%
-293% -2%
27% 11%
-16% 6%
1% 5%
1% 5%
1% 5%
1% 5%
In Retail and corporate: we assume flat revenues and some declines in costs
(due to restructuring programme) with the cost income ratio towards the low end of the guided 50-60% range.
Figure 39: UBS Retail and Corporate Division Underlying
CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses Underlying PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT PAT Underlying attributable Invested assets Cost Income Basel 3 RWAs PBT/Avg RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2011 3.9 -1.7 -0.5 -2.1 1.8 -0.1 1.7 0.3 0.0 0.3 1.9 1.3 1.2 848 55% 33.1 4.9% 35% 2012e 3.7 -1.4 -0.8 -2.1 1.6 0.0 1.6 0.0 0.2 0.2 1.8 1.3 1.1 361 57% 38.4 4.5% 32% 2013e 3.7 -1.3 -0.6 -1.9 1.8 0.0 1.8 0.0 0.0 0.0 1.8 1.4 1.3 374 51% 40.2 4.6% 32% 2014e 3.7 -1.3 -0.6 -1.9 1.8 0.0 1.8 0.0 0.0 0.0 1.8 1.4 1.3 387 51% 40.9 4.4% 31% 2015e 3.7 -1.3 -0.6 -1.9 1.8 0.0 1.8 0.0 0.0 0.0 1.8 1.4 1.3 401 52% 41.5 4.3% 31% 2016e 3.7 -1.3 -0.6 -1.9 1.8 0.0 1.8 0.0 0.0 0.0 1.8 1.4 1.3 415 52% 42.2 4.2% 30% 2017e 3.7 -1.4 -0.6 -2.0 1.7 0.0 1.7 0.0 0.0 0.0 1.7 1.3 1.2 429 53% 42.9 4.1% 29% 2011 -1% 3% -1% 2% -5% -6% 2012e -4% -18% 64% -1% -8% -3% 2013e 0% -1% -24% -9% 11% 12% % Ch 2014e 0% -1% 0% -1% 0% 0% 2015e 0% 0% 0% 0% -1% -1% 2016e 0% 0% 0% 0% 0% 0% 2017e 0% 2% 3% 2% -3% -3%
Asset Management: As in Wealth management we assume asset performance

of c2% per annum and some improvement in costs due to the restructuring bringing the cost income ratio towards the middle of the guided 60-70% range.
28
10 January 2013
Figure 40: UBS Global Asset Management Division Underlying

CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses Underlying PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT PAT U/L Attributable Cost Income Basel 3 RWAs PBT/Avg RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2011 1.8 -1.0 -0.4 -1.3 0.5 0 0.5 0.0 0.0 0.0 0.4 0.4 0.3 75% 3.6 12.8% 91% 2012e 1.9 -0.9 -0.5 -1.4 0.5 0 0.5 0.0 0.0 0.0 0.5 0.4 0.4 73% 3.5 14.2% 100% 2013e 1.9 -0.9 -0.4 -1.3 0.6 0 0.6 0.0 0.0 0.0 0.6 0.5 0.4 68% 3.6 17.5% 124% 2014e 2.0 -0.9 -0.4 -1.3 0.7 0 0.7 0.0 0.0 0.0 0.7 0.5 0.5 65% 3.7 18.8% 134% 2015e 2.0 -0.9 -0.4 -1.3 0.7 0 0.7 0.0 0.0 0.0 0.7 0.6 0.5 64% 3.8 19.4% 138% 2016e 2.1 -0.9 -0.4 -1.3 0.8 0 0.8 0.0 0.0 0.0 0.8 0.6 0.5 64% 4.0 19.6% 139% 2017e 2.2 -0.9 -0.4 -1.4 0.8 0 0.8 0.0 0.0 0.0 0.8 0.6 0.6 63% 4.1 19.9% 141% 2011 -12% -14% -9% -12% -12% -12% 2012e 4% -5% 16% 1% 11% 11% 2013e 4% -2% -7% -4% 24% 24% % Ch 2014e 3% -1% -1% -1% 11% 11% 2015e 3% 1% 1% 1% 6% 6% 2016e 3% 2% 2% 2% 4% 4% 2017e 3% 2% 2% 2% 4% 4%
We assume a CHF3.1bn or c69% decline in FICC revenues 2015 vs. 2012
Investment Banking: We assume a sharp decline in FICC revenues

cumulative 69% decline 2015e vs. 2012e as many credit and rates businesses are exited with CHF90bn (pre 4Q12 disposals) of RWAs assets transferred to the central legacy division to be run off. We assume equity revenues broadly flat with some steady improvement in M&A ECM and DCM from current relatively subdued levels.
IB cost income ratio is forecast to decline to 83%: still towards the top end of
the guided range of 65-85%, resulting in PBT achieved of c CHF1bn and RoB3E of c10.5% before adjusting for Dodd Frank etc.
29
10 January 2013
Figure 41: UBS Investment Banking Division Underlying

CHFbn M&A ECM DCM Equities FICC Revenues Staff cost Other expenses Total expenses PIP Loan losses U/L PBT Rev 1-offs IBD Rev 1-offs Equities Rev 1-offs FICC Rev 1-offs Costs 1-offs FVOD 1-offs Reported PBT U/L PAT U/L Attributable Cost Income Basel 3 RWAs Clean PBT/Avg RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2011 1.4 3.7 4.7 9.8 -5.6 -3.1 -8.7 1.1 0.0 1.1 0.00 -1.9 -0.3 -2.1 -0.2 1.5 -0.8 0.3 0.9 0.8 89% 270.2 0.4% 2.8% 2012e 1.5 3.1 4.5 9.0 -4.9 -3.2 -8.1 0.9 0.0 0.9 0.0 -0.4 0.0 -0.4 -3.1 0.0 -3.5 -2.5 0.7 0.7 90% 72.0 0.6% 3.9% 2013e 1.6 3.1 3.2 7.9 -4.3 -2.8 -7.1 0.8 0.0 0.8 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.8 0.6 0.6 89% 70.0 1.1% 8.0% 2014e 1.6 3.2 2.4 7.2 -3.8 -2.4 -6.2 1.1 -0.1 1.0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.0 0.8 0.7 85% 70.0 1.5% 10.5% 2015e 1.7 3.2 1.4 6.3 -3.2 -2.0 -5.2 1.1 -0.1 1.0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.0 0.8 0.7 83% 70.0 1.5% 10.4% 2016e 1.7 3.2 1.4 6.3 -3.2 -2.0 -5.2 1.1 -0.1 1.0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.0 0.8 0.7 83% 70.0 1.5% 10.6% 2017e 1.8 3.2 1.4 6.4 -3.2 -2.1 -5.3 1.1 -0.1 1.1 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.1 0.8 0.7 83% 70.0 1.5% 10.7% 2011 -43% -17% -4% -17% -14% 0% -9% -50% -49% 2012e 9% -17% -5% -7% -12% 4% -6% -16% -15% 2013e 4% 2% -28% -12% -13% -13% -13% -9% -15% % Ch 2014e 4% 2% -25% -9% -12% -15% -13% 30% 29% 2015e 4% 0% -42% -13% -16% -15% -16% 0% 0% 2016e 4% 0% 0% 1% 1% 1% 1% 1% 1% 2017e 4% 0% 0% 1% 1% 1% 1% 1% 1%
Wealth Management Americas (WMA) division: We assume relatively good

