The bank also launched a SFr5bn (£3.5bn) bond buyback as it has sharply reduced its funding needs and wants to reduce its costs in line with that.
Operating income for the year dropped 8.4 per cent to SFr25.44bn, while operating expenses increased 21 per cent to SFr27.22bn.
That leaves a pre-tax operating loss of SFr1.77bn, compared with a profit of SFr5.31bn for 2011, and a loss attributable to shareholders of SFr2.51bn, compared with a 2011 profit of SFr4.14bn.
For the fourth quarter of 2012 the bank made a loss of SFr1.89bn, its second consecutive loss.
UBS was hit with a Libor fine of SFr1.4bn in December and is already in the process of laying off 10,000 staff as it shuts down much of the fixed income arm of its investment banking operations.
The bonus pool has been cut by another seven per cent to SFr2.5bn to reflect that, and a bail-in element will be applied to those awards.
But the bank is making progress in its restructuring, shrinking its balance sheet and reducing funding needs, leading to the bond buyback.