6-K 1 investorpreso20240207.htm investorpreso20240207
 
 
 
 
 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
REPORT OF FOREIGN PRIVATE
 
ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: February 7, 2024
UBS Group AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-36764
UBS AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Aeschenvorstadt 1, 4051 Basel, Switzerland
 
(Address of principal executive offices)
Commission File Number: 1-15060
 
Credit Suisse AG
(Registrant's Name)
Paradeplatz 8, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-33434
Indicate by check mark whether the registrants file or will file annual
 
reports under cover of Form
20-F or Form 40-
F.
Form 20-F
 
 
Form 40-F
 
This Form 6-K consists of the transcripts of the of UBS Group AG 4Q23
 
Earnings call remarks and
Analyst Q&A, which appear immediately following this page.
 
 
1
Investor update and fourth
quarter 2023 results
 
6 February 2024
Speeches by
Sergio P.
 
Ermotti
, Group Chief Executive Officer,
 
and
Todd
 
Tuckner
,
Group Chief Financial
 
Officer
Including analyst
 
Q&A session
Transcript.
Numbers for
 
slides
 
refer to
 
the investor
 
update and
 
fourth quarter
 
2023 results
 
presentation.
Materials and a
 
webcast replay are available
 
at
www.ubs.com/investors
 
Sergio P.
 
Ermotti
Slide 3 – Key messages
Thank you, Sarah and good morning,
 
everyone.
2023 was
 
a defining
 
year for UBS
 
as we
 
acquired Credit
 
Suisse in
 
one of
 
the largest transactions
 
in banking
history, setting a
 
new long-term
 
trajectory for
 
our franchise.
 
It was
 
also an
 
intense year
 
that required
 
exceptional
focus from all
 
of our colleagues during
 
periods of significant change
 
and uncertainty.
 
We stayed close
 
to our
clients,
 
helping
 
them
 
manage
 
a
 
rapidly
 
evolving
 
geopolitical
 
and
 
macroeconomic
 
backdrop,
 
as
 
well
 
as
 
the
turmoil that occurred
 
in the financial
 
system last March.
 
The strength and
 
stability of UBS provides
 
is a direct
result of our decade-long sustainable strategy, an unwavering commitment to maintaining a balance
 
sheet for
all seasons, and a focus on risk and capital
 
efficiency.
For these reasons, clients reward UBS with their extended trust and confidence during periods of volatility and
market uncertainty.
 
And it allowed UBS to credibly step
 
in and stabilize the Swiss, and wider,
 
financial system
by taking
 
over Credit
 
Suisse.
 
We have
 
acquired an
 
enterprise that
 
has suffered
 
from many
 
years of
 
unsustainable
capital allocation
 
and under-investment
 
in its
 
businesses and
 
control framework.
 
This resulted
 
in cost
 
and capital
inefficiencies,
 
significant
 
losses
 
and,
 
ultimately,
 
substantial
 
franchise
 
erosion.
 
However,
 
the
 
acquisition
accelerates
 
our
 
strategic
 
priorities
 
by
 
providing
 
UBS
 
with
 
a
 
complementary
 
client
 
base,
 
stronger
 
regional
presence, more
 
products and services,
 
as well as
 
many talented people. This
 
gives us great
 
confidence in our
ability to meet our ambitions and deliver long-term
 
growth and consistently higher returns.
 
2
Slide 4 – Stabilized Credit Suisse franchise and delivered
 
on 2023 financial priorities
We made great progress
 
on our plans
 
in 2023. We
 
successfully won
 
back, retained and
 
grew client assets
 
while
beginning the restructuring phase.
 
We have also
 
substantially reduced funding costs
 
and run down
 
non-core
books. In our first
 
full quarter as a combined
 
firm, we stabilized Credit
 
Suisse’s client franchises and achieved
underlying
 
profitability.
 
This
 
permitted
 
us
 
to
 
pay
 
down
 
the
 
extraordinary
 
liquidity
 
support
 
and
 
voluntarily
terminate the
 
loss-protection agreement
 
guaranteed by
 
the Swiss
 
government. We
 
also provided
 
important
clarity
 
for
 
all
 
of
 
our
 
stakeholders
 
as
 
we
 
finalized
 
our
 
target
 
operating
 
model.
 
Notably,
 
we
 
established
 
the
perimeter for Non-Core and Legacy and moved forward
 
with fully integrating our Swiss domestic operations.
 
Our progress
 
continued in the
 
fourth quarter.
 
We maintained
 
momentum with our
 
clients, with
 
22 billion in
net new assets in GWM, bringing our total to 77 billion since the closing of the acquisition. In the quarter, we
also cut another 1
 
billion in exit-rate gross
 
costs as we move
 
forward on our
 
restructuring plans. Nearly 80%
of Non Core and Legacy’s 12 billion decline in risk weighted assets in the second half was driven by our active
wind-downs.
 
We
 
achieved
 
all
 
of
 
this
 
while
 
maintaining
 
our
 
capital
 
strength.
 
Our
 
CET1
 
capital
 
ratio
 
increased
 
to
 
14.5%,
helping us to build capacity for higher capital returns while, at the same time, preparing to absorb integration
charges and
 
tax inefficiencies.
 
A great
 
- and
 
often overlooked
 
- measure
 
of the
 
Group’s
 
resilience and
 
self-
sufficiency
 
is
 
our
 
total
 
loss-absorbing capacity,
 
which now
 
stands
 
at
 
200
 
billion. Given
 
the
 
ongoing debate
following the events of last March, this is particularly
 
relevant to me.
Lastly, let me highlight some things I am especially proud of, and which I believe is the essential driver of what
will make this
 
successful journey
 
a great story. Our people
 
have embraced
 
both our culture
 
and the opportunity
ahead while collaborating
 
on the integration.
 
This will
 
allow us to
 
continue to
 
serve clients
 
and fulfil our
 
growth
initiatives. Before I take you through our plans for the next phase of the acquisition, I will
 
hand off to Todd
 
to
cover our fourth-quarter results.
 
 
 
 
3
Todd
 
Tuckner
Slide 5 – 4Q23 underlying PBT of 0.6bn
Thank you Sergio and good morning,
 
everyone.
You’ll
 
recall that with our third quarter earnings, we introduced underlying performance metrics that strip out
items that we
 
don’t consider
 
to be representative of
 
underlying performance
 
- primarily pull-to-par
 
effects from
the
 
purchase
 
price
 
allocation
 
process
 
and
 
integration-related
 
expenses.
 
In
 
this
 
respect,
 
when
 
assessing
 
the
progress
 
we
 
are
 
making
 
in
 
our
 
underlying
 
performance,
 
it
 
is
 
important
 
to
 
remember
 
that
 
our
 
underlying
operating expense baseline
 
is the combination of the
 
cost stacks of two globally, systemically important banks,
such
 
that our
 
underlying costs
 
in
 
absolute terms
 
remain
 
elevated, and
 
will
 
for some
 
time. This
 
quarter,
 
our
underlying performance also excludes a material
 
loss relating to our ownership interest in SIX Group.
 
In my remarks,
 
I will refer
 
to these underlying
 
numbers in US
 
dollars and compare
 
them to our
 
performance last
quarter, unless stated otherwise.
Starting with the P&L on slide 6
 
[edit: 5]. PBT in the fourth quarter was
 
592 million, a decrease of 322
 
million
from the third quarter, mainly driven by lower
 
client activity and
 
billable invested assets,
 
as well as the
 
UK bank
levy and a
 
US FDIC special assessment
 
relating to last year’s
 
US bank closures.
 
Credit loss expenses were
 
136
million this quarter, mainly relating to P&C and the IB.
On a
 
reported basis,
 
the fourth
 
quarter net
 
loss was
 
279 million,
 
including a
 
net tax
 
benefit of
 
473 million,
primarily resulting
 
from a revaluation
 
of our
 
deferred tax assets
 
as we
 
completed our
 
business planning
 
process.
As we continue to
 
execute on our integration plans at
 
pace and benefit from
 
seasonally higher client activity,
we expect substantial improvement in our first quarter
 
reported net profit as compared to 4Q23.
Slide 6 – 4Q23 underlying total revenues 10.4bn, down
 
3% QoQ
Moving to revenues on
 
slide 6. Group revenues decreased
 
by 3% sequentially to 10.4 billion, driven
 
by lower
recurring and net management fees on a reduced, average invested asset base, lower fair value and exit gains
in Non-Core and Legacy, as well as decreased transaction-based revenues across the divisions.
Total reported revenues reached 10.9 billion, which
 
included 944 million
 
from pull-to-par and related
 
effects in
our core businesses. As
 
mentioned, we also marked down
 
our investment in SIX
 
by 508 million
 
to reflect the
lower valuation of SIX’s stake
 
in Worldline as well as SIX’s goodwill
 
impairment relating to its ownership
 
of the
Spanish stock exchange.
Slide 7 – 4Q23 underlying operating expenses
 
9.7bn, up 1% QoQ
Moving to slide 7.
 
Operating expenses for the
 
Group increased to 9.7 billion,
 
up 1%. Our combined
 
workforce
was reduced by around 4
 
thousand in the quarter,
 
bringing year-to-date reductions to 17
 
thousand, or down
11% versus the workforce
 
of both banks at
 
the end of
 
2022. These reductions
 
contributed to our
 
achievement
of around 4 billion in gross run-rate cost saves exiting 2023 when
 
compared to the 2022 baseline.
Integration-related expenses
 
were 1.8 billion, of
 
which 794 million
 
were personnel-related, including
 
a pension
benefit equalization
 
charge of
 
245 million,
 
and 604
 
million from
 
real-estate and
 
technology asset
 
expenses.
The pension charge did not affect CET1 capital as we recorded an offsetting
 
gain in OCI. On a reported basis,
including integration-related expenses, opex was
 
11.5 billion.
 
 
4
Slide 8 – Global Wealth Management
Turning
 
to
 
the
 
performance
 
in
 
our
 
businesses,
 
beginning
 
with
 
Global
 
Wealth
 
Management
 
on
 
slide
 
8.
 
As
mentioned last quarter, to align with peers, we now report net new money, plus dividends and interest, under
the
 
label
 
of
 
net
 
new
 
assets.
 
We
 
will
 
also
 
continue
 
to
 
disclose
 
net
 
new
 
fee-generating
 
assets,
 
now
 
for
 
the
combined franchise.
We saw continued momentum in flows with 22 billion
 
in net new assets, with particularly strong performance
in APAC
 
and the Americas. We also attracted 16 billion of net
 
new deposits, with net inflows across both the
UBS and
 
Credit Suisse
 
platforms, and including
 
deposit inflows in
 
the Americas for
 
the first time
 
since 2021.
Despite the significant
 
outflows at Credit Suisse
 
in the first half
 
of 2023, we generated
 
around 54 billion of
 
net
new
 
assets
 
across
 
the
 
platforms
 
for
 
the
 
full
 
year,
 
as
 
we
 
stabilized
 
Credit
 
Suisse
 
and
 
grew
 
our
 
combined
franchise.
Moving on to
 
GWM’s P&L,
 
profit before tax
 
was 778 million,
 
down 31% sequentially, driven
 
by lower revenues
and higher operating expenses. Credit provisions were a 7 million
 
release in the quarter.
Revenues of
 
5.4 billion
 
were 3% lower
 
with decreases
 
in NII and
 
recurring fees,
 
and with
 
transactional revenues
overall impacted by lower client activity,
 
but nonetheless strong on the UBS platform, up 10% year-over-year.
Net interest income
 
was down
 
2%, reflecting tapering
 
deposit mix
 
effects in the
 
US, and
 
ongoing deleveraging,
partially offset
 
by stronger
 
deposit revenues
 
on higher
 
volumes. Recurring
 
fees were
 
down 2%,
 
reflecting a
lower average billing base.
Operating expenses
 
increased 5% to
 
4.6 billion, mainly
 
due to the
 
FDIC special assessment,
 
litigation provisions
and higher
 
marketing and
 
branding costs.
 