revenues and positive jaws vs. slower growing expenses in 2013e driving strong bottom line growth. Given the groups large but time-limited Unrecognised Potential DTAs in the the US, we would expect driving PBT growth in the WMA division to be a strategic imperative.
Figure 42: UBS Wealth Management Americas Division Underlying
CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses Underlying PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT PAT U/L Attributable Net new Assets Performance Invested Assets Margin (bps) Cost Income Basel 3 RWAs PBT/Avg RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2010 5.6 -4.2 -1.1 -5.3 0.3 0.0 0.3 0.0 -0.4 -0.4 -0.1 0.2 0.2 -6 0.7% 689 81 95% 23.8 1.1% 8% 2011 5.2 -3.8 -0.9 -4.7 0.49 -0.0 0.5 0.0 -0.0 0.0 0.5 0.4 0.3 12 1.1% 709 75 91% 26.1 1.9% 14% 2012e 6.1 -4.3 -1.0 -5.2 0.8 0.0 0.8 0.0 0.0 0.0 0.8 0.7 0.6 13 9.4% 788 81 86% 23.8 3.4% 24% 2013e 6.4 -4.4 -1.0 -5.3 1.1 0.0 1.1 0.0 0.0 0.0 1.105 0.9 0.8 12 3.0% 823 80 83% 26.4 4.4% 31% 2014e 6.7 -4.5 -1.0 -5.4 1.3 0.0 1.3 0.0 0.0 0.0 1.259 1.0 0.9 12 2.0% 852 80 81% 27.3 4.7% 33% 2015e 6.9 -4.6 -1.0 -5.6 1.3 0.0 1.3 0.0 0.0 0.0 1.336 1.0 0.9 14 2.0% 883 80 81% 28.3 4.8% 34% 2016e 7.2 -4.7 -1.0 -5.8 1.4 0.0 1.4 0.0 0.0 0.0 1.420 1.1 1.0 14 2.0% 915 80 80% 29.3 4.9% 35% 2017e 7.4 -4.9 -1.1 -6.0 1.5 0.0 1.5 0.0 0.0 0.0 1.461 1.1 1.0 15 2.0% 948 80 80% 29.5 5.0% 35% 2011 -6% -9% -15% -11% 87% 86% 2012e 16% 12% 4% 11% 72% 75% 2013e 6% 2% 1% 2% 33% 32% % Ch 2014e 4% 2% 2% 2% 14% 14% 2015e 4% 3% 3% 3% 6% 6% 2016e 4% 3% 3% 3% 6% 6% 2017e 4% 4% 3% 4% 3% 3%
nm 3%
3% 11%
-5% 5%
4% 3%
10% 4%
4% 4%
4% 4%
30
10 January 2013
Corporate central costs increased in 2012 due to the management of legacy

assets. We expect these costs to decline somewhat as these assets are wound down. We exclude P&L movements from the STAB Fund option from the underlying P&L but would expect the positive revaluation gains to continue, albeit at a lower level.
Figure 43: UBS Corporate Division Centre Underlying
CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses U/L PBT ex legacy Legacy assets U/L PBT including legacy Rev 1-offs o/w FVoD Cost 1-offs 1-offs Reported PBT Clean PAT Attributable Basel 3 RWAs o/w Corp centre core o/w Legacy Clean PBT/Avg RWAs U/L Ro B3E at 10% CT1 Source: Liberum Capital 2010 0.4 -0.1 -0.3 -0.4 0.0 0.0 0.0 0.0 0.0 0.7 0.0 0.0 0.7 0.8 0.0 0.0 8.2 8.2 0.0 1% 2011 0.0 -0.1 -0.2 -0.3 -0.2 0.0 -0.2 0.0 -0.2 -0.1 0.0 0.0 -0.2 -0.4 -0.2 -0.2 30.4 30.4 0.0 nm -8% 2012e 0.0 -0.3 -0.5 -0.8 -0.8 -0.1 -0.9 0.0 -0.9 -1.9 0.0 -2.6 -4.4 -5.4 -0.7 -0.7 110.1 5.7 104.4 -1.8% -10% 2013e 0.0 -0.3 -0.6 -0.9 -0.8 0 -0.8 -3.5 -4.3 0 0 0 0.0 -4.3 -0.7 -0.6 66.4 5.7 60.8 -1.0% -7% 2014e 0.0 -0.3 -0.5 -0.7 -0.7 0 -0.7 -3.5 -4.2 0 0 0.0 -4.2 -0.6 -0.5 49.1 5.7 43.4 -1.4% -9% 2015e 0.0 -0.3 -0.3 -0.6 -0.6 0 -0.6 -1.0 -1.6 0 0 0.0 -1.6 -0.5 -0.4 36.1 5.7 30.4 -1.6% -10% 2016e 0.0 -0.3 -0.3 -0.5 -0.5 0 -0.5 0.0 -0.5 0 0 0.0 -0.5 -0.4 -0.4 25.9 5.7 20.3 -2.1% -12% 2017e 0.0 -0.2 -0.2 -0.5 -0.5 0 -0.5 0.0 -0.5 0 0 0.0 -0.5 -0.4 -0.3 25.9 5.7 20.3 -2.3% -13% 2011 2012e 2013e % Ch 2014e 2015e 2016e 2017e
nm
nm
-12%
-15%
-17%
-11%
-11%
31
10 January 2013
Figure 44: UBS Summary Financials

Income Statement CHF m, Dec YE Net interest income % YoY change Non-interest income Fees & commissions % YoY change Trading revenues % YoY change Other income Total op. revenues % YoY change Admin expenses % YoY change Other expenses Pre-provision op profit % YoY change Loan loss provisions Other 1-off items Pretax profit % YoY change Tax % Tax rate Minorities Net Income Balance sheet CHF m, Dec YE ASSETS Net customer loans % YoY change Loan loss reserves Investments Other int earn. assets % YoY change Avg int earn assets Goodwill Other assets Total assets Ratio Analysis FY11A 6,826 10% 15,279 -11% 6,247 -17% 1,470 29,822 -7% -21,555 -8% -759 7,382 -2% -82 0 5,451 -27% -952 13% -280 4,219 FY12E 6,000 -12% 15,558 2% 3,946 -37% 90 25,594 -14% -23,886 11% -691 -2,128 -129% -136 0 -2,264 -142% -594 -26% -286 -3,144 FY13E 6,180 3% 15,558 0% 4,795 21% 962 27,495 7% -20,436 -14% -658 6,313 -397% -57 1 2,756 -222% -413 15% -250 2,092 FY14E 6,365 3% 15,558 0% 4,536 -5% 962 27,421 0% -19,585 -4% -626 7,122 13% -74 1 3,548 29% -532 15% -250 2,766 Per Share Data EPS reported EPS Adjusted % YoY change DPS % YoY change Dividend yield Payout ratio BV per share TCE per share Shares outs, dil Return ratios RoRWA Pre-tax RoE RoE RoTCE Revenues NIM (NII / AIEA) Non-IR / avg assets Total rev / assets NII / Tot revenues Fees / tot revenue Trading / Tot revs FY11A 1.11 1.11 -18.7% 0.10 #REF! 9.0% 14.1 11.4 3,842 FY11A 1.9% 14.5% 12.0% 10.5% FY11A 0.55% 1.7% 2.2% 22.9% 51.2% 20.9% FY12E -0.83 0.99 -10.5% 0.15 #REF! -18.0% 13.4 11.4 3,819 FY12E -1.4% -4.4% 6.6% 8.7% FY12E 0.50% 1.4% 1.8% 23.4% 60.8% 15.4% FY13E 0.56 1.22 23.1% 0.20 #REF! 35.8% 13.8 11.9 3,796 FY13E 1.1% 12.2% 9.4% 10.4% FY13E 0.54% 1.7% 2.1% 22.5% 56.6% 17.4% FY14E 0.74 1.38 13.3% 0.50 #REF! 67.7% 14.4 12.5 3,796 FY14E 1.9% 6.7% 10.4% 11.3% FY14E 0.59% 1.8% 2.4% 23.2% 56.7% 16.5%
FY11A 266,604 1% -2,534 53,969 875,395 9.6% 1,252,017 9,695 102,234 1,419,313
FY12E 278,441 4% -2,407 70,009 786,628 -10.1% 1,193,548 6,632 54,410 1,354,446
FY13E 264,519 -5% -2,287 66,551 746,541 -5.1% 1,135,579 6,632 -17,831 1,219,001
FY14E 264,519 0% 0 63,267 702,741 -5.9% 1,083,053 6,632 -90,065 1,097,101 Cost ratios Cost / income Cost / assets Staff numbers B/S Gearing Loan / deposit Investment / assets Loan / assets Deposits / liabs LT Debt / liabilities Capital Reserves / loans LLP / RWA RWAs % YoY change Core Tier 1 Total Tier 1 Basel 3RWAs B3 Eq. tier1 rep. B3 Eq Tier1 full loaded
FY11A 75.2% 1.6% 64,199 FY11A 77.9% 3.8% 18.8% 24.1% 9.2% FY11A 0.7% 0.0% 240,962 21.2% 14.1% 15.9% 380,000 10.7% 6.7%
FY12E 108.3% 1.8% 65,484 FY12E 75.4% 5.2% 20.6% 27.2% 9.6% FY12E 0.7% -0.1% 212,381 -11.9% 17.0% 19.1% 266,000 13.6% 9.3%
FY13E 77.0% 1.7% 66,082 FY13E 71.0% 5.5% 21.7% 30.6% 10.7% FY12E 0.7% 0.0% 151,870 -28.5% 24.6% 27.5% 225,935 17.8% 11.8%
FY14E 74.0% 1.8% 66,703 FY14E 70.3% 5.8% 24.1% 34.3% 11.9% FY12E 0.0% -0.1% 145,590 -4.1% 26.3% 29.3% 210,887 20.8% 13.6%
LIABILITIES Customer deposits 342,409 % YoY change 3.0% Long term funding 130,271 Interbank funding 44,617 Avg interest liabs 749,893 Other liabilities 157,122 Shareholders' equity 53,551 Minorities 5,043 Total liabilities 1,419,313 Source: Company Reports; Liberum Capital
369,047 7.8% 130,271 44,617 778,516 68,817 50,351 5,043 1,354,446
372,737 1.0% 130,271 44,617 793,680 -71,849 51,881 5,043 1,219,001
376,465 1.0% 130,271 44,617 797,389 -199,493 53,898 5,043 1,097,101
32
10 January 2013
HOLD
Stock Data
Target Price (pence) 52-Week Range (pence) Current price (pence) Shares Outstanding (bn) Free Float (%) Market Cap (CHF bn) Avg daily volume (m) *E=Liberum Capital Estimates 25.0 15.97 - 26.53 24.38 1.32 89% 32.2 6
Credit Suisse
Missing a Trick (negative FICC franchise value)
PRICE: 24.4 | SWITZERLAND | BANKS | CSGN.VX | CSGN VX
Over the last 12/24 months CS has underperformed UBS by 18%, and 29% respectively on a total return basis. We expect this relative underperformance to continue until CS follows UBSs lead and radically restructures its economic-value-destroying IB division.
Stock Performance
30.0 28.0 26.0 24.0 22.0 20.0 18.0 16.0 14.0 Jan-12 Mar-12 CS Jun-12 Sep-12 Dec-12
Good EPS growth: factoring in cost savings of CHF1.0bn by 2015e