Important to
 
note is that
 
we continue
 
to see
 
progress in taking
 
down
costs
 
across
 
GWM
 
where
 
we
 
are
 
integrating
 
Credit
 
Suisse.
 
Specifically,
 
in
 
the
 
parts
 
of
 
our
 
wealth
 
business
outside the
 
US, underlying
 
operating expenses
 
ex litigation
 
and FX
 
ticked down
 
in the
 
quarter and
 
have dropped
8% compared to
 
2Q23 on an
 
exit rate basis.
 
In the
 
US, where
 
a year-over-year
 
comparison is more
 
relevant,
costs were down 2% ex financial advisor compensation,
 
the FDIC assessment and litigation.
Slide 9 – Personal & Corporate Banking (CHF)
Turning to Personal &
 
Corporate Banking
 
on slide 9.
 
In its first
 
full quarter since
 
the announcement
 
of the Swiss
decision at the end of August, P&C generated a
 
pre-tax profit of 794 million Swiss francs,
 
up 3%, with lower
revenues
 
more
 
than
 
offset
 
by
 
lower
 
operating expenses
 
and
 
credit
 
charges. As
 
I
 
highlighted last
 
quarter in
connection with
 
September trends, the
 
focus on win-back
 
and coverage alignment
 
across both Swiss
 
platforms
continues to
 
contribute to
 
strong financial
 
performance for P&C,
 
including over
 
7 billion
 
of net
 
new deposit
inflows in the fourth quarter and revenue resiliency.
Net interest
 
income was down
 
1%, as
 
the benefits from
 
deposit inflows and
 
higher rates were
 
slightly more
than offset by the effects of lower loan
 
volumes and clients shifting deposits
 
into higher-yielding products. We
expect NII
 
for
 
P&C
 
and
 
GWM
 
combined, and
 
in
 
US
 
dollar
 
terms,
 
to be
 
roughly
 
flat
 
sequentially in
 
the
 
first
quarter,
 
with higher rates broadly offsetting
 
the residual effects of
 
deposit mix shifts and
 
the initial impact of
financial resource optimization, which Sergio and I will cover in greater
 
detail shortly. Non-NII revenues in P&C
declined
 
by
 
11%,
 
mostly
 
driven
 
by
 
transaction-based income,
 
including
 
lower
 
client
 
activity,
 
particularly
 
in
Corporate and Institutional Clients.
Credit loss expenses
 
in the quarter
 
were 72 million
 
Swiss francs, mainly
 
related to defaults
 
across several names
on the Credit
 
Suisse platform,
 
and from aligning
 
provisioning approaches pertaining
 
to Credit Suisse’s
 
watchlist
credits. I would also note that
 
PPA adjustments have reduced the level of CLE this
 
quarter. While we have now
substantially
 
aligned
 
provisions
 
and
 
methodologies
 
across
 
both
 
books,
 
we
 
could
 
see
 
a
 
continuation
 
of
 
the
elevated levels of CLE in P&C for the foreseeable future
 
given Credit Suisse’s higher historical credit risk profile
and the current economic environment. Opex dropped by 5% on
 
lower personnel and real estate expenses.
 
 
 
5
Slide 10 – Asset Management
Moving to slide 10.
 
Underlying PBT in Asset Management increased
 
16% to 180 million on
 
seasonally higher
performance fees
 
and from
 
gains on
 
disposals that
 
closed in
 
the quarter,
 
notably our
 
joint venture
 
in South
Korea.
 
Net
 
management
 
fees
 
were
 
down
 
slightly
 
on
 
lower
 
average
 
invested
 
assets
 
in
 
the
 
quarter.
 
Opex
increased 4% to 625 million, mainly from higher personnel
 
expenses and litigation charges.
 
Net
 
new
 
money in
 
the
 
quarter
 
was
 
negative
 
12
 
billion,
 
predominantly
 
from
 
two
 
large
 
outflows
 
in
 
indexed
equities, while we continue to see client
 
demand for SMA and Private Markets capabilities.
Slide 11 – Investment Bank
Turning to the Investment Bank on slide 11. As we said last quarter, since the IB has taken on only select parts
of Credit
 
Suisse’s investment
 
bank, we
 
continue to
 
consider year-over-year
 
comparisons to
 
be instructive
 
in
describing the performance of the business,
 
in particular regarding revenues. The operating loss of 280
 
million
primarily reflects 34% higher costs, mainly personnel and technology related, while revenues from onboarded
Credit Suisse staff are only beginning to build.
 
Underlying revenues, not including 277 million of pull-to-par accretion and other
 
effects, increased 11% year-
over-year
 
to
 
1.9
 
billion.
 
Global
 
Banking
 
revenues
 
increased
 
69%
 
with
 
fee-pool
 
outperformance
 
across
 
key
products and across all regions and particular strength in leveraged and
 
debt capital markets, as well as strong
performance in
 
the Americas.
 
Global Markets
 
revenues were
 
down 4%,
 
reflecting declines
 
in Rates
 
and FX,
more than offsetting
 
growth in equity
 
derivatives, cash equities and
 
financing, the latter of
 
which topped off
its best full year on record. I
 
should highlight that cash equities gained global market share over the course of
2023.
During the fourth quarter we completed the Credit Suisse
 
banking team integration, which is already showing
in our M&A
 
pipeline. Similarly,
 
for Markets, we expect to
 
substantially complete onboarding of
 
the team and
the majority of its
 
trading positions to UBS infrastructure
 
by the end of
 
1Q. With improving market activity,
 
a
growing banking pipeline and
 
advanced progress on integration,
 
we expect the IB
 
to return to profitability
 
in
the first quarter.
Slide 12 – Non-core and Legacy
 
Moving
 
to
 
Non-Core
 
and
 
Legacy
 
on
 
Slide
 
12.
 
Underlying
 
PBT
 
was
 
negative
 
977
 
million.
 
In
 
the
 
quarter
 
we
reduced
 
RWA
 
by
 
6
 
billion,
 
with
 
three
 
quarters
 
of
 
the
 
decrease
 
from
 
active
 
wind-down.
 
LRD
 
dropped
 
by
19 billion, and is down one-third since 2Q23.
Revenues were
 
162 million
 
in the
 
quarter.
 
As in
 
3Q, on
 
average we
 
exited positions
 
at or
 
above our
 
marks.
Credit loss expenses were negligible in the
 
quarter now that the majority of the NCL book is accounted
 
for at
fair value.
 
Notably,
 
underlying opex
 
was down
 
9% as
 
we continue
 
to reduce
 
headcount. Integration-related
expenses of 749 million consisted mainly of
 
real estate impairment charges.
 
 
6
Slide 13 – Maintained capital strength with CET1 ratio
 
comfortably above guidance
 
Moving
 
to
 
CET1
 
capital
 
and
 
RWA
 
on
 
Slide
 
13.
 
Our
 
capital
 
position
 
remains
 
strong,
 
with
 
capital
 
ratios
comfortably above our guidance and
 
regulatory requirements. The CET1 capital ratio improved 10
 
basis points
to 14.5% as the negative
 
impacts from the reported loss
 
and dividend accruals were more
 
than offset by RWA
reductions ex-FX and a net write-up of temporary difference DTAs.
 
Both CET1
 
capital and
 
RWAs
 
were
 
significantly impacted
 
by currency
 
translation, which
 
broadly
 
offset each
other in the CET1 capital ratio. Currency
 
translation effects also accounted for more of
 
the 80 billion increase
in LRD this quarter.
 
We also retained
 
higher HQLA to underpin increased deposit balances and to address
 
the
new Swiss liquidity requirements that just took effect. I
 
will return shortly to comment on how we’re thinking
more broadly about capital,
 
liquidity and funding,
 
as we work
 
towards delivering our
 
financial ambitions
 
by the
end of 2026.
Let me also briefly
 
touch on a
 
few reporting changes we
 
are implementing from the
 
first quarter of
 
2024. First,
we are transferring the
 
high net-worth client segment from
 
the Swiss Bank of
 
Credit Suisse to Global
 
Wealth
Management to best meet our clients’ needs and
 
align to UBS’s divisional structure. These clients represent an
estimated 60
 
billion in
 
invested assets
 
and 550
 
million in
 
annual revenues.
 
Second, and
 
as I
 
highlighted last
quarter,
 
we are pushing out to our business divisions substantially all balance sheet, equity and P&L items that
were previously retained
 
centrally.
 
We will restate
 
2023 to ensure comparability and
 
publish an updated time
series ahead of 1Q results.
With that, I’ll hand back to Sergio for
 
the investor update.
 
 
 
7
Sergio P.
 
Ermotti
Slide 15 – Attractive business model with unique
 
global asset gathering businesses
 
Thank you, Todd.
 
For more
 
than a
 
decade, UBS has
 
stood out
 
among its G-SIB
 
peers for its
 
favorable mix of
businesses and unique model.
 
Our global asset gathering
 
operation and Swiss
 
universal bank are at the
 
core of
our strategy, and they are complemented by our capital-light
 
Investment Bank. Since 2012,
 
our ambition to be
the world’s leading
 
global wealth manager
 
has served us
 
well, allowing us to
 
generate over 50 billion
 
in capital
for shareholders through the end of 2022, while also
 
investing in sustainable, long-term growth.
 
Slide 16 – Accelerating our strategy by enhancing
 
client franchises, capabilities and scale
The
 
Credit
 
Suisse
 
deal accelerates
 
our
 
strategy.
 
We
 
are
 
the
 
only truly
 
global wealth
 
manager with
 
nearly 4
trillion in invested assets across a client franchise that would be
 
nearly impossible to replicate. Globally,
 
GWM
clients benefit from our unparalleled
 
advice, products and services.
 
We are the number one wealth
 
manager in
Switzerland, EMEA
 
and APAC.
 
In these
 
regions, our
 
invested assets
 
have grown
 
by at
 
least 50%
 
due to
 
the
acquisition – the
 
equivalent of a decade
 
of growth. In
 
the Americas, we
 
are a
 
top player in
 
the U.S., and
 
are
number one in Latin America.
 
The acquisition is
 
also reinforcing our
 
position as the
 
number one universal bank
 
in Switzerland. This
 
is not a
function of our size or market share, but the clear result of the value we bring to our clients through our one-
firm approach,
 
expertise and global
 
reach that
 
is particularly important
 
to our
 
large corporate and
 
Small and
Medium Enterprise clients.
 
With 1.6
 
trillion in
 
invested assets,
 
Asset Management
 
has improved
 
our competitiveness
 
globally and
 
expanded
our presence in growth markets. We have strengthened the value
 
provided to clients through complementary
products across key asset classes.
In the Investment
 
Bank, we are
 
reinforcing our
 
competitive position with our
 
key clients. We
 
will continue to
build durable
 
and profitable
 
market share
 
in the
 
areas that
 
differentiate UBS
 
for our
 
clients, while
 
now deploying
a smaller proportion of the Group’s financial resources, compared to pre-acquisition levels.
Slide 17 – Executing to capture long-term growth and value creation
 
We finished 2023 with strong momentum in terms of our
 
integration timeline. While we have full confidence
in our ability to fulfil
 
our goals, we are not
 
complacent about the
 
magnitude and complexity
 
of the task ahead.
Given
 
the
 
evident
 
structural
 
issues
 
with
 
Credit
 
Suisse’s
 
business
 
model
 
and
 
lack
 
of
 
profitability,
 
there
 
is
 
a
significant amount of restructuring and optimization that must take place over the next three years before we
can harvest the full benefits of the combination.
As we previously communicated, during
 
2024 and 2025, we will
 
incur substantial integration-related expenses
as we materially restructure and remove duplication across our operations. The Non-core and Legacy portfolio
will continue to be a meaningful drag on our results as it is
 
actively unwound. In addition, over the next three
years, Credit
 
Suisse’s core
 
businesses will
 
also continue
 
to require
 
balance sheet
 
optimization. While
 
we will
sacrifice some
 
reported profitability
 
and growth
 
in the
 
short-term, we
 
are convinced
 
this will
 
improve the
 
quality
of our long-term growth trajectory, and bring greater cost and
 
capital efficiency. As a result, we are reiterating
our targets to realize
 
an underlying return on CET1
 
capital of around 15% and
 
cost/income ratio of less than
70% as we exit 2026.
 
 
 
 
 
8
Slide 18 – Restructuring and delivering on integration
 
milestones by end-2026
As I’ve said
 
before, 2024 is
 
a pivotal year
 
for UBS. We
 
are taking a
 
staged approach in our
 
execution plan to
minimize the
 
risk of
 
disruption for
 
clients and
 
employees. With
 
over six
 
thousand deliverables
 
over the
 
next
three years, the task
 
is not as simple
 
as the illustrative
 
overview you see
 
on slide 18.
 
We expect to complete
 
the
merger of our parent banks
 
and establish a single
 
US IHC by the
 
end of the first
 
half of the year. The merger of
our Swiss entities should occur
 
before the end of the third quarter. Completing these key milestones will
 
allow
us to realize the associated cost, capital and funding benefits. These significant legal-entity mergers are a pre-
requisite for
 
the first
 
wave of
 
client migrations and
 
will allow
 
us to
 
begin streamlining
 
and decommissioning
legacy platforms
 
in the second
 
half of 2024.
 
This process will
 
continue into
 
2025 before we
 
begin the
 
transition
towards our target state in 2026.
Slide 19 – Building capacity to invest and achieve
 
<70% cost/income ratio by end-2026
 
Again,
 
I’m
 
sure
 
we
 
all
 
appreciate
 
the
 
significant
 
costs
 
associated
 
with
 
running
 
and
 
combining
 
two
 
G-SIBs,
including one that
 
is still structurally
 
unprofitable. This is
 
why a pure
 
integration cost journey
 
is not enough.
 
We
also need to deeply restructure to get to an appropriate cost base.
 
Therefore, the
 
realization of our
 
integration plans and
 
the run-down of
 
the Non-core
 
and Legacy portfolio
 
is
expected to result
 
in around 13
 
billion in gross
 
cost reductions by
 
the end of 2026.
 
In addition to supporting
our cost/income
 
ratio target,
 
this decrease
 
also provides
 
us with
 
the necessary
 
capacity to
 
enhance the
 
resilience
of our combined infrastructure.
 
It will also allow us
 
to continue to drive
 
enduring growth by investing
 
in talent,
products
 
and
 
services.
 
We
 
will
 
focus
 
on
 
improving
 
the
 
client
 
experience
 
and
 
lowering
 
the
 
cost
 
to
 
serve
 
by
leveraging our already-leading technology proficiencies.
 
Slide 20 – Optimizing financial resources to enable sustainable
 
growth and higher returns
 
Another key
 
driver of
 
value creation
 
will come
 
from improved
 
use of
 
our financial
 
resources. Obviously,
 
the
most prominent
 
example is
 
the Non-core
 
and Legacy
 
portfolio, where
 
we expect
 
our
 
wind-down efforts
 
to
result in a
 
capital release of over 6
 
billion by the end
 
of 2026. Of equal
 
importance, we need to optimize
 
the
utilization of financial resources across the core businesses to improve returns on
 
risk-weighted assets.
 
As you can
 
see on the
 
slide, Credit Suisse’s
 
capital efficiency and
 
profitability were compromised
 
in recent years
by capital intensive exposures, underpriced resources and
 
products, and hurdle rates that were
 
not aligned to
underlying risks. While
 
in the
 
short-term, it will
 
be difficult
 
to produce the
 
best-in-class returns that
 
UBS had
previously,
 
our aim is
 
to narrow the
 
gap in a
 
reasonable timeframe. This
 
will require
 
re-pricing and/or exiting
low returning exposures. We will also
 
remain disciplined to ensure that pricing
 
reflects the underlying risks and
the value
 
of the
 
advice, products
 
and services
 
we provide.
 
As we
 
do this, we
 
will expect
 
to capture gross
 
inflows
in GWM and
 
P&C as we
 
prioritize relationships where we
 
provide more
 
holistic client coverage. As
 
I said, we
assume that our
 
actions to improve
 
capital efficiency will
 
result in
 
a lower growth
 
trajectory through 2025, a
necessary trade-off to create long-term value.
Slide 21 – GWM – Building on our unrivaled global
 
scale and footprint
 
Now, moving to our
 
medium-term priorities and ambitions for our business divisions, starting with GWM. We
have robust
 
momentum
 
across our
 
entire platform
 
and our
 
top objectives
 
are to
 
stay close
 
to clients
 
and improve
advisor productivity. In Switzerland,
 
EMEA and
 
APAC, we expect
 
PBT margins
 
to eventually
 
exceed 40%
 
in each
of
 
these
 
regions
 
as
 
we
 
capture
 
the
 
benefits
 
of
 
our
 
fortified
 
leadership
 
positions
 
and
 
integration-related
synergies.
 
 
 
 
9
While
 
our
 
U.S.
 
wealth
 
management business
 
will
 
profit
 
from
 
our
 
strengthened
 
Investment
 
Bank
 
and
 
Asset
Management franchises, it is not directly benefiting from increased
 
scale related to the acquisition. Therefore,
we need to keep
 
working on improving our
 
profitability. Over the next three years, we
 
will organically invest
 
to
institutionalize our
 
platform by
 
building
 
out
 
our
 
core
 
banking
 
infrastructure
 
to
 
provide
 
clients
 
with
 
a
 
more
comprehensive loan
 
and deposit
 
offering, and
 
by rolling
 
out more
 
products and
 
services to
 
Ultra High
 
Net Worth
and family and institutional wealth clients.
 
We
 
will
 
further leverage
 
our
 
advisory
 
capabilities through
 
our
 
global CIO
 
platform. In
 
particular,
 
we aim
 
to
provide our international clients who have interests in the U.S.
 
with more access to our American advisors and
products. We
 
will also
 
continue to
 
invest in
 
our infrastructure
 
to augment
 
the user
 
experience and
 
improve
productivity. We expect PBT margins in the
 
U.S. to remain in
 
the low double
 
digits in the
 
near-term, but we are
confident that the actions
 
we take will help produce
 
mid-teens profit margins by
 
the end of 2026.
 
This will put
us in a position to explore opportunities to further
 
narrow the gap to our peers.
 
Slide 22 – GWM – Ambition to surpass 5trn
 
of invested assets over next five years
Our actions will
 
allow GWM to
 
attract around
 
100 billion in
 
net new
 
assets per annum
 
through 2025
 
as we
expect
 
to
 
continue
 
growth
 
in
 
our
 
platform
 
to
 
partially
 
offset
 
by
 
outflows
 
related
 
to
 
the
 
capital
 
efficiency
initiatives I
 
described a moment
 
ago. From
 
2026, our
 
aim is
 
to build
 
to around
 
200 billion in
 
net new
 
assets
annually by
 
2028. Overall,
 
this level
 
of organic
 
growth over
 
three years
 
would nearly
 
add up
 
to the
 
Credit Suisse
franchise we
 
just acquired,
 
and will
 
power our
 
ambition to surpass
 
5 trillion
 
in invested
 
assets. Greater
 
scale
alongside our cost and capital efficiency measures will support GWM’s ability to achieve improved profitability
with an expected underlying cost/income
 
ratio of less than 70%.
Slide 23 – P&C - #1 bank in Switzerland with unparalleled
 
reach and strong returns
In Switzerland,
 
we are the
 
leading bank for
 
multi-nationals and
 
SMEs, and
 
we also
 
serve more than
 
one in three
households. To
 
reiterate, our uniqueness
 
is not driven
 
by size, but
 
by our ability
 
to provide
 
these clients with
access to innovative products, solutions, digital applications
 
and global footprint.
In
 
recent
 
years,
 
P&C’s
 
consistent
 
investments
 
to
 
improve
 
the
 
client
 
experience
 
and
 
boost
 
efficiency
 
has
supported steady
 
growth and higher
 
returns. We will
 
replicate this playbook
 
for our
 
combined client
 
franchises.
Meanwhile, we
 
will lower our
 
cost to serve
 
by streamlining our
 
operations, decommissioning
 
legacy technology
platforms and removing branch duplication. Our ambition is for P&C to
 
report a cost/income ratio below 50%
as we exit 2026.
 
Slide 24 – AM – Improved positioning across key asset classes
 
and growth markets
In Asset Management, we
 
are building on
 
our differentiated offering
 
in Sustainable Investing and SMAs
 
with
an expanded Alternatives platform, which includes new capabilities in Credit.
 
Our aim is to keep
 
growing our
higher margin products, and capture
 
the benefits of our increased
 
scale in customized Indexing and a
 
deeper
regional footprint. We will
 
do this while building
 
on our strong partnership with
 
Global Wealth Management
to drive growth.
 
While
 
our
 
improved
 
strategic
 
positioning and
 
product
 
offering
 
will
 
help
 
us
 
meet the
 
evolving
 
needs
 
of
 
our
clients, we
 
are not
 
immune to
 
structural issues
 
facing the
 
asset management
 
industry. This makes
 
the realization
of cost synergies
 
a critical component
 
of our plan to
 
get to a
 
cost/income ratio below
 
70% by the
 
end of 2026,
while self-funding investments for growth and efficiency will
 
be delivered.
 
 
 
10
Slide 25 – IB – Enhancing client offering while maintaining
 
capital discipline
The
 
acquisition
 
has
 
added
 
capability
 
that
 
were
 
already
 
of
 
strategic
 
importance
 
for
 
our
 
Investment
 
Bank.
Therefore,
 
in terms
 
of strategy,
 
clients’ priorities
 
and risk
 
discipline, nothing
 
changes. In
 
Global Banking,
 
we
have significantly strengthened our coverage and product teams in growth markets that are aligned to GWM,
notably the
 
Americas
 
and APAC.
 
We
 
have
 
reinforced
 
our
 
leading
 
position in
 
Switzerland. And
 
globally,
 
we
expect our broader
 
and deeper solutions across
 
M&A, Equity Capital Markets
 
and Leveraged Capital Markets
to
 
drive
 
profitable
 
market
 
share
 
gains.
 
We
 
are
 
already
 
seeing
 
the
 
benefits with
 
notable
 
mandate successes
across the globe.
In Global Markets, we are bolstering core products and services that are most relevant to our
 
clients, including
Electronic Trading,
 
Financing and
 
Equity Derivatives.
 
Our award-winning
 
Equities and
 
FX franchises
 
will now
serve an even larger and broader client base, also supported
 
by our strengthened Global Research coverage of
the most relevant and fastest-growing sectors. By deploying its products and services across a more diversified
institutional,
 
corporate
 
and
 
financial
 
sponsor
 
client
 
base,
 
in
 
addition
 
to
 
the
 
improved
 
connectivity with
 
our
clients in
 
GWM and
 
P&C, the
 
Investment Bank
 
is poised
 
to achieve
 
around 15%
 
return on
 
attributed equity
over the cycle. And it will do this while consuming
 
no more than 25% of the Group’s risk weighted assets.
 
Slide 26 – Non-core and Legacy – driving lower costs
 
and efficient capital release
As I mentioned before, the active run-down
 
of the Non-core and Legacy portfolio
 
releases capital, removes tail
risks
 
and
 
complexity,
 
and
 
reduces
 
our
 
cost
 
base,
 
allowing
 
us
 
to
 
improve
 
our
 
returns. We
 
have
 
made
 
good
progress to
 
date. We
 
have closed over
 
two thousand NCL
 
books, including full
 
exits of
 
several macro
 
books,
and are
 
largely closed
 
– we
 
have largely
 
closed our
 
non-core Cash
 
Equities, Convertibles
 
and Prime
 
Services
exposures.
 
To
 
date, we have
 
decommissioned around 150 of
 
NCL systems, and
 
retired nearly 20%
 
of its models.
 
As we
further
 
wind
 
down
 
this
 
portfolio, we
 
will
 
focus
 
on
 
economic profitability,
 
including funding,
 
operating and
capital
 
costs.
 