we expect a 6% EPS p.a. 2013-15E, putting us 8% below consensus for 2015e. We are pessimistic on IB revenues with a cumulative 6% decline by 2014e due to the planned 11% decline in IB RWAs by YE13e & are 10% below consensus for 2014e Group revenues.
Improving capital position: CS had a fully loaded Basel 3 equity

capital ratio of 7.5% at 3Q12. We forecast a fully loaded Basel 3 equity ratio of 10.7% by YE13e assuming CS achieves its target of shrinking RWAs to below CHF280bn (-10%). Our valuation assumes a further CHF1.5bn capital deduction for Libor fines and litigation (although CS participates to only 3 Libor Panels- USD, EUR, CHF).
EURO Banks (r ebased)
Price Performance Price Absolute Rel SMI Rel Eurobanks Source: Bloomberg
1M 22.8 -8% -10% -13%
3M 21.2 1% -7% -13%
12M 21.4 -2% -19% -36%
Arguably misleading to measure IB profitability without

attributing minority interests, central costs and regulatory changes: CS reports its 9m12 underlying IB return on Basel 3 equity capital as 11%. However on a fully allocated basis, the RoB3E is 5.3% (we dont exclude PAF2 expenses- recurring in our view). Even generously excluding wind-down losses (for which limited disclosure) the RoB3E would be 9.8% -still below the IB divisions cost of equity.
Summary Financials & Valuation

Dec y/e (CHF bn) Revenue Op Costs Impairments PBT Adj EPS, pence P/Adj EPS DPS, pence Yield % TCE/share, CHF RoTCE % P/TCE FY11A 25.4 -23.9 0.1 6.8 3.91 6.2 1.30 5.3 20.3 6.0% 1.20 FY12E 24.0 -22.5 -0.2 2.7 1.23 19.8 0.75 3.1 21.9 10.9% 1.12 FY13E FY14E 25.6 25.5 -20.8 -20.1 -0.2 -0.3 3.0 5.2 2.29 10.6 0.75 3.1 22.6 10.8% 1.08 277 17.9% 10.7% 2.40 10.2 0.85 3.5 24.3 10.8% 1.00 285 17.4% 11.5%
Valuation and recommendation: Fully adjusting for the 24% share

count increase related to MACCs and scrip, CS trades on 2013e: PE 10.2x; p/TCE 1.1x for RoTCE 11.0%; yielding 3.1%. Adjusted for capital, regulation and future cost savings, the multiples for CS become PE 10.4x; p/TCE 1.2x for RoTCE 10.3%. Our cap-adjusted SoTP derived target price of CHF25.0 per share implies CS is trading just below fair value.
Basel 3 RWAs 339 299 B3CET1* reportd (%) 11.5% 16.4% B3CET1* full load (%) 4.0% 8.7% Source: Liberum Capital estimates
Potential positive catalyst: Any indication that CS was planning to

follow UBS lead and exit some of its disadvantaged FICC businesses under Basel 3, would re-rate the shares in our view. We estimate that CSs IB division has a negative economic value of CHF9.7bn under fully loaded Basel 3, equivalent to CHF6.1 per share. Shrinking the IB by 50%, would create value of at least CHF1.9 per share in our view, net of realignment costs.
Scope for positive sentiment shift: only 31% of sell-side analysts

have a buy recommendation on CS (vs. 64% for UBS).
33
10 January 2013
Credit Suisse
We highlight the following features: i) 32% increase in shares outstanding in 2013 on conversion of the CHF3.8bn of mandatory convertibles ii) discuss managements calculation approach for the Group RoE and IB RoE iii) The Fully Loaded IB division RoB3E is only 5.2% implying scope to create value by shrinking division iv) Briefly discuss divisional trends. Taking each of these in turn:
i)Share count up by 31% by 2013e vs. YE11:

Sharp 31% rise in shares outstanding due to capital raisings 2011-2013
While Credit Suisse pays a relatively attractive dividend yield of 3.1% in 2013e this will be entirely funded via scrip. As a consequence of scrip dividends, the CHF3.8bn mandatory convertible, as well as significant transfer of equity to employees, we estimate that by YE13e CS shares outstanding will increase to 1,598m by shares a 31% increase vs. YE11. BY contrast for UBS the outstanding shares are likely to be essentially unchanged.
ii) In our view Credit Suisse miscalculates its group RoE