We
 
will
 
also
 
remain
 
focused
 
on
 
balancing
 
our
 
priorities
 
with
 
the
 
needs
 
of
 
our
 
clients
 
and
counterparties. Our
 
ambition is
 
for NCL’s
 
underlying loss
 
to move to
 
around 1 billion,
 
with the
 
residual portfolio
of total risk
 
weighted assets
 
accounting for around
 
5% of the
 
Group’s by the
 
end of 2026.
 
By the end
 
of 2024,
we expect combined risk – credit and market risk risk-weighted
 
assets to be substantially below 40 billion.
Slide 27 – Balancing resiliency, growth and attractive capital returns
Capital strength has
 
been a key
 
pillar of our
 
strategy, and we remain committed
 
to maintaining
 
a balance
 
sheet
for all
 
seasons. We
 
expect to
 
operate with
 
a
 
CET1 capital
 
ratio of
 
around
 
14%. This
 
will provide
 
us
 
with a
substantial capital buffer
 
relative to our
 
minimum regulatory requirements
 
during the integration, but
 
also as
our capital requirements increase over time.
 
As
 
we
 
fund
 
growth
 
with part
 
of
 
our
 
retained
 
profits,
 
we
 
will
 
also
 
seek
 
to
 
calibrate the
 
proportion
 
of
 
cash
dividends versus buybacks. For
 
the 2023 financial year, we intend to propose an ordinary dividend
 
of 70 cents,
a 27% increase
 
year-on-year. With respect to
 
our progressive dividend
 
policy, we are accounting
 
for a mid-teen
percentage
 
increase
 
in
 
2024.
 
We
 
also
 
plan
 
to
 
continue
 
to
 
distribute
 
excess
 
capital
 
to
 
shareholders
 
via
repurchases. In the short
 
term, it is
 
prudent to hold
 
off until the parent
 
bank merger is
 
complete in the
 
first half
of this year. Then, we expect
 
to resume buying back
 
stocks, with a target
 
of up to 1
 
billion dollars in 2024.
 
Our
ambition in 2026 is for total capital returns to exceed
 
pre-acquisition levels, with share repurchases most likely
being the biggest component.
 
11
Slide 28 – Rebuilding profitability while restructuring for sustainable
 
growth
As you can
 
see from this
 
slide, in terms of
 
returns on capital, we
 
expect to build towards
 
our 15% return on
CET1 target
 
as we
 
exit 2026,
 
with 2024
 
still reflecting
 
the significant
 
restructuring and
 
optimization work
 
taking
place as we integrate Credit Suisse.
 
Our plan
 
is not
 
relying on
 
overly optimistic
 
market assumptions.
 
And, if
 
necessary,
 
we have
 
the flexibility
 
to
adjust our plans
 
as needed to
 
respond to
 
changes in the
 
underlying assumptions. When our
 
cost and capital
efficiency measures are behind us, we expect to increase – we expect our increased
 
scale and enhanced client
franchises will position us to attain
 
sustainably higher returns, starting with a reported
 
return on CET1 capital
of around 18% in 2028.
With that, I hand back to Todd for more details on our plans.
 
 
 
12
Todd
 
Tuckner
Slide 30 – Our path to ~15% underlying RoCET1
 
by year-end 2026
Thanks again, Sergio. The strategic and detailed planning we’ve undertaken over the last several months now
informs a clear path
 
towards our objectives
 
of generating an
 
underlying return on
 
CET1 capital of around
 
15%
and an underlying
 
cost-income ratio of
 
less than 70%
 
by the time we
 
complete the integration
 
of Credit Suisse
at
 
the
 
end
 
of
 
2026.
 
In
 
the
 
next
 
few
 
minutes,
 
I’ll
 
describe
 
the
 
ways
 
in
 
which
 
we
 
expect
 
to
 
achieve
 
these
objectives, offer details on trajectories, and comment
 
on how we’ll measure progress.
I want to emphasize that our plans are
 
based on the complex work required to restructure
 
a cost base that at
present supports the infrastructure of two G-SIBs, and to enhance the returns on financial resources deployed
in our core businesses
 
that have been
 
diluted by the
 
acquisition. These significant
 
efficiency undertakings come
at a cost, whether
 
through integration-related expenses or somewhat
 
slower net new asset growth
 
while we
optimize the balance sheet
 
over the next few quarters.
 
Ultimately, the key to delivering our long-term financial
ambitions is the discipline we’re applying now in driving
 
cost and financial resource efficiency.
Moving to
 
slide 30,
 
which provides
 
an overview
 
of the
 
main drivers
 
of the
 
expected return
 
on capital
 
uplift
between now and the end of 2026. Our financial ambitions are mainly dependent on controllable factors and
market assumptions
 
that are
 
in line
 
with consensus,
 
rather than
 
blue-sky scenarios.
 
Our focus
 
is on
 
building
high quality and
 
sustainable revenue streams
 
to support healthy
 
and attractive returns over
 
the long term.
 
In
this respect
 
we’ll drive
 
most of
 
the improvement
 
over the
 
integration timeline
 
by right
 
sizing our
 
cost base,
optimizing financial resources, and normalizing the tax
 
rate.
Importantly,
 
by
 
building our
 
plans
 
primarily around
 
cost and
 
resource
 
optimization, we
 
retain
 
flexibility and
optionality in execution. For
 
example, while we expect
 
to continue investing for growth
 
in our core businesses,
we
 
have
 
discretion
 
to
 
pace
 
this
 
spend
 
in
 
case
 
markets
 
are
 
less
 
constructive.
 
Finally,
 
as
 
we
 
progress
 
with
simplification
 
of
 
our
 
legal
 
entity
 
structure,
 
we’ll
 
see
 
additional
 
support
 
to
 
our
 
capital
 
returns
 
from
 
the
normalization of the effective tax rate, dropping to around 23% by
 
2026.
Slide 31 – Revenue plans reflect enhanced capabilities
 
and improved productivity
 
Moving to details of our revenue expectations, on slide 31. First, we believe GWM’s income outside of NII will
be one
 
of the
 
main drivers
 
of our
 
growth. As
 
we expand
 
our GWM
 
invested asset
 
base and
 
enhance our
 
solution
offerings and
 
capabilities,
 
we expect
 
to increase
 
both recurring-fee
 
and transaction-based
 
income, with
 
stronger
net margins. By staying
 
close to our clients,
 
continuing to win back
 
assets, and offering differentiated products
and services to
 
help navigate challenging
 
market conditions,
 
we expect to
 
attract around 200
 
billion in net
 
new
assets
 
over
 
the
 
next
 
two
 
years
 
while
 
optimizing
 
returns
 
on
 
financial
 
resources.
 
Beyond
 
2025,
 
with
 
the
optimization work largely behind
 
us, we expect annual
 
net new asset growth
 
to build to
 
200 billion by
 
2028
and to surpass 5 trillion in assets under management
 
at that time.
In addition to growing our
 
asset base, we believe
 
we’re in a strong position
 
to offset some of the
 
structural fee
margin pressure visible in the
 
industry by leveraging a
 
unified shelf of CIO-led
 
products and solutions as
 
well as
increasing discretionary mandate penetration across our expanded client base. Further positive contribution to
our
 
GWM
 
top
 
line
 
is
 
expected
 
from
 
transaction-based
 
fees.
 
This
 
growth
 
is
 
expected
 
to
 
be
 
driven
 
by
 
the
continued expansion of
 
distribution channels and
 
product capabilities,
 
including growing
 
and leveraging
 
our
successful
 
GWM-IB
 
joint
 
coverage
 
initiatives
 
as
 
well
 
as
 
broadening
 
our
 
scalable
 
transaction-based
 
advisory
offerings for high- and ultra-high net worth clients, and clients with professional markets expertise. On top of
revenue improvement, we also believe we
 
can enhance GWM’s net margins and drive greater
 
returns overall,
by leveraging
 
the benefits
 
of increased
 
scale, realizing
 
cost synergies
 
from the
 
Credit Suisse
 
integration, and
emphasizing data and AI capabilities to improve advisor
 
productivity.
 
13
Second, in our
 
Investment Bank,
 
we’re well positioned
 
to achieve revenue
 
accretion relatively quickly, especially
as we’re selectively
 
adding key Credit
 
Suisse IB resources
 
directly to the
 
UBS platform.
 
As a result,
 
we accelerate
our IB
 
strategy by doubling
 
our Banking
 
presence in
 
the US
 
and building
 
on our market-leading
 
strengths in
Switzerland, EMEA and APAC. As the newly-onboarded bankers
 
return to full productivity over the
 
next 12-18
months,
 
we
 
expect
 
Banking
 
to
 
generate
 
almost
 
twice
 
its
 
baseline
 
revenues
 
by
 
2026,
 
assuming
 
supportive
markets. We
 
also aim
 
to drive
 
incremental client
 
flow across
 
Derivatives &
 
Solutions, Execution
 
Services and
Financing, with support from
 
around 400 Credit
 
Suisse colleagues joining our Markets
 
business. Additionally,
we
 
expect
 
continued
 
revenue
 
growth
 
in
 
the
 
IB
 
from
 
technology
 
and
 
resource
 
investments
 
we've
 
made
 
in
capabilities
 
such
 
as
 
Research,
 
FX,
 
prime
 
brokerage
 
and
 
equity
 
derivatives,
 
and
 
from
 
increased
 
connectivity
between the IB and GWM. We also price in a return
 
to more normalized markets vs 2023.
Moving to net
 
interest income in
 
GWM and P&C.
 
As I mentioned
 
earlier,
 
we expect NII
 
in US dollar
 
terms to
remain roughly
 
stable in
 
the first
 
quarter of
 
2024 versus
 
4Q23. As
 
we look
 
out beyond
 
the first
 
quarter,
 
full
year 2024 NII is
 
expected to decline
 
by mid-single digits
 
from annualized 4Q23
 
levels mainly on
 
lower rates and
as our financial
 
resource optimization measures
 
impact loan volumes.
 
Over the second
 
half of the
 
plan horizon,
we expect NII
 
to recover,
 
resulting from funding
 
cost efficiencies, stable
 
implied forward rates,
 
and improved
loan revenues. I’ll cover the steps we’re taking to drive
 
funding efficiencies in a few moments.
Rounding out the
 
revenue picture across
 
core businesses.
 
We expect stable
 
revenues in P&C,
 
outside of
 
NII, and
in
 
Asset Management,
 
as we
 
take actions
 
to offset
 
market headwinds
 
and potential
 
dis-synergies from
 
the
Credit Suisse acquisition while focusing these franchises on driving cost synergy realization and improvements
in
 
operating
 
efficiency.
 
In
 
particular,
 
P&C
 
will
 
continue
 
its
 
focus
 
on
 
winning
 
back
 
flows,
 
improving
 
asset
efficiency,
 
and
 
defending
 
market
 
share
 
in
 
Switzerland
 
while
 
Asset
 
Management
 
embeds
 
new
 
investment
capabilities acquired from Credit
 
Suisse and continues its key
 
role in providing
 
advisory support to our Global
Wealth Management clients.
 
Finally,
 
in NCL,
 
we’re not
 
pricing in
 
revenue growth
 
as we
 
look forward,
 
as the
 
now largely
 
fair value
 
book
reflects our expectation of exit prices. The roughly 3.1 billion of PPA
 
adjustments we made to the NCL accrual
book, before
 
we tagged
 
most of
 
the positions
 
as held
 
for sale,
 
are now
 
subsumed in
 
the marks.
 
Hence, we
expect NCL revenues in any given quarter from here
 
to be around zero with position P&L from
 
sales, unwinds
and marks, net of hedging
 
and funding costs, all to
 
be broadly offsetting. Of course, as
 
our first priority in NCL
remains taking out costs
 
and releasing sub-optimally deployed capital,
 
we’ll at times sacrifice
 
P&L on position
exits in pursuit of these aims.
Slide 32 – ~13bn of cumulative gross cost saves to be
 
achieved by year-end 2026
Turning
 
to costs on
 
Slide 32.
 
Of the
 
around 13
 
billion in
 
gross cost
 
saves we expect
 
to deliver
 
by the
 
end of
2026, around 4 billion, or one-third, are already reflected in our
 
2023 exit rate. By the end
 
of 2024, we expect
to generate
 
more
 
than 2
 
billion in
 
gross
 
exit-rate saves,
 
with more
 
towards
 
the latter
 
half of
 
the year
 
after
completion of the largest legal entity mergers. As indicated
 
on the slide, we expect to drive further
 
gross cost
saves of
 
around 4
 
billion by
 
the end
 
of 2025
 
with the
 
balance coming
 
out as
 
we exit
 
2026. The
 
non-linear
trajectory of cost
 
saves between 2023
 
and 2026 reflects
 
the intensity of
 
our integration work,
 
with the legal
entity mergers,
 
migration of
 
over a million
 
clients, and
 
decommissioning of
 
platforms requiring
 
significant levels
of workforce to execute against our timelines, especially
 
over the next 12-18 months.
 
As
 
we
 
progress
 
on,
 
and
 
ultimately
 
complete,
 
these
 
complex
 
aspects
 
of
 
the
 
integration,
 
our
 
resource
requirements for these various programs
 
of work will diminish, leading to considerable cost
 
reductions by the
end of 2025, when we expect to have delivered a substantial portion of our integration milestones. The back-
end portion
 
of our
 
cost save
 
plan relates
 
mainly to
 
completing hardware
 
and software
 
decommissioning, in
particular switching off
 
redundant legacy applications and
 
infrastructure. This includes the
 
applications in the
various support and control functions,
 
like Risk and Finance,
 
where the work is
 
naturally sequenced to follow
the completion of client-facing technology decommissioning. As
 
Sergio mentioned, we’ll re-invest part of
 
the
gross saves generated from the integration into enhancing
 
the resilience of our technology estate and
 
funding
organic business growth in our core divisions.
In terms of the
 
nature of the gross cost
 
saves, we expect that
 
roughly half will be personnel-related
 
costs as we
 
14
streamline
 
our
 
front
 
office
 
operations
 
across
 
businesses
 
and
 
deliver
 
synergies
 
in
 
our
 
support
 
and
 
control
functions.
 
The
 
remaining
 
balance
 
of
 
saves
 
will
 
be
 
derived
 
predominantly
 
from
 
hardware
 
and
 
software
decommissioning, real
 
estate
 
rationalization, and
 
reduced
 
service
 
requirements
 
from
 
external providers
 
and
contractors.
Moving to
 
integration-related expenses,
 
which we
 
expect to
 
total to
 
around
 
13 billion
 
by the
 
end of
 
2026,
including the 4 and a half billion
 
incurred to date. Our objective is to front-load these
 
expenses where possible
as they typically
 
pave the way for
 
run-rate savings. For example,
 
in real
 
estate, we’ve taken restructuring
 
and
impairment charges on select properties, reducing the
 
current run-rate cost of our footprint by 400
 
million per
year,
 
down 15%
 
from 2022
 
levels. This
 
save comes
 
as a
 
result
 
of taking
 
1 billion
 
in integration-related
 
real
estate charges through the end of 2023, with a payback
 
of 2.5 years.
This
 
said,
 
the
 
timing
 
of
 
integration-related
 
expenses
 
and
 
the
 
resulting
 
saves
 
vary,
 
depending
 
on
 
the
 
cost
category.
 
Some charges can
 
be provisioned upfront,
 
as in
 
the real
 
estate example, while
 
other provisions
 
are
recorded later,
 
like severance costs for personnel
 
whose services are required
 
until an integration milestone is
completed,
 
such
 
as
 
the
 
legal
 
entity
 
mergers
 
or
 
client
 
platform
 
migration.
 
While
 
we
 
remain
 
focused
 
on
accelerating
 
these
 
costs-to-achieve
 
future
 
savings
 
wherever
 
possible,
 
we
 
nevertheless
 
expect
 
to
 
recognize
integration-related expenses
 
over the
 
entire 3-year
 
planning horizon,
 
albeit with
 
as much
 
as 80
 
to 90%
 
incurred
by the end of 2025. Although
 
the timing will differ, we still expect total integration-related costs to
 
be broadly
offset in
 
our pre-tax
 
P&L by
 
the recognition
 
of PPA
 
-related pull-to-par
 
revenue effects,
 
including the
 
portion
now in the NCL marks, as described earlier.
 
Slide 33 – Non-core and Legacy to be a key contributor
 
to Group net cost saves
Turning to NCL costs on slide 33. We expect around half of the Group’s planned 13 billion in gross saves, and
a
 
considerable majority
 
of
 
net
 
saves,
 
to
 
be
 
achieved as
 
a
 
function
 
of
 
running down
 
NCL’s
 
book
 
as
 
well
 
as
eliminating its broader
 
cost stack related
 
to Credit Suisse’s
 
complex legal entity
 
structure and its historical
 
G-SIB
status.
 
This
 
includes
 
expenses
 
associated
 
with
 
governing,
 
operating
 
and
 
maintaining
 
Credit
 
Suisse’s
 
many
regulated legal entities and branches. As I have highlighted,
 
the mergers of our largest group entities later this
year are expected to
 
enable further workforce consolidation and management de-layering. For reference,
 
our
target legal entity structure is presented in the Appendix.
 
Additionally, with complete exits of larger books of business in NCL, we expect to drive cost saves by reducing
staff aligned
 
to the
 
unit and
 
eliminating expensive-to-maintain technology
 
applications and infrastructure.
 
In
this respect, we
 
expect the trajectory of
 
cost saves in NCL
 
to accelerate in the
 
second half of this
 
year and to
hasten
 
further
 
over
 
the
 
course
 
of
 
the
 
following
 
two
 
years
 
depending
 
on
 
the
 
timing
 
of
 
larger-scale
 
exits
 
of
position books.
 
Ultimately, our objective is
 
to limit
 
the cost
 
drag from NCL
 
to a
 
level substantially
 
below 1
 
billion
as we exit 2026, a drop of over 85% when compared to
 
its 2022 cost base.
 
Since the formation
 
of NCL after
 
the Credit
 
Suisse acquisition, we’ve
 
also taken steps
 
to reduce
 
the risk
 
that
any remaining
 
costs are
 
left stranded once
 
we stop reporting
 
NCL as
 
a separate segment,
 
expected in 2027.
We completed most
 
of this work
 
ahead of NCL’s
 
formation when
 
we reviewed the
 
way in which
 
Credit Suisse’s
Corporate
 
Center
 
costs
 
were
 
allocated
 
among
 
divisions.
 
As
 
part
 
of
 
our
 
planning
 
process
 
we
 
identified
 
an
additional 300
 
million of
 
such costs
 
that we’ll
 
reallocate to
 
the core
 
business divisions,
 
where they
 
are more
appropriately managed.
 
This change
 
will form
 
part of
 
the planned
 
restatements that
 
I
 
described earlier.
 
For
2024, we expect NCL to
 
incur underlying operating expenses of around
 
4 billion, generating a pre-tax
 
loss of
also around 4 billion in light of the zero revenue guidance I offered earlier.
 
 
15
Slide 34 – Balance sheet for all seasons remains the foundation
 
of our success
Moving to our
 
balance sheet on
 
slide 34. Maintaining a
 
balance sheet for
 
all seasons is
 
key to everything
 
we
do. It gives
 
us the ability
 
to withstand financial shocks
 
and the flexibility
 
to support our clients
 
in all climates.
It’s especially critical
 
during this complex
 
integration process. As
 
highlighted earlier during
 
the fourth quarter
review, we’re maintaining appropriately prudent
 
capital and liquidity
 
levels while executing
 
the restructuring of
Credit
 
Suisse
 
and
 
preparing
 
for
 
new
 
regulatory
 
requirements.
 
This
 
is
 
also
 
the
 
case
 
for
 
our
 
key
 
operating
subsidiaries. With
 
these considerations
 
in mind, I’ll
 
now cover
 
how we think
 
about capital,
 
liquidity and funding
across the Group as we look out over the planning horizon.
Slide 35 – Strong capital position at group and pro forma combined parent
 
bank level
First, capital. At the end of
 
4Q, the Group maintained a
 
going-concern capital ratio of 17.0%, over 200 basis
points above the current Swiss requirements, comprised of 14.5% in CET1 capital and 2.5% in additional Tier
1 capital.
 
Between 2026
 
and 2030
 
our going-concern capital
 
requirement is
 
expected to increase
 
by around
180 basis points to
 
16.7% as the effects
 
of the currently
 
larger balance sheet and greater
 
market share from
the Credit
 
Suisse acquisition are
 
phased-in. To
 
improve efficiency
 
of our
 
capital stack, we
 
intend to fund
 
this
increase
 
by
 
cost-effectively
 
building-out
 
the
 
permissible
 
AT1
 
bucket
 
over
 
time,
 
bringing
 
the
 
going
 
concern
capital ratio to around
 
18% while broadly maintaining
 
our CET1 capital ratio
 
at around 14%.
 
In this respect,
following last year’s successful raises, we expect
 
to issue up to 2 billion in AT1 in 2024.
 
A word
 
on going
 
concern capital at
 
our parent
 
bank, UBS
 
AG, on
 
a pro-forma
 
post-merger basis.
 
The main
take-away here
 
is that
 
we expect
 
a healthy
 
buffer over
 
regulatory requirements
 
on a
 
fully applied
 
basis and
even
 
without
 
the
 
substantial
 
regulatory
 
concession
 
historically
 
applied
 
to
 
Credit
 
Suisse
 
AG’s
 
investments in
subsidiaries. Any increases
 
in UBS
 
AG’s going-concern capital requirements
 
from greater
 
market share
 
and a
larger balance sheet will be funded in much the same way I described for the Group, and by being disciplined
in right-sizing UBS
 
AG and its
 
subsidiaries. In terms
 
of gone-concern capital, I
 
would highlight that,
 
for now,
UBS AG’s
 
standalone requirement
 
serves as
 
the binding
 
constraint for
 
the Group.
 
As such,
 
we consider
 
the
Group’s current
 
substantial TLAC buffers
 
to be
 
appropriate, and, accordingly,
 
we intend to
 
replace maturing
TLAC at similar
 
tenors. Over time,
 
as we reduce
 
the leverage in
 
our businesses, we expect
 
to see the
 
level of
Holdco start to tick down, with some potential
 
to tighten average spreads in the back book.
 
On to liquidity
 
and funding. Beyond our
 
approach to TLAC
 
and AT1,
 
our strategic objective in
 
the context of
liquidity and
 
funding is
 
to balance
 
efficiency with
 
resiliency and
 
safety.
 
In this
 
respect, we
 
maintain liquidity
levels among
 
the highest in
 
the industry,
 
satisfying the more
 
stringent Swiss liquidity
 
requirements that
 
took
effect last month. At
 
the same time, we’ve begun executing on
 
a funding plan that drives
 
significant funding
cost efficiencies over the next 3
 
years, principally from reducing the size
 
of our balance sheet. Specifically,
 
we
expect
 
to
 
reduce
 
LRD
 
by
 
over
 
100
 
billion
 
at
 
constant
 
FX
 
via
 
the
 
wind-down
 
of
 
NCL
 
and
 
from
 
resource
optimization across our core business divisions, driving
 
down funding needs.
 
We also
 
aim to narrow
 
the structural funding gap
 
of the Swiss
 
entity inherited from
 
Credit Suisse, increasing
the self-sufficiency of
 
the post-merger Swiss
 
banking subsidiary.
 
In this respect,
 
deposits remain a
 
key source
of
 
funding.
 
We’ll
 
continue
 
to
 
focus
 
on
 
winning
 
them
 
back,
 
with
 
emphasis
 
on
 
stability
 
reflected
 
in
 
tenors,
products, and
 
counterparty selection. In
 
addition to applying
 
discipline on deposit
 
pricing, we expect
 
to take
actions to
 
optimize our funding
 
mix and drive
 
down costs, including
 
reducing our
 
levels of
 
OpCo by
 
making
further use of Swiss covered bonds
 
and tapping an expanded
 
variety of funding markets.
 