CS includes earnings attributable to preference shares in the numerator of its RoE but excludes them from the denominator
CS arguably overstates its RoE by c1% on average. To calculate its RoE CS takes ts so-called Net income attributable to shareholders and divides by average shareholders equity. However the EPS calculation which arguably better reflects true attributable earnings has 2 further deductions for (Claudius) preference share dividends and earnings available for unvested share based-payments. On average these additional deductions dilute attributable earnings by c16%. To see this more clearly as Figure 45 illustrates, using CSs own reported numbers from its reported financial highlights summary (page1), dividing 2Q12 basic EPS by the average stated book value per share and annualizing implies a 2Q12 RoE of 7.0%. However CSs states its RoE calculation is 9.2%, with the difference mainly due to CHF 114m of preferred securities dividends.
Figure 45: Credit Suisse comparison of Co Definition of RoE vs. standard definiton
Book Value per share Avg book value EPS basic RoE Net Income attributable Shareholders equity Avg Shareholders Equity RoE Co def RoE overstatement Source: Liberum Capital 1Q12 27.43 2Q12 27.1 27.265 0.48 7.0% 788 34,774 34,180 9.2% 2.2% 3Q12 27.6 27.35 0.16 2.3% 254 35,682 35,228 2.9% 0.5%
33,585
34
10 January 2013
iii) Fully Loaded 2013e IB division RoB3E is only 5.2% implying scope to create value by shrinking division
To the extent that CS uses its own published IB RoE figures in its mgmt planning, there is a risk of incremental misallocation of capital to the IB going forward.
As discussed in the main section (Figure 27) on an unloaded basis CSs IB

division will have a 2013e RoB3E of 10.9%. However after allocating central costs and minority interests in proportion to RWAs the RoB3E is considerably lower at 5.2%. Allocating is proportion to RWAs is logical in our view, since being regulatory capital preference shares are proportional to RWAs and similarly other central costs such as balance sheet levies are again correlated to balance sheet utilisation.
We estimate a negative impact from Dodd Frank, ring fencing initiatives

and financial activity taxes of CHF 0.5bn net of tax. Details available on request: Essentially we estimate
CHF0.35bn of negative impact from derivatives moving onto exchange
with a consequent 15% drop in revenues from equity and FICC trading and assume variable costs of 45%.
CHF0.35bn of negative impact from ring-fencing and resolution clarifying
regulatory initiatives- assuming a 0.25% increase in funding costs for a net CHF468bn of IB assets (CHF772bn as of 3Q12 less the guided CHF100bn reduction less cCHF204bn of deposits) and take a 50% discount due to the delayed implementation and implementation uncertainty. Looking on a historic basis, our estimated IB RoB3E is below those of CS: IB RoE for 9m12: CS reports its IB RoB3E as 11% on a normalised basis for 9M12. After allocating central costs, below the line items (equity minorities, earnings for unvested shares) as well as the impact of Dodd Frank and other regulation the 9M12 annualised RoB3E is much lower at 5.3%.
35
10 January 2013
Figure 46: CS IB normalised RoE for 9M12 under CS definition vs. Liberum Definition
bn Average IB Basel 3 RWAs Allocated Capital Reported Pre tax income Net PAF2 expense Wind-down business Litigation provisions Allocated central costs Dodd Frank/ Ring fencing Cost savings Normalised pre tax Income tax Expense @ 25% Normalised net income Attributable BTL expenses Normalised attributable earnings Normalised RoB3E CS calc 9M 12 USD 217 21.7 2.0 0.3 0.1 Liberum calc 9M 12 CHF 217 21.7 1.9 Liberum calc 2012 CHF 212 21.2 2.5
At 5.3% our estimated ROE for 9M12 is significantly below CSs own calculation 11% (different methodology)
2.4 -0.6 1.8
11.2%
0.1 -0.3 -0.5 0.2 1.4 -0.3 1.0 -0.2 0.86 5.3%
0.1 -0.4 -0.7 0.2 1.8 -0.5 1.4 -0.3 1.08 5.1%
Memo items Average Group RWAs u/l central costs u/l central costs allocatable to IB BTL expenses incl Minorities BTL expenses allocatable to IB Source: Company Reports; Liberum Capital
317
317 -0.48 -0.33 -0.25 -0.17
313 -0.58 -0.39 -0.4 -0.30
Even after somewhat bullishly excluding wind-down losses the 9M12 RoB3E is
9.5% (vs. CSs calculated RoB3E of 16.1%). Given limited disclosure on the duration and composition of these wind-down positions we feel uncomfortable excluding their P&L from the IB RoE calculation.
Even excluding wind down asset losses our estimate of RoB3E remains below an estimated Ke of 11%
Figure 47: CS IB normalised RoE ex wind-down losses for 9M12 under CS definition vs. Liberum Definition
CS calc ex wind down 9M 12 USD 192 19.2 2.0 0.3 0.7 0.1 Liberum calc ex wind-down 9M 12 CHF 192 19.2 1.9 0.7 0.1 -0.3 -0.5 0.2 2.1 -0.5 1.5 -0.2 1.37 9.5% Liberum calc ex wind-down 2012 CHF 187 18.7 2.5 0.9 0.1 -0.4 -0.7 0.2 2.7 -0.7 2.1 -0.3 1.75 9.3%
Average IB Basel 3 RWAs Allocated Capital Reported Pre tax income Net PAF2 expense Wind-down business Litigation provisions Allocated central costs Dodd Frank/ Ring fencing Cost savings Normalised pre tax Income tax Expense @ 25% Normalised net income Attributable BTL expenses Normalised attributable earnings Normalised RoB3E Source: Company Reports; Liberum Capital
3.1 -0.8 2.3
16.1%
IB RoE in 2013e: Figure 48 shows the expected IB RoE in 2013e, 10.9% before
allocation of central costs and minority interests, declining to 5.2% on a fully allocated basis.
36
10 January 2013
Figure 48: CS 2013e fully loaded divisional returns on Basel 3 equity at 10% Basel 3 equity gearing
CHF bn YE13e Capital Basel 3 gearing RWAs Allocated U/L Capital PBT Attrib utable earnings Unloaded RoB3E Reallocate centre capital Adjusted Reallocate Regulatory Allocated central impact* capital cost, minorities etc 2.5 -0.1 0.0 5.1 -0.2 0.0 1.3 0.0 0.0 18.8 27.7 -0.71 1.0 0.0 0 0.0 -0.5 0.0 -0.5 0 -0.5 Cost saves* Fully loaded attrib earnings 1.8 0.5 0.4 1.0 0 3.6 0.0 3.8 Loaded RoB3E
Wealth Mgmt Corp and Institutions Asset management Investment Bank Centre & BTL** Subtotal
24.0 48.7 12.6 180.0 12.0 277.4
10% 10% 10% 10% 10% 10%
2.4 4.9 1.3 18.0 27.7 0.5 28.3
2.5 0.9 0.5 2.6 5.2 0.0 5.3
1.9 0.7 0.4 2.0 -1.0 3.8 0.0 3.8
77.6% 14.2% 27.8% 10.9% -86.8% 13.8% 1.0% 13.6%
0.1 0.2 0.1 0.8 -1.2 0.0
0.0 0.0 0.1 0.2 0.0 0.3 0 0.3
70.0% 9.3% 28.7% 5.2% nm 13.0% 1.0% 12.7%
1.2 -1.2
Excess capital Total 277.4 *Net tax; **BTL: Below the Line Source: Liberum Capital
Some possibility of reaching cost of equity hurdle via cost cutting: The
above 2013e IB RoB3E already assumes CHF0.5bn of IB cost reduction vs the 2012e run rate. Of course additional potential IB cost cutting of CHF1.2bn would boost the RoB3E above 10%. However we are sceptical whether this incremental 12% decrease would be feasible without impacting revenues.
In addition there is potential further downside risk to the IB RoB3E if regulators require banks to adopt a more conservative RWA calculation methodology
Potential incremental downside risk for CSs IB division RoE if Basel 3 RWA methodology changes materially If the Basel capital requirement for securitisations under Basel 3 increases as suggested by the recent (18Dec) Basel consultation paper3, it would adversely impact CSs CHF37bn of Securitisation RWAs.
As one sensitivity, if the securitisation RWAs increased by 100% along with a