Overall, as a result of
lower funding
 
needs, diversified
 
and
 
more
 
stable funding
 
sources,
 
tighter issuance
 
spreads
 
relative
 
to 2023
levels, and disciplined deposit pricing, we
 
believe we can realize funding cost
 
saves of up to 1
 
billion by 2026
on top of the saves achieved last year. This is reflected in our long-term NII guidance that
 
I described earlier.
 
 
 
16
Slide 36 – RWA expected to decrease by ~35bn due to optimization and
 
NCL unwind
Let me now walk you through our RWA expectations over the next three years. In NCL, we expect the run-off
of its book to
 
drive a decrease
 
in risk weighted assets
 
of 45 billion by
 
the end of 2026
 
bringing us to around
5% of the
 
Group’s total RWAs before
 
any further post-integration
 
de-risking. In
 
our core businesses,
 
we expect
Basel 3
 
to increase
 
RWA
 
by around
 
15 billion
 
beginning in
 
2025, primarily
 
from FRTB,
 
credit risk,
 
and CVA
changes in the final standard. The core
 
businesses are also expected to absorb
 
around 10 billion of additional
RWA, net of 14 billion from converting Credit Suisse’s risk models to the
 
appropriate UBS standard.
 
I
 
would
 
also
 
highlight
 
that
 
we
 
expect
 
the
 
resource
 
optimization
 
work
 
we’re
 
undertaking
 
to
 
result
 
in
 
RWA
reduction
 
of
 
around
 
15
 
billion
 
in
 
the
 
core
 
businesses.
 
Importantly,
 
this
 
impact
 
can
 
vary
 
depending
 
on
 
the
availability
 
of
 
revenue-growth
 
opportunities driving
 
accretive
 
returns. All
 
told,
 
over
 
the
 
next
 
3
 
years, Group
RWA is expected to
 
drop from its current levels
 
by 35 billion
 
at constant FX,
 
freeing up around 5
 
billion in CET1
capital.
Slide 37 – Effective tax rate to reduce following key legal entity
 
mergers
Turning to tax, on
 
slide 37.
 
As mentioned, we
 
expect to
 
operate with
 
a relatively high
 
effective tax rate
 
in 2024,
mainly due to
 
losses generated by
 
various Credit Suisse
 
entities, primarily in
 
Switzerland, the US
 
and the UK,
that cannot at present offset profits in
 
their counterpart UBS entities in the same jurisdictions. The legal entity
mergers planned
 
for later
 
this year
 
will resolve
 
a considerable
 
level of
 
this inefficiency, driving
 
down our
 
effective
tax rate to around 40% by the end of 2024. Further optimization of our legal entity structure,
 
combined with
improved profitability and opportunities for tax planning, are
 
expected to drive the effective tax rate to below
30% by the end of 2025, and finally to
 
our normal levels of around 23% in 2026.
In terms of deferred tax assets, our year-end 2023 balance sheet reflects recognition of around 3 billion in net
tax loss DTAs, mainly relating to the US. Of those, we
 
expect to amortize around 0.5 billion against
 
profits and
convert around
 
2 billion
 
into temporary
 
difference DTAs
 
by the
 
end of
 
2025, seeking
 
to maintain
 
a balance
equal to
 
the eligible cap
 
of 10% of
 
our CET1 capital.
 
The remaining level
 
of recognized net
 
tax loss DTAs
 
of
0.5 billion, absent further planning considerations,
 
is expected to remain relatively stable over the near
 
term. It
is worth highlighting that the more modest level of tax loss DTAs expected over the next couple of years
 
limits
the impact of one of the key differentiators between
 
tangible equity and CET1, signalling their convergence.
 
Slide 38 – Delivering on our priorities while creating
 
long-term sustainable value
 
Finally,
 
let me briefly
 
touch on how we
 
plan to communicate our progress
 
across the integration
 
timeline. As
you would expect,
 
demonstrating the headway
 
we’re making in our
 
cost reduction plans is,
 
and will remain, of
paramount importance. We intend
 
to regularly report
 
on developments, and to
 
track our performance vs the
opex and integration cost trajectories I described earlier,
 
even when we switch back to focusing on year-over-
year comparisons by 3Q24. NCL risk reduction
 
will continue to feature in our quarterly performance
 
reporting.
And we’ll periodically
 
check in on
 
where we stand
 
in terms of
 
key integration milestones, including
 
the legal
entity mergers, systems migration of client accounts and infrastructure decommissioning, as well as improving
overall efficiency in the utilization of our financial resources.
 
With that, I hand back to Sergio
 
for his closing remarks before we move to Q&A.
17
Sergio P.
 
Ermotti
Thank you, Todd.
To
 
re-cap, we
 
are pleased
 
with the
 
progress we
 
have made
 
so far.
 
As you
 
can see,
 
and you
 
heard, we
 
have
detailed plans to achieve our ambitions.
 
We are in full execution mode. While our
 
progress over the next three
years will not be measured
 
in a straight line, our
 
strategy is clear.
 
With enhanced scale and capabilities across
our leading client franchises and improved resource discipline, we will drive sustainable long-term growth and
higher returns.
 
We are
 
confident that by the
 
end of 2026
 
and beyond, this
 
will allow us
 
to deliver significant value
 
for all of
our
 
stakeholders.
 
Particularly,
 
our
 
clients
 
will
 
benefit
 
from
 
even
 
 
an
 
even
 
stronger
 
products
 
and
 
service
capabilities. Our
 
people will
 
have a
 
better platform
 
to grow
 
their careers.
 
And our
 
shareholders will
 
benefit
from
 
higher
 
capital
 
returns.
 
Last
 
but
 
not
 
least,
 
we
 
will
 
remain
 
a
 
reliable
 
economic
 
partner,
 
employer
 
and
taxpayer in the communities where we operate.
With that, let’s get started with
 
questions.
 
18
Analyst Q&A (CEO
 
and CFO)
Kian Abouhossein, JP Morgan
Yes. First of all, thanks for taking my questions. Looking at the slides, I can put together
 
a revenue picture as
you're giving some details around return on risk-weighted assets
 
in the long term, as well as your risk-
weighted assets overall absolute. So, I get to
 
about $48.5 billion of revenues, which implies around 70%
 
cost
income of $34 billion. And clearly, first of all, I wanted to see if the revenue assumption
 
that I'm making here
calculation is reasonable and what underlying scenarios
 
you use to calculate that. And secondly, on the cost
side, clearly, even if I assume some kind of growth rate in kind of cost inflation, I still see that
 
most of the cost
savings come from your legacy non-core reductions. So, it looks
 
like a lot of flexibility. So, can you talk a little
bit about – is my calculation correct to some extent?
 
And secondly, how should I think about the cost
flexibility as it seems to mainly come from Non-core and Legacy?
 
That's the first question.
If I may, just secondly,
 
on the Investment Bank. You're clearly making a big investment push, and here I want
to understand at what point do you see delivery
 
has to be achieved. I think you mentioned
 
end-2026 in terms
of revenue improvement, but is there any milestones that have to be achieved
 
order to illustrate that this cost
income will continuously improve not just in the first
 
quarter?
Todd
 
Tuckner
Thanks for your questions. Let me take the first.
 
So, I think in terms of the way you're thinking about
 
it, I'd
say the key is to think about a cost income
 
ratio below 70% is really the driver as we
 
exit 2026. You know,
the revenue picture that we gave, as I commented, is not
 
based on blue sky scenarios. You see that for two of
the core business divisions, we effectively priced in, you know, flat revenue growth. NCL, we priced
 
in flat
revenue growth. We talked quite, you know, I think appropriately about what we would expect from GWM
as it improves its asset base. And of course, on the
 
IB, coming from a low 2023 and given the onboarding of
the Credit Suisse bankers we discussed and getting them
 
productive over the next 12 to 18 months, one
could see that our revenue picture is, you know, is appropriate in that respect and not toppy.
That said, you know, when you look at, say, the return on RWA, which is I think what you used as a basis,
you know, that is certainly our ambition is to do the financial resource optimization
 
to improve our – the ratio
of revenues over RWA, and that's clearly something we know we need to
 
do. You saw in the depiction of
how dilutive the CS revenues have been on that metric.
 
So clearly, we're going to keep working on that. But
the key really to take away here is that, you know, as both Sergio and I said, we
 
have the flexibility to, you
know, pace the reinvestments of the $13 billion in gross cost saves depending
 
on how that revenue trajectory
develops. So, for us, that's really the key, maintaining less than a 70% cost income
 
ratio. That's where the
discipline comes in and as I said, pricing in what
 
is an appropriate revenue picture and just ensuring we keep
to the gross cost saves and then we could pace the
 
reinvestment as appropriate.
Sergio P.
 
Ermotti
Kian, vis-a-vis your second question on the
 
IB, I think of course we do expect the
 
onboarded resources,
particularly in the banking part of the business,
 
to start to ramp-up to average productivity of the
 
incumbent
UBS bankers. And that will happen and
 
is already happening, to be honest, because we
 
have been observing
good mandates winning. Of course, now what
 
we need is the second condition how do
 
I – first one is do we
win mandates? Do we get tractions? And the
 
answer is clearly yes. So, I'm very pleased with
 
that outcome.
Now, the most difficult question to answer is, is the market going to be there to
 
support monetizing those
mandates? And you know what's going on.
 
It's very difficult to predict the near future. So, past a very, very
hard 2023 but the momentum is very good. So,
 
I do think that is important to measure that.
19
The other observation I tried to take on
 
executed transaction will be are we gaining market
 
shares? How do
we do relatively to our competitors? A third element which
 
is very important for me, how is the IB
contributing to the value creation in our Wealth Management
 
and P&C businesses because it is very, very
important, is a pillar, is a very important driver and particularly now in the US but
 
also for example in
Australia, but also in APAC, in general. We can drive this real value creation by working closer together. But
lastly, it will be over the cycle, can they deliver return on allocated equity, as we've said, as a target? So, it's a
set of short-term and medium-term and long-term
 
measures that we will use, but I'm confident that
 
the
trajectory we had in the last seven, eight years,
 
which has volatility elements, will continue
 
but in a way that
accrue value to our shareholders and clients.
Kian Abouhossein, JP Morgan
Thank you.
Chris Hallam, Goldman Sachs
Thanks. So, first, on slide 28. If I zoom in on
 
2026, you've guided to an exit run rates
 
of 15% return on core
Tier 1. But for the year as a
 
whole, you flagged double digit, which I guess
 
is sort of 10% to 12%. So, just
wondering if there's something specific happening later
 
towards the end of 2026 that's causing a sort
 
of big
jump up in profitability or perhaps whether I'm just
 
being a bit too pessimistic on assuming
 
that double digit
means 10% to 12%? And then second, on distribution.
 
We have the details in terms of what you want to do
on the dividend this year, also the comments you've made on buybacks for 2024
 
and for 2025, but I was just
thinking about how you think about the
 
overall payout ratio longer term, 2026 onwards, and
 
the split in that
between dividends and buybacks.
Todd
 
Tuckner
Hey, Chris. So, on the first, I think what's that dynamic is effectively the benefit of having the
 
full year of
2026 absorb all the savings that, you know, we're working super hard at to achieve
 
over the next two to
three years. So, during the course of 2026, we're still going
 
to be taking significant cost out. In particular, the
expectation is more in the middle and back office where, as I mentioned,
 
you know, things are sequenced a
bit. You know,
 
we have to get the client tech decommissioning
 
done and you'll start to see sort of
 
a lot of the
middle and back office functions, including semi-owned,
 
where we'll see more of the cost take-out in the
latter part of the journey. And so, what you're seeing really priced in at the end of
 
226 is the full harvesting,
effectively the complete cost income story whereas in
 
2026 in-year, of course, you know, you're just having
the averaging effect over the course of the year.
Sergio P.
 
Ermotti
Yes, Chris. On buyback, of course, in 2026 we're going to have to factor in different considerations. But
generally speaking, I would say that
 
we want to continue to have a good mix.
 
I think that our progressive
dividend policy is extremely unlikely to change over the
 
long term. So, I think that we want to
 
continue to
deliver a cash dividend growth every year. The pace will be a function as well of where the stock
 
trades,
right? So, I mean, at the end of the day, there is an element of balancing cash versus
 
stock depending on
where the stock trades.
Having said that, I do recognize that also from a prudential
 
and capital management standpoint of
 
view,
share buybacks offers more flexibility, right? So, what we want to always make sure that our cash dividend is
sacrosanct and our progressive policy is also very, very important. Therefore, we always want to measure this
in two ways. Our dividend will be then benchmark
 
also in respect of making sure that we have an attractive
story for more yield focused equity investors.
20
Jeremy Sigee, BNP Paribas Exane
Thank you. And apologies, my video is not
 
working actually so I'm audio only. So, sorry for that. Two
questions if I could. So, I think what you said about
 
RWA reductions is very welcome, you know, and the
target of $510 billion in the medium term
 
and that frees up a lot of capital, which is really great to hear.
You've talked about optimization outside Non-core, so within the core divisions, and I just wonder
 
if you
could sort of talk about that a bit more. Just
 
give us some examples of the kind of lazy assets
 
that you think
you can cut. So, that's my first question.
The second one is back on the capital returns.
 
You talked about 2024 and you talked about 2026 on the
buybacks and I just wondered in terms of how we
 
think about what you might be able to
 
do in 2025. Is 14%
CET1 the relative – the relevant thresholds? Are there other constraints that will constrain
 
you in terms of
what buybacks you can do in 2025? So, does
 
it have to wait for the Swiss integrations to
 
be done? Does it
have to wait for non-core milestones? If you just
 
could talk about the constraints that would affect that,
 
that
would be great.
Todd
 
Tuckner
Okay. Hi, Jeremy.
 
So, on the first in terms of RWA reduction, you were looking for examples
 
in terms of
optimization in the core. So, I'd say, you know, the classic example would be where on, say, on the Credit
Suisse side. In Wealth Management, to give an example,
 
we are inheriting a situation where there was just
say a loan relationship between the bank and a client.
 
And perhaps, you know, we weren't bringing to bear
the holistic client array of services that is our
 
expectation to sort of do. Now, it's been the blueprint for us in
UBS. GWM. And so, that's just an example
 
where you have kind of a monoline is a simple example
 
of that.
Another example could be pricing. So, you
 
might not be getting the pricing for
 
the risks that you're effectively
taking with respect to that financing. So, I think those
 
are two examples where, you know, we need to do
work to ensure the holistic client coverage is brought to
 
bear in a given situation or we're looking at pricing
opportunities in particular cases.
Sergio P.
 
Ermotti
Yeah, Jeremy,
 
in respect of share buyback in 2025, I think it's a
 
little bit early to discuss that. But I would say
that first of all, the integration, the Swiss topic,
 
is a 2024 matter. So, by mid-2024 or during 2024 latest, we
know exactly how we manage the integration of
 
the parent company, the US entities and the Swiss
operation. That will so in 2025 is unlikely to
 
play a role in our capital return policies. The 14%
 
is a good
assumption. And what we mean by around 14% means
 
13.8% to 14.2%, not 14.5%. When we have excess
capital, well above the 14% is because we
 
are creating the buffer to do share buyback, to offset temporary
timing differences between cost to achieve in our integration
 
journey and the savings we realize and have
 
the
necessary buffer to also phase in the reduction of our tax
 
rate.
 
So, in a sense, nothing really changes but we do
 
indeed expect also the underlying profitability to
 
improve,
and therefore potentially giving us more flexibility. But this is something that we will focus in exactly
 
12
months' time and we will communicate our
 
plans for 2025.
Jeremy Sigee, BNP Paribas Exane
That's great. Thanks very much.
21
Andrew Coombs, Citigroup
Good morning. Thank you for taking my
 
questions. So, the first one would just
 
be going back to some of the
math that Kian outlined at the start.
 
I'm just trying to understand your decision-making
 
process. So, if you
look at slide 20, I think you said the 9% revenue to
 
RWA post-Basel IV.
 
So, you're suggesting exit run rate
$46 billion of revenues, 70% cost income, $32 billion
 
of costs and that's a couple of billion below the
 
full
year 2026 consensus revenues and full year 2026 costs,
 
appreciate we’re comparing exit versus full year
there. But with that in mind, could you elaborate
 
on where you've identified the additional cost opportunities
given that you previously said $10 billion, you're now
 
at $13 billion and you're on the tape of saying we are
sacrificing some topline growth in order to enhance returns.
 
So also, where you've made the decision to
perhaps come out of some product areas where there was a revenue opportunity?
 
That's the first question.
Second question is on capital return. Again,
 
trying to run the numbers, $510 billion
 
RWAs, 14% core Tier 1.
You need to be, on that basis, $71.5 billion in core Tier 1 capital. You're at $78 billion today. So, already a lot
of excess capital there, then there's the retained earnings
 
coming through. So, just trying to understand. Are
there any other moving parts aside from that amortization
 
in the FINMA waiver between tangible equity
 
and
core Tier 1 capital over the next three to four years?
 
Thank you.
Sergio P.
 
Ermotti
So, I'll let Todd take the questions and only noting that you may have got the revenues wrong, but you may
address this issue.
Todd
 
Tuckner
Okay. Yes.
 
So, Andy, hey.
 
I will just go on the cost side because I think
 
I addressed the revenue side anyway in
response to Kian. I would – I'd also – it's also important
 
to point out just quickly on that slide that
 
as we say in
there, it's pre-impact from the Basel III final and model update so
 
that, you know, also will impact on the
return of RWA.
In terms of the additional cost opportunities
 
that we found, as you asked, I mean, first,
 
I would say we're just
confirming what we said last year about
 
greater than $10 billion and saying we had to go do the
 
work to
validate all the details. And so, you know, the $13 billion that we've
 
come out with, neither Sergio nor I think
that that's, you know, going further. It was for us always the neighborhood of where, you know, we thought
the plan – the detailed bottom-up plans would get
 
us. And ultimately, when we were communicating greater
than $10 billion, you know, that was an informed estimate of course
 
because we had done a fair bit of work.
But of course, all the work that we've
 
done over the last three months validating that, you
 
know, that
number. So, that's sort of the first thing is just important to emphasize that it's
 
not as if we've gone deeper.
But in terms – so on that basis, I would just say
 
that the $13 billion remains for us on a gross basis,
 
critical.
You know,
 
we said half is going to be personnel
 
related. Half is – the other half will be consisting comprised
of things like mainly tech but also real estate, also
 
third party costs. So, again, it's a validation of what
 
we've
done and also as I highlighted going through the trajectories,
 
giving you a sense of when we think these
 
will
head through.
And just quickly on the – you asked about, you
 
know, sacrificing topline growth. I think the point that both
Sergio and I have made is just of course when
 
you do a financial resource optimization work, and
 
we've done
this before, you know, naturally to reduce the balance sheet means at times, well,
 
you know, you're going to
be sacrificing revenues as assets come down. And
 
so, you know, it all comes down to the accretion of return
on CET1 ultimately and how we think about
 
this in terms of trade-offs. So, that's how I would respond to
that.
And then I think you were saying any other differences, if I took your
 
point on CET1 and tangible equity. Was
that the point that you were making the differences, I think you
 
were saying, Andy.
22
Andrew Coombs, Citigroup
It's exactly that. Just trying to get with the
 
capital build. Thank you.
Todd
 
Tuckner
Yes. Well, I was just pointing out in terms of convergence, as I highlighted, you know, historically one of the
big differentiators between CET1, which we think, by the
 
way, is the right is the right model anyway because
that's the basis for being able to buy back shares
 
and pay dividends, so we think, you know, measuring return
on CET1 capital is right. But we know there's always
 
interest in that CET1 versus TE. So, what I was
 
just
suggesting was that our – as our tax loss DTAs, which were one of the big differentiators, are amortizing
down and being converted into temp difference DTAs which are CET1 accretive, that that becomes much
 
less
of a delta and therefore, you know, signals a move towards convergence.
Sergio P.
 
Ermotti
Yeah, Maybe let me just add quickly to your comment on driving optimization of
 
the balance sheet and
return on risk-weighted assets. You mentioned if we are planning to exit products, I have to
 
say that, you
know, never say never because in the next two or three years, you never know
 
how developments work out.
But at this stage, everything that we don’t
 
deem as a product that we want to have is part
 
of non-core. So,
it's all about repricing the existing core relationships and businesses.
 
It's not about exiting businesses. I mean,
I'm talking about meaningful businesses, of
 
course, right? So, I don't expect – it's
 
really and that's the reason
why it's not an immediate effect because we have to
 
manage the relationship. We have to manage the
discussion with clients in a way that they understand
 
risk-reward for us, for them. They understand the value
of the advice we give to clients, the services and
 
products we give. We also have to make sure that, you
know, where applicable, we stop having discounts. And so, this is over time, of
 
course, is going to help to
close the gap.
Andrew Coombs, Citigroup
That's great. Perhaps I could just follow-up on the opening
 
remark, I think you said my revenue calculation
was wrong on slide 20. The $510 billion I think
 
is post-Basel IV and in the footnote you said
 
9% post-Basel IV
finalization model update. So, should we be taking
 
$510 billion times the 9% or $510 billion
 
times the 10%
on the slide? Just to be clear.
Todd
 
Tuckner
Well, it would be $510 billion times the 9% since that
 
would be the return inclusive of the – so that's
 
apples
and apples.
Andrew Coombs, Citigroup
Brilliant. Thank you.
Anke Reingen, RBC
Yeah. Sorry.
 
Hopefully that works. If you can talk about
 
the path from the 15% to the 18% in 2028 return
on core Tier 1 capital. Given you had 15% to
 
18% before, so how conservative is the timing as
 
well as the
18% compared to your previous range and how much
 
is at self-help versus market? And the second
 
question
is a Q4 question. Your net fee generating assets were negative in Q4. If you can maybe elaborate
 
a bit on
what's been driving this? Thank you.
23
Sergio P.
 
Ermotti
Anke, I'll take this one. I think – and you take
 
the second, Todd. I guess on the exit rate, we are trying to
model what the potential will be and I outline
 
that we can definitely converge back into a
 
level of value
creation that is in the middle range since maybe it's
 
also appropriate to remember that if we wanted to really
reiterate the old story, we would have talked about 15% to 18%., and what we are saying is that
 
we believe
the exit rate is 18%. So, I believe that the combined
 
story over time will deliver a better, more stable, less
volatile returns and those returns will be in
 
the mid of that range between, you know, from above 15%,
around 18%.
So, I would say that's the nuances of the changes
 
are the one I just mentioned. So, we are not talking about
15% to 18%. I believe that we are well-positioned
 
to be sustainably in the high teens going forward. I don't
think there is a level of being conservative five years
 
ahead. We need to really work out the execution of
 
the
phase and understand what is the potential,
 
and over time we will fine tune short-term
 
ambitions.
Todd
 
Tuckner
And Anke, on the net new fee generating assets
 
in the quarters, you mentioned they were negative.
 
Just to
unpack that a bit. We saw good NNFGA on the
 
UBS platform. What you see a bit is more the Credit Suisse
dynamic in terms of mandates on the Credit Suisse
 
platform and in the fact that there was a net
 
outflow of
mandates that also could be as well from relationship
 
managers who have left. We are countering that by
virtue of having now have an aligned CIO
 
view and aligned solutions and offerings that we're bringing out
 
to
both – on both platforms. So, we expect going
 
forward that, you know, the CS mandates that perhaps we
were seeing a bit less of than ideal. We should be able
 
to stem that issue a bit going forward from an NNFGA
perspective.
Anke Reingen, RBC
Thank you.
Alastair Ryan, Bank of America
Yeah. Okay.
 
Apologies. Technology is not my specialty. $100 billion net new assets in 2024 and 2025 but
that feels like about dividends and interest given the
 
shape of the balance sheet you provide in the slides.
 