20% increase in other IB RWAs due to for instannce a FINMA-mandated requirement to use standardised RWA calculation methodologies (rather than advanced method), we estimate a CHF63bn increase in Group Basel 3 RWAs by YE13, with a CHF6bn capital impact, equivalent to 17% of the current market cap. In this sensitivity even with a 10% CHF1.2bn incremental reduction in IB costs, the IB RoB3E @10% gearing would be only 7.6% i.e. below the cost of equity.
http://www.bis.org/publ/bcbs236.htm
37
10 January 2013
Figure 49: Potential increase in CS capital requirements due to higher capital requirements for securitisations and application of standardised approach for RWAs
CHF bn 3Q12 YE13 Equity Capital requirements @10% 33 16 31 43 123 57 180 97 277 3 2 3 4 12 6 18 10 28 RWA potential % increase Revised YE13 Revised Equity RWAs Capital requirements @10% 67 7 19 2 37 4 51 5 174 17 69 7 243 24 102 345 10 34 Difference in capital requirements
As 1 sensitivity a 100% increase in the RWA weighting for securitisation assets as well as a 20% increase for other IB assets would increase the IB division capital requirement by CHF6bn making it highly unlikely that the IB RoB3E could exceed 11% even with aggressive efficiency measures
Securitised products Credit Macro Other FICC FICC Other IB total Other Group CHF bn Per share CHF Increase capital % of mkt cap Source: Liberum Capital
37 18 34 50 139 63 202 104 307
100% 20% 20% 20% 42% 20% 35% 5% 24%
6 3.9 18%
As an aside, UBS is less exposed to potential regulation-driven increases

in RWAs due to its smaller balance sheet: the impact would be lower given starting point IB RWAs of only CHF70bn vs. CHF180bn for CS and given that is shrinking its funded balance sheet by CHF300bn vs. CSs CHF100bn reduction.
We estimate CS could unlock CHF2-4 per share of value net of 1-off costs by closing or significantly restructuring its IB.
In conclusion, CS could unlock significant value by following UBSs lead

and shrinking the IB: As figure 50 shows, we estimate the IB division has negative value of minus CHF9.7bn, approximately 25% of the current market cap - CHF6.1 per share. Shrinking the less profitable FICC areas of the IB aggressively as seen with UBS is likely to unlock at least CHF2-4 per share (815% of current share price) of value net of incremental business realignment costs.
Figure 50: CS Fair value by division vs. allocated capital and implied economic value loss*
% Value mix Wealth Mgmt. 54% Retail & Corporate/ CIC 12% Asset Management 12% Investment Banking 21% Total core 99% Surplus/deficit (+/-) 1% Total 100% *Based on SoTPs analysis in Figure 30 Source: Liberum Capital % total equity 9% 18% 5% 67% 98% 2% 100% YE13 Value/ Capital x 8.3 0.9 3.4 0.4 1.4 1.0 1.4 Value loss CHF bn 0.0 -0.2 0.0 -9.7 -10.0 0.0 -10.0 Value loss Economic Value per share loss % mkt cap 0.0 0% -0.1 -1% 0.0 0% -6.1 -24% -6.2 -25% 0.0 0% -6.2 -25%
Group and Divisional Underlying P&L trends
Summary divisional PBT: We expect average PBT growth of 5% 2013-15e with

good growth in wealth management and asset management profitability compensating for relatively flat PBT in the IB division.
38
10 January 2013
Figure 51: Credit Suisse Summary Divisional PBT, underlying

2010 2.5 0.9 3.6 0.5 -0.3 7.2 0.2 -0.6 -0.4 6.8 6.8 5.6 4.8 398.7 1.8% 12.1% 2011 1.9 0.9 0.1 0.6 -0.3 3.1 1.0 -1.3 -0.3 2.7 2.7 2.3 2.0 330.0 0.8% 5.6% 2012e 2.2 0.9 2.7 0.3 -0.6 5.5 -1.8 -0.8 -2.6 3.0 3.0 4.5 3.9 298.7 1.8% 12.5% 2013e 2.5 0.9 2.6 0.5 -0.7 5.7 -0.5 -0.5 5.2 5.2 4.4 3.8 277.4 2.0% 13.3% 2014e 2.7 0.9 2.6 0.6 -0.7 6.1 -0.3 -0.3 5.8 5.8 4.7 4.1 284.7 2.2% 14.4% 2015e 2.9 0.9 2.6 0.6 -0.6 6.5 -0.3 -0.3 6.3 6.3 5.0 4.3 295.4 2.2% 15.0% 2011 -26% -2% nm 18% 19% -57% 2012e 19% 3% nm -43% 92% 80% % Ch 2013e 9% 0% -3% 47% 14% 4% 2014e 9% 0% 0% 23% 0% 6% 2015e 9% 3% 2% 9% -8% 7%
Wealth Mgmt Corporate & Institutional Investment Bank Asset Management Corporate Centre U/L Total PBT Rev 1-offs Cost 1-offs 1-offs Reported Total PBT Reported total check U/L PAT U/L Attributable Basel 3 RWAs U/L PBT/Avg RWAs Ro B3E @10% CT1 Source: Company Reports; Liberum Capital
Group P&L: We forecast essentially flat group revenues out to 2015 with costs
declining a cumulative 4% to drive bottom line PBT growth of 6%
Figure 52: Credit Suisse Summary U/L Group P&L
CHF bn Revenues Total expenses PIP Loan losses U/L PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT Clean PAT Minorities & BTL adj U/L Attributable 2010 30.4 -23.3 7.1 0.1 7.2 0.2 -0.6 -0.4 6.8 5.5 -0.6 4.9 2011 24.4 -21.2 3.3 -0.2 3.1 1.0 -1.3 -0.3 2.7 2.3 -0.4 1.9 87% 330 5.2% 2012e 25.7 -20.0 5.7 -0.2 5.5 -0.5 -0.8 -1.3 4.3 4.2 -0.4 3.8 78% 299 12.0% 2013e 25.6 -19.6 6.0 -0.3 5.7 0.0 -0.5 -0.5 5.2 4.4 -0.5 3.8 77% 277 13.3% 2014e 25.5 -19.2 6.3 -0.3 6.07 0.0 -0.3 -0.3 5.8 4.6 -0.6 4.1 75% 285 14.4% 2015e 25.9 -19.2 6.8 -0.3 6.5 0.0 -0.3 -0.3 6.3 4.9 -0.6 4.4 74% 295 15.1% 2011 -20% -9% -54% -57% 2012e 5% -5% 74% 80% % Ch 2013e 0% -2% 5% 4% 2014e 0% -2% 5% 6% 2015e 2% 0% 7% 7%
-61%
98%
2%
6%
8%
Cost Income 77% Basel 3 RWAs 399 Ro B3E @10% CT1 12.3% Source: Company Reports; Liberum Capital
-17%
-9%
-7%
3%
4%
Wealth Management: We expect Wealth Management average PBT growth of

9% 2013-15e with c2% revenue growth and flat costs driving the bottom line. We assume some modest margin erosion down to 63bps in 2014e vs. 65bps in 2012e.
39
10 January 2013
Figure 53: Credit Suisse U/L Wealth Management Division

CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses U/L PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT U/L PAT U/L Attributable 2010 9.8 -4.2 -3.1 -7.2 2.6 -0.1 2.5 0 0 0 2.5 1.9 1.7 2011 9.0 -4.0 -3.0 -7.0 2.0 -0.1 1.9 0.1 -0.5 -0.4 1.5 1.4 1.2 42.2 -7% 792 70 78% 24.2 8.3% 54.9% 2012e 8.6 -3.6 -2.6 -6.2 2.3 -0.1 2.2 0.0 0.0 0.0 2.3 1.7 1.5 21.1 2% 828 65 73% 25.0 9.1% 60.2% 2013e 8.8 -3.6 -2.6 -6.2 2.6 -0.1 2.5 2014e 9.0 -3.6 -2.6 -6.2 2.8 -0.1 2.7 2015e 9.2 -3.6 -2.6 -6.2 3.0 -0.1 2.9 2011 -9% -3% -3% -3% -25% -26% 2012e -4% -10% -12% -11% 20% 19% % Ch 2013e 3% 0% 0% 0% 9% 9% 2014e 2% -1% -1% -1% 9% 9% 2015e 3% 0% 0% 0% 9% 9%
2.5 1.9 1.6 21.1 2% 866 64 71% 24.0 10.0% 66.1%
2.7 2.0 1.8 21.1 2% 905 63 69% 25.0 10.9% 72.1%
2.9 2.2 1.9 21.1 2% 944 63 67% 26.1 11.4% 75.6% -7% -2% -50% 5% 0% 5% 0% 4% 0% 4%
Net new Assets 45.3 Performance -5% Invested Assets 808 Margin (bps) 76 Cost Income Basel 3 RWAs 21.0 U/L PBT/Avg RWAs 12.0% Ro B3E @10% CT1 79.7% Source: Company Reports; Liberum Capital
Asset Management: Credit Suisse has announcement plans to merge the asset
management division with Wealth Management, to capture cost synergies. For now we show the divisions separately but reflect the cost savings in Asset Management with expenses down 4% in 2013e and 6% in 2014e see main section for cost analysis in terms of head count.
Figure 54: Credit Suisse U/L Asset Management Division

CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses U/L PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT U/L PAT U/L Attributable Cost Income Basel 3 RWAs U/L PBT/Avg RWAs Ro B3E @10% CT1 Source: Liberum Capital 2010 2.3 -1.1 -0.7 -1.8 0.5 0 0.5 0.0 0.0 0.0 0.5 0.4 0.3 2011 2.1 -0.9 -0.7 -1.6 0.6 0 0.6 0.0 0.0 0.0 0.6 0.4 0.4 74% 12.0 4.3% 28.6% 2012e 1.9 -1.0 -0.6 -1.6 0.3 0 0.3 0.4 0.0 0.3 0.7 0.5 0.4 83% 13.1 2.5% 34.8% 2013e 2.0 -0.9 -0.6 -1.5 0.5 0 0.5 0.0 0.0 0.0 0.5 0.4 0.3 77% 12.6 3.6% 23.8% 2014e 2.0 -0.9 -0.6 -1.4 0.6 0 0.6 0.0 0.0 0.0 0.6 0.4 0.4 71% 12.9 4.5% 29.5% 2015e 2.0 -0.9 -0.6 -1.4 0.6 0 0.6 0.0 0.0 0.0 0.6 0.5 0.4 69% 13.2 4.8% 31.6% 2011 -7% -14% -12% -13% 18% 18% 2012e -12% 7% -13% -1% -43% -43% % Ch 2013e 5% -7% 1% -4% 47% 47% 2014e 1% -7% -5% -6% 23% 23% 2015e 3% 0% 0% 0% 9% 9%
13.5
Corporate and Institutional banking: We forecast the CIC division to be

relatively stable with underlying PBT of cCHF 0.9bn. Curiously CS doesnt disclose the RWAs directly attributable to the CIC division but groups it with Wealth Management as Private Banking in the divisional RWA disclosure. Allocating 2/3rds of Private Banking RWAs to the CIC division which may be on
10 January 2013
the low side (given the implied ratio of invested assets to RWAs in WM for CS of 33x vs. 46x for UBS) results in a RoB3E for CIC of only 13.2% in 2012e a relatively low level of profitability compared to the 32% return of UBSs equivalent R&C division.
Figure 55: Credit Suisse U/L Corporate and Institutional Division
CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses U/L PBT Rev 1-offs Cost 1-offs 1-offs Reported PBT U/L PAT U/L Attributable Invested Assets Cost Income Basel 3 RWAs U/L PBT/Avg RWAs Ro B3E @10% CT1 Source: Liberum Capital 2010 1.8 -0.6 -0.4 -1.0 0.8 0.1 0.9 0 0 0 0.9 0.7 0.6 2011 1.8 -0.6 -0.4 -0.9 0.9 0.0 0.9 0.0 0.0 0.0 0.9 0.7 0.6 136 51% 40.3 2.1% 14.0% 2012e 1.9 -0.6 -0.4 -1.0 1.0 -0.1 0.9 0.0 0.0 0.0 0.9 0.7 0.6 221 50% 50.8 2.0% 13.2% 2013e 1.9 -0.6 -0.4 -1.0 1.0 -0.1 0.9 0.0 0.0 0.0 0.9 0.7 0.6 227 50% 48.7 1.8% 12.1% 2014e 1.9 -0.6 -0.4 -1.0 1.0 -0.1 0.9 2015e 2.0 -0.6 -0.4 -1.0 1.0 -0.1 0.9 2011 2% -2% -2% -2% 7% -2% 2012e 3% 2% 0% 1% 5% 3% % Ch 2013e 1% 2% 0% 1% 0% 0% 2014e 1% 2% 0% 1% 0% 0% 2015e 2% 2% 0% 1% 3% 3%
0.0 0.9 0.7 0.6 232 50% 50.8 1.8% 12.1%
0.0 0.9 0.7 0.6 241 50% 52.9 1.8% 12.0%
42.6
We assume IB revenues decline 6% by 2014e due to RWA shrinkage.
Investment banking: IB Credit Suisse plan to shrink their Basel 3 IB RWAs to

CHF180bn by YE13e from the 3Q12 level of CHF202bn. We forecast top line IB revenues declining 6% by 2014e due to this RWA shrinkage.
We expect costs to decline 8% over the same period driven by a 1,100

reduction in average IB headcount down to 19,600 see Figure 25. Our 2015e PBT of CHF2.6bn is just marginally below the 2012e level.
41
10 January 2013
Figure 56: Credit Suisse U/L Investment Bank Division

CHFbn M&A ECM DCM Equities FICC Revenues Staff cost Other expenses Total expenses PIP Loan losses U/L PBT Rev 1-offs IBD Rev 1-offs Equities Rev 1-offs FICC Rev 1-offs Costs 1-offs FVOD 1-offs Reported PBT Clean PAT U/L Attributable 2010 3.9 5.9 6.4 16.3 -8.0 -4.8 -12.8 3.5 0.1 3.6 0.0 -0.1 0.0 -0.1 0.0 0.0 0.0 3.5 2.8 2.4 2011 2.9 4.7 3.9 11.5 -6.7 -4.7 -11.3 0.2 -0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.00 0.079 0.1 0.1 2012e 3.0 4.5 5.8 13.3 -6.3 -4.3 -10.7 2.7 0.0 2.7 0.0 0.0 0.0 0.0 -0.1 0.0 -0.14 2.5 2.1 1.8 2013e 3.0 4.4 5.4 12.8 -6.0 -4.2 -10.2 2.7 -0.1 2.6 2014e 3.0 4.5 5.0 12.5 -5.8 -4.1 -9.9 2.7 -0.1 2.6 2015e 3.1 4.5 5.0 12.6 -5.8 -4.1 -9.9 2.7 -0.1 2.6 2011 -26% -20% -40% -29% -17% -2% -11% -95% -98% 2012e 5% -5% 50% 16% -5% -7% -6% 1610% 3276% % Ch 2013e 0% -1% -8% -4% -6% -3% -5% 1% -3% 2014e 1% 0% -7% -2% -3% -3% -3% 0% 0% 2015e 1% 0% 0% 0% 0% 0% 0% 2% 2%
2.6 2.0 1.8 79% 180.0 1.4% 9.4%
2.6 2.0 1.8 79% 183.6 1.4% 9.6%
2.6 2.1 1.8 78% 187.3 1.4% 9.6%
Cost Income 79% 99% 80% Basel 3 RWAs 311.2 241.1 194.7 Clean PBT/Avg RWAs 1.1% 0.0% 1.2% Ro B3E @10% CT1* 7.8% 0.2% 8.3% *Before adjusting for impact of Dodd Frank and other Financial regulation Source: Liberum Capital
Corporate centre: We assume the underlying corporate centre PBT remains relatively stable at around the minus CHF0.7bn level. Our divisional RoB3E estimates reallocate these central costs to each of the other divisions.
Figure 57: Credit Suisse U/L Corporate Centre Division
CHFbn Revenues Staff cost Other expenses Total expenses PIP Loan losses U/L PBT Rev 1-offs Cost 1-offs FVoD Total 1-offs Reported PBT U/L Attributable Basel 3 RWAs Clean PBT/Avg RWAs Ro B3E @10% CT1 Source: Liberum Capital 2010 0.2 -0.3 -0.1 -0.4 -0.3 0 -0.3 -0.7 0.3 -0.4 -0.7 -0.2 10.3 -16.2% 2011 0.0 -0.1 -0.2 -0.3 -0.3 0 -0.30 0.0 -0.8 0.9 0.1 -0.231 -0.2 12.3 nm -17.7% 2012e 0.0 -0.3 -0.3 -0.6 -0.6 0 -0.6 0.4 -0.6 -2.6 -2.8 -3.4 -0.4 15.2 -4.2% -27.9% 2013e 0.1 -0.5 -0.3 -0.8 -0.7 0 -0.7 -0.5 -0.5 -1.2 -0.4 12.0 -4.8% -32.1% 2014e 0.1 -0.5 -0.3 -0.8 -0.7 0 -0.7 -0.3 -0.3 -0.9 -0.4 12.4 -5.4% -35.8% 2015e 0.1 -0.4 -0.3 -0.7 -0.6 0 -0.6 -0.3 -0.3 -0.9 -0.4 16.0 -4.3% -28.4% 2011 2012e % Ch 2013e 2014e 2015e
nm
nm
14%
0%
-8%
42
10 January 2013
Figure 58: Credit Suisse Summary Financials

Income Statement CHF, m, year-end Dec Net interest income % YoY change Non-interest income Fees & commissions % YoY change Trading revenues % YoY change Other income Total operating revs % YoY change Admin expenses % YoY change Other expenses Pre-provision op profit % YoY change Loan loss provisions Other provisions Other non recurrent Pretax profit % YoY change Tax % Tax rate Minorities &Unvested sh Net Income (Rep) Balance sheet CHF, m, year-end Dec ASSETS Net customer loans % YoY change Loan loss reserves Investments Other int earning assets % YoY change Avg int earnings assets Goodwill Other assets Total assets FY11 6,433 -1.7% 12,976 -7.8% 4,928 -47.2% 1,092 25,429 -17% -13,151 -9.7% -9,342 2,936 -56.3% -187 0 2,749 -59.6% -671 24.4% -125 1,640 FY12E 6,690 4.0% 12,976 0.0% 2,464 -50.0% 1,841 23,971 -6% -12,490 -5.0% -8,349 3,132 6.7% -150 0 2,982 8.5% -749 25.1% -125 3,086 FY13E 6,958 4.0% 12,976 0.0% 2,464 0.0% 3,245 25,642 7% -12,051 -3.5% -8,090 5,502 75.7% -255 0 5,247 75.9% -1,259 24.0% -125 3,453 FY14E 7,236 4.0% 12,976 0.0% 2,464 0.0% 2,845 25,521 0% -11,533 -4.3% -7,908 6,080 10.5% -260 0 5,820 10.9% -1,397 24.0% -125 3,867 Ratio Analysis Per Share Data EPS reported EPS Adjusted % YoY change DPS % YoY change Dividend yield Payout ratio BV per share TCE per share Shares outstanding Return ratios RoRWA Pre-tax RoE RoE RoTCE Revenues NIM (NII / AIEA) Non-IR / avg assets Total rev / avg assets NII / Tot revenues Fees / tot revenues Trading / Tot revenues FY11 1.36 1.23 -68.5% 0.75 -42.3% 3.1% 0.0% 27.59 20.32 1,207 FY11 0.7% 8.2% 4.9% 6.0% FY11 0.0% 1.9% 2.5% 25.3% 51.0% 19.4% FY12E 1.94 2.29 86.1% 0.75 0.0% 3.1% 0.0% 28.71 21.86 1,251 FY12E 1.3% 8.3% 8.6% 10.9% FY12E 0.0% 1.6% 2.2% 27.9% 54.1% 10.3% FY13E 2.16 2.40 4.7% 0.85 13.3% 3.5% 0.0% 28.36 22.59 1,592 FY13E 1.6% 12.6% 8.3% 10.8% FY13E 0.0% 1.9% 2.6% 27.1% 50.6% 9.6% FY14E 2.42 2.54 5.8% 1.00 17.6% 4.1% 0.0% 30.08 24.29 1,592 FY14E 1.8% 12.5% 8.3% 10.8% FY14E 0.0% 2.0% 2.8% 28.4% 50.8% 9.7%
FY11 233,413 1.5% -1,466 18,386 518,788 -1.5% 780,723 8,591 121,742 1,049,165
FY12E 242,750 4.0% -1,495 19,121 539,540 4.0% 785,999 8,591 126,612 1,090,788
FY13E 199,783 -17.7% -1,525 15,737 444,041 -17.7% 730,486 8,591 104,201 900,616
FY14E 199,783 0.0% -1,555 15,737 444,041 0.0% 659,561 8,591 104,201 900,616 Cost ratios Cost / income Cost / assets
FY11 88.5% -2.2%
FY12E 86.9% -1.9%
FY13E 78.5% -2.0%
FY14E 76.2% -2.2%
Bal. Sheet Gearing Loan / deposit Investment / assets Loan / assets Cust. deposits / liabilities LT Debt / liabilities Asset Qual. / Capital LLP / RWA Basel 2/2.5 RWAs % YoY change Basel 2/2.5 Core Tier 1 Total Tier 1 Basel 2/2.5 Basel 3RWAs B3 Eq. tier1 rep. B3 Eq Tier1 fully applied
FY11 66.0% 1.8% 22.2% 33.7% 15.5% FY11 0.61% 241,753 10.5% 9.3% 15.2% 339 11.5% 4.0%
FY12E 66.0% 1.8% 22.3% 33.7% 14.9% FY12E 0.66% 225,698 -6.6% 14.8% 20.1% 299 16.4% 8.7%
FY13E 66.0% 1.7% 22.2% 33.6% 18.1% FY13E 0.74% 206,854 -8.3% 17.3% 23.2% 277 17.9% 10.7%
FY14E 66.0% 1.7% 22.2% 33.6% 18.1% FY14E 0.73% 212,751 2.9% 18.1% 23.8% 285 17.4% 11.5%
LIABILITIES Customer deposits 353,548 % YoY change 12.9% Long term funding 162,655 Interbank funding 176,559 Avg int bearing liabs 423,319 Other liabilities 315,318 Shareholders' equity 33,674 Minorities 7,411 Total liabilities 1,049,165 Source: Company Reports; Liberum Capital
367,690 4.0% 162,655 183,621 438,639 331,212 37,902 7,707 1,090,788
302,609 -17.7% 162,655 151,120 355,471 232,741 45,148 6,343 900,616
302,609 0.0% 162,655 151,120 354,110 230,017 47,872 6,343 900,616
43
10 January 2013
Appendix PE approach gives similar conclusion: UBS (+21%) & CS (-2%)

As a simple valuation cross check we calculate the PE multiples for UBS and CS
adjusted for 1-offs such as UBSs UPDTAs and adjusted for Capital to 10% Basel 3 and regulation such Dodd Frank and Ring Fencing
Figure 59: Calculating UBS and CS PEx adjusting for regulation and adjusting capital to 10% Basel 3 equity gearing
2010 EPS UBS CS Share Price UBS CS Exclude UPDTAs: value per share UBS CS Implied PE adjusted for UPDTAs UBS CS Underlying attributable UBS CS Dodd Frank/ other Reg impact bn UBS CS FinReg adjusted Attributable CHFbn UBS CS Shares outs UBS CS Basel 3 RWAs UBS CS Basel 3 capital fully load UBS CS Capital Surplus (vs. Basel 3 10% CT1) UBS CS Buyback/ Issuance impact Assumed post tax return on cash Change in Earnings UBS CS Change in Shares Outs bn UBS CS FinReg Cap adjusted Earnings CHFbn UBS CS Cap adjusted Shares Outs UBS CS FinReg Cap adjusted EPS UBS CS FinReg Cap adjusted P/E UBS CS Source: Company Reports; Liberum Capital 1.36 3.91 15.0 24.4 2.0 0.00 9.7 6.2 5.2 4.7 -0.17 -0.51 5.1 4.2 3.84 1.19 380 399 21.7 12.8 (16) (27) 11.9 19.8 4.3 1.5 -0.17 -0.51 4.1 1.0 3.84 1.22 380 339 25.3 12.2 (13) (22) 13.3 10.6 3.8 3.6 -0.17 -0.51 3.6 3.1 3.82 1.33 266 299 23.3 24.4 (3) (6) 1.0% 0.2 0.3 1.1 1.8 5.2 4.5 4.93 2.99 1.06 1.49 12.4 16.4 0.1 0.2 0.8 0.9 4.2 1.2 4.69 2.11 0.90 0.57 14.7 43.1 0.0 0.1 0.2 0.2 3.6 3.2 4.04 1.55 0.90 2.05 14.6 11.9 0.0 0.0 -0.2 0.0 4.4 3.3 3.63 1.58 1.22 2.10 10.8 11.6 -0.1 0.0 -0.4 -0.1 5.0 3.5 3.39 1.49 1.48 2.37 8.9 10.3 -0.1 0.0 -0.5 -0.2 5.3 3.8 3.33 1.41 1.59 2.71 8.3 9.0 10.8 10.2 4.6 3.8 -0.17 -0.51 4.5 3.3 3.80 1.61 226 277 25.1 28.3 3 1 9.5 9.6 5.2 4.1 -0.17 -0.51 5.1 3.5 3.80 1.61 211 285 27.1 31.3 6 3 9.0 8.9 5.5 4.4 -0.17 -0.51 5.4 3.9 3.80 1.61 200 295 27.0 34.4 7 5 2011 1.11 1.23 2012e 0.99 2.29 2013e 1.22 2.40 2014e 1.38 2.54 2015e 1.46 2.73
We calculate PEs after excluding the PV of UBSs UPDTAs
Calculate UBS and CS attributable income post regulation
UBS and CS actual capital levels in our base case Implied capital surplus vs. 10% target assumed eliminated via equity buyback/issuance
Earnings impact of buyback/ issuance Change in share outstanding due to buyback/issuance (in billions)
Attributable earnings adjusted for capital and FinReg Number shares adjusted for buyback/ issuance FinReg CapAdj EPS
FinReg CapAdj PEx
44
10 January 2013
We then compare the PEx to peers weighted by business mix to derive fair value
PE multiples for UBS and CS and implied upside and downside.
Figure 60: Implying % relative upside for UBS and CS from peer multiples based on business mix
2010 2011 14.7 43.1 18% 3% 71% 73% 2012e 14.6 11.9 18% 48% 66% 65% 2013e 10.8 11.6 12% 46% 58% 65% 2014e 8.9 10.3 14% 43% 54% 64% 2015e 8.3 9.0 13% 41% 50% 63%
For convenience repeated from previous table UBS earnings from IB declining over time; less so for CS UBS capital allocated to IB and legacy declining over time; less so for CS
Julius Baer more or less pure-play WM trades on 2013e PE of 15.7x Blackrock trades on 2013e PE of 14.4x Avg of BAER and BLK PEx Simplistic PE upside if UBS and CS were 100% WMs Estimated peer PEx for IB and WM businesses (IB PEx from GS; WM PE from avg of BAER and BLK) % that is WM/AM: 50% / 50% weighted by earnings & capital (see * and **) Expected PE based on Peer multiples*** % premium of expected PE for UBS and CS vs. current FinReg adjusted PE(see ****)
FinReg Cap adjusted P/E**** UBS CS % of Earnings from IB* UBS CS % of capital allocated to IB & Legacy** UBS CS Juliius Baer PE Calc Share price EPS P/E Blackrock PE Calc Price EPS P/E Avg implied WM multiple % upside to Wm Multiple UBS CS Proxy PEx for IB and WM businesses*** IB WM % WM/ AM UBS CS Expected Fair value PE UBS CS Implied Upside UBS CS Source: Company Reports; Liberum Capital; Bloomberg
12.4 16.4 29% 49% 77% 78% 34.22 2.39 14.3 216.5 10.9 19.8 17.1
2.17 15.8
2.07 16.5
2.18 15.7
2.77 12.4
3.05 11.2
11.85 18.3 17.0
13.39 16.2 16.4
15.01 14.4 15.1
16.76 12.9 12.6
18.436 11.7 11.5
59% 21% 10.9 17.1 47% 36% 13.8 13.1 11% -20%
25% -58% 9.9 17.0 55% 62% 13.8 14.3 -6% -67%
11% 36% 9.0 16.4 58% 43% 13.3 12.2 -9% 3%
34% 24% 8.2 15.1 65% 45% 12.6 11.3 17% -3%
45% 25% 7.4 12.6 66% 46% 10.9 9.8 22% -4%
42% 31% 6.8 11.5 68% 48% 10.0 9.0 Avg 13-15 20% 0% 21% -2%
The peer group based PE approach implies 21% upside for UBS and 2%
downside for CS, taking the average of the PE % upside for 2013-15e; implies fair value for UBS of CHF 18.2 and CHF 23.9 for CS.
While clearly a crude approach it serves as a cross check on the SoTP

approaches (figures 29-30).
45
10 January 2013
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Equity Research: BUY Case On UBS HOLD CS

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What are the analyst's recommendations for UBS and Credit Suisse?

What are the analyst's recommendations for UBS and Credit Suisse?

What capital and cost reduction measures is UBS undertaking?

What capital and cost reduction measures is UBS undertaking?

10 January 2013

European Equity Research

Road to Damascus: Long Paul vs. Saul

TCE1 12.0 22.3

Road to Damascus: Long Paul vs. Saul

Road to Damascus: Long Paul vs. Saul

Road to Damascus: Long Paul vs. Saul

-4% -1% 13% 6%

-5% -3% 4% -10%

http://tinyurl.com/athw8tm , Martin Taylor (former Barclays CEO) FT op-ed 2Nov2012.

Road to Damascus: Long Paul vs. Saul

Figure 3: UBS summary underlying divisional P&L

Road to Damascus: Long Paul vs. Saul

Figure 5: Liberum revenue and EPS forecasts vs. Bloomberg consensus

1.53 2.10 -27%

25.7 24.0 24.4 -2% 2.29 1.84 24%

25.6 25.6 27.0 -5% 2.40 2.51 -4%

25.5 25.5 28.4 -10% 2.54 2.90 -13%

25.9 25.9 30.6 -15% 2.73 2.99 -8%

For UBS sharp rise in RoB3E due to reduced Capital Consumption

Figure 6: UBS and CS Basel 3 RWAs CHFbn 2010-2017e

Road to Damascus: Long Paul vs. Saul

Road to Damascus: Long Paul vs. Saul

Figure 8: Bridge from TCE to Basel 3 equity capital 3Q12

CS 35.7 (8.9) 3.6 30.4

(0.3) 2.8 3.2 (1.8) 34.4 (3.2) (7.2)

(1.0) 22.9 (1.5) 21.4 1.6 307 3.2 10.7 % 1.3x

Figure 10: CS underlying return on Basel 3 equity

Road to Damascus: Long Paul vs. Saul

UBS could annually yield 11.9% 2015-17e; CS 8.6%

Put differently from YE14-YE17e, UBS will generate distributable cash of

Road to Damascus: Long Paul vs. Saul

9% 9% 0.4 0.10 15 0.7%

-18% 15% 0.6 0.15 1.0%

36% 16% 0.7 0.20 1.3%

68% 36% 1.9 0.50 3.3%

102% 96% 5.3 1.42 9.5%

84% 91% 5.3 1.42 9.5%

81% 88% 5.3 1.42 9.5% 9.5%

25 6.7% 9.0% 0.4 0.10 0.7%

25 9.3% 15.1% 0.6 0.15 1.0%

27 11.8% 16.4% 0.7 0.20 1.3%

29 13.6% 36.2% 4.8 0.50 3.3%

27 13.6% 120% 6.6 1.75 11.7%

26 13.6% 127% 7.4 1.95 13.0%

25 13.0% 104% 6.3 1.66 11.1%

5.5 200 5% 10 1.3 76% 1.1 7.4%

5.8 192 5% 10 1.3 78% 1.2 8.0%

6.0 195 5% 10 1.3 79% 1.3 8.4%

Road to Damascus: Long Paul vs. Saul

55% 48% 0.9 0.75 24.38 3.1%

32% 26% 1.0 0.75 3.1%

39% 35% 1.4 0.85 3.5%

41% 39% 1.6 1.00 4.1%