So,
could you just talk – just expand a little bit on
 
what else the underlying outflows
 
assumptions you're making
perhaps on some of the relationships you took over
 
with Credit Suisse whether that's case? And secondly,
cash, now 18% of the balance sheet. Very, very high liquidity coverage ratio. Is that something that's just
 
the
new run rate or can you bring that down as
 
you complete the complex legal entity
 
restructuring? Thank you.
Todd
 
Tuckner
Hey, Alastair,
 
I'll take those. So, on your first on net
 
new assets, you know, the $100 billion over the next two
years just reflects the fact that, you know, to the point that I think we've been
 
making that while we're going
to continue to grow the asset base, I mean, $100
 
billion is still $100 billion over the next – each
 
of the next
two years, $200 billion by the end of 2025
 
and that's a focus of the team. In terms
 
of where we think, you
know, the appropriate ambition would be, normally when we're just in growth – full growth
 
mode and not
looking to also ensure that, you know, appropriate hygiene on the balance sheet,
 
that's reflecting that
discount in there a bit. We still think it's a strong number. It's still growing the asset base. It's still providing a
basis to grow our revenues, as I highlighted in my comments,
 
but it is reflecting the fact that in addition to
growing client relationships and bringing more and more aligned products and
 
solutions to our clients, there
are going to be situations, as we both highlighted,
 
where, you know, perhaps we see potential outflows
because of decisions we've made around given service
 
for example, trying to a price alone, potentially
unsuccessfully, and then seeing that roll off and then potentially the collateral moving out of the
 
bank as a
result. So, it's just appropriate to price in some of that
 
as we do this, you know, good and necessary work to
ensure ultimately stronger return on RWA and sustainably higher returns in the
 
long run.
24
In terms of cash or the HQLA that we have,
 
yeah, you could assume going forward that that
 
is structurally our
run rate for now just given the new Swiss
 
liquidity ordinance requirements that we're complying with. So, you
can assume that that's right. Naturally, we're focusing on, you know, winning back deposits and continuing
diversified sources of funding, not least given the
 
structural funding gap we've inherited from the
 
Credit
Suisse subsidiary in Switzerland. So, you know, we're taking steps in our
 
funding plan to narrow that. But in
the end, you can assume that for now, that level of liquidity is sort
 
of run rate level.
Alastair Ryan, Bank of America
Thank you.
Giulia Miotto, Morgan Stanley
Hi. Good morning. You hear me well? Okay, perfect. So, my first question goes to GWM Americas. I think the
target is low teens until 2026 and then up to
 
mid-teens PBT margin. So, what strategic
 
options are you taking
to structurally lift profitability in this division? I think
 
I heard this – rebuilding the banking platform in-house,
but if you can give us more color on that. So that's
 
my first longer-term question. Whereas on the short term,
in terms of transaction margins, those are being
 
subdued for a while and especially in Asia.
 
What evidence
are you seeing or are you seeing any evidence of that coming
 
back? Thank you.
Todd
 
Tuckner
Yeah. Hi, Giulia. So, on – in terms of the sorts of investments we're making, as you mentioned,
 
you know, we
think the core banking infrastructure work is critical because
 
that effectively institutionalizes clients much
more effectively in doing that. The more that you have a broader suite of
 
products and capabilities to offer
clients, the more in effect it becomes, you know, they become stickier. The clients and the advisors just
become stickier. We know that playbook. We run that playbook in every part of the world outside
 
the US.
And so, it's something that for us is quite fundamental.
 
And so, we're going to continue to do that and
continue to invest in digital capabilities to
 
make being both a client and an advisor
 
of the US business of
GWM better.
There are also some other things that we're doing to bring that
 
profit margin up. Sergio mentioned in his
comments. A lot of it's also about products and capabilities
 
and we're seeing that start to hit through. And
that's just in terms of, again, borrowing a page from the playbook
 
that we use outside the US, it's the global
markets approach. So, it's having a more joint GWM-Investment
 
Bank approach to serving clients from a
transactional perspective, especially clients
 
with more sophisticated needs, also from a lending perspective
 
as
well, having more of a focus on lending solutions
 
as we've done outside the US as well. So,
 
I think doing all
that is where we think, you know, just doing the sort of good blocking
 
and tackling will, you know, should
support the profit margin in mid-teens over the next two
 
to three years.
In terms of transaction margins in APAC, yeah, I think we are seeing – we actually
 
saw some good
performance in the fourth quarter from a TRX perspective,
 
in particular on the UBS platform, which
 
is
encouraging. So, we're – and also in APAC. Again, given just our diversification in
 
the region, we're not just
limited to, you know, one location potentially underperforming from an
 
equity markets perspective, and we
actually saw a good performance in the region. In particular, we saw good performance
 
in transactions in
Japan this quarter. And so, you know, we have the good, diversified approach to ensure that even if one – as
I said, one particular part of the region isn't generating
 
the sorts of margins that are ideal for us that we're
able to compensate.
Giulia Miotto, Morgan Stanley
Thanks.
25
Stefan Stalmann, Autonomous
Yes. Good morning, everyone. Thanks for the presentation and for taking my questions.
 
I hope you can hear
me well. I wanted to first ask on the share buyback restart
 
this year. I was a bit surprised that you make this
link between the legal entity merger of
 
the parent banks and the ability to restart the share buyback. Do
 
you
see actually a direct link there between Group payout capacity and
 
what happens to the parent bank merger
or is it just a short form for you to say if the
 
merger works, that's a good indication
 
that the integration is
online, and that's why I can go back to share buybacks?
And the second question is on capital requirements. You have obviously presented the plan very much
 
on the
basis of the rules as they currently stand, but we
 
also have an upcoming review by the government
 
and we
don't know how that looks like. On a confidence
 
scale of 1 to 10, where do you think the outcome
 
will be?
Do you think your numbers will still be proven fine
 
after this review or do you think it could change?
 
Thank
you.
Sergio P.
 
Ermotti
Thank you, Stefan. I think the link between
 
share buyback and the parent bank merger and the underlying
 
US
operation and later on, the Swiss one, it's
 
very relevant because if we have a delay, our ability to start to
deliver on the cost synergies will come just later. And therefore, we would lose capital buffers that we
 
believe
is necessary. So, I think it's totally there is no gaming or nothing. It's just prudent
 
reasonable way to look at
the two major risks associated with such an
 
integration is regulatory approvals to execute legal entity
mergers. We are talking about 50-plus countries. Okay?
 
And the second one is IT migration. This
 
is probably
more the 2024 into 2025 as we start to migrate.
 
So, if we don't get into a good place with our
 
parent
company merger by the end of the second quarter, we have a delayed effect which has
 
to be reflected in our
prudence in terms of how we accrue capital.
 
So, I hope this is very clear now.
In terms of capital requirements, yeah, well, I mean, I can
 
only say, you know,
 
watch and listen to what has
been said publicly by different international and domestic
 
experts around the topic of capital and why Credit
Suisse failed. Credit Suisse didn't fail because of lack
 
of capital or lack of liquidity per se but it failed
 
because,
you know, partially,
 
I would say the loss of trust and confidence,
 
the lack of underlying profitability and that
created a self-fulfilling problem. I think if you look at regulation, you
 
know, the regulation was well applied
and fully functioning for UBS. So, the same
 
regulation should have worked for Credit Suisse.
I do think that – I'm pretty convinced that any authorities
 
and governments, before taking actions
 
on capital,
they will also have to sit down and look at
 
what happened, like the commission that
 
is investigating on the
matter is doing, and everybody will have to
 
pose and think about what they could
 
have done better, being a
little bit more self-critical about what happened. So,
 
I believe the current regime and no experts is saying that
more capital is necessary. So, I'm not going to give you an answer on my rating of confidence
 
because there
is only downside on that, but I can only tell you
 
that facts are telling us a crystal clear story that
 
capital is not
the way to manage such a situation.
Stefan Stalmann, Autonomous
Very clear.
 
Thank you very much.
26
Adam Terelak, Mediobanca
Morning. Thank you for the questions.
 
I've got three on capital, one of which is a clarification.
 
I wanted to dig
into slide 36, the $15 billion of balance sheet
 
optimization. Clearly, it's talking about net of gross as well. So,
can we get a feeling for what the underlying
 
moving parts are because it's clearly going
 
in different directions
and whether there's any kind of regulatory securitization type
 
benefit to think about, say non-revenue costing
RWA efficiencies to think about on the forward look. And then linked to
 
that, clearly the lower RWA outlook
has created lots of flexibility in your plan, but how
 
do you guys think about redeploying your balance
 
sheet if
there are profitable growth opportunities particularly given that your stock
 
is trading above tangible book or
CET1?
And then just a clarification. On the AT1 buildout, it says increasing to 18% by
 
2029 but I think you
referenced 2026 as well in terms of that Tier
 
1 capital requirement. So, if you just give us color on the
 
AT1
buildout timeline would be very helpful. Thank
 
you.
Todd
 
Tuckner
So, let me – thanks for that, Adam. Let me
 
just cover. The last one is 2029 because that's, you know, that is
how we've modeled and also just given the
 
way our expectations are on the Too Big To
 
Fail requirements
coming in impacting on going concern
 
capital out until 2030. So, that is the correct read. In terms
 
of the first
question on slide 36, so the $510 billion effectively
 
where we think we get to, of course, is net of growth. So,
there is a growth that is priced in. So, the fact that we
 
have, say, balance sheet optimization in the core
businesses, we say net of growth. So, these are trade-offs that we're making and
 
look, we've done this
before and it's, you know, taking the balance sheet in areas where there are opportunities to generate
greater returns on RWA. That's the work that we're doing, and obviously where
 
there are opportunities to
grow especially to start to begin to harvest the combination
 
and the scale that we have. Clearly, that will be
the case.
Sergio P.
 
Ermotti
Yeah, I guess a 5% return on risk-weighted assets is not acceptable, right? So, I think
 
that's the reason I'm
saying it makes no sense for us to try
 
to overly impress anybody with growth on the top line if this is
 
just
destroying value or not sustainable. So, we are willing to take
 
a step back in terms of growth. But still in some
areas, are we going to grow? Now, It's very important to understand the restructuring element
 
up until the
end of 2026. Afterwards, we will grow. Of course, we will grow. So, we are not a restructuring story. We will
grow again because our business will grow but from a base that
 
I believe is going to be much more reliable
and sustainable.
Adam Terelak, Mediobanca
Could I have a follow-up in terms of what
 
volume of RWA are sitting below kind of your aspiration in terms
of RoRWA? Just trying to size the opportunity in terms
 
of recycling your risk weights into high growth.
Sergio P.
 
Ermotti
Well, you look at the balance sheet of Credit Suisse that
 
we onboarded has revenues on risk-weighted assets
of 5% on average in 2022. Now, we are already taking actions but this is the volume
 
you have to think
about. So, we were perfectly happy with the return
 
profiles of our Wealth Management and IB and Swiss
bank operation. So, we need to now bring
 
it back. And I think it is very important
 
that, you know, it's all
about giving clear directions to our people. Our new
 
colleagues from Credit Suisse fully understand that they
are now following what they believe also is the best
 
way to create value for clients – for shareholders, but
also for clients because we want to be predictable.
 
We want to be a partner that is there and where the
relationship allows us to tell what are our expectations
 
and what is the client expectations, and that
 
we'll
need to be addressed and we now have a clear, aligned way of looking at how to develop
 
and grow the
business.
27
Adam Terelak, Mediobanca
Right. Thank you very much.
Benjamin Goy, Deutsche Bank
Yes. Hi. Good morning. Two
 
questions, please, one on the Global Wealth Management
 
and one on
Investment Bank. If you can add a bit more color
 
on the $100 billion net new asset run rate
 
that should rise to
$200 billion per year by 2028. So, just wondering
 
how much is reduced impact from business exits or kind
 
of
risk appetite, financial advisor leaving, and
 
then how much is, say, acceleration of the platform of a unified
platform? And then secondly, sounds like the Credit Suisse bankers you onboarded, pretty low revenues so
far. It's picking up the next one to two years. I was just wondering because you
 
mentioned for the markets
position that it will be transferred end of Q1, but
 
you also feel that in sales and trading, the
 
Credit Suisse
colleagues you onboarded have been underearning
 
and whether they could see an acceleration
 
this year.
Thank you.
Todd
 
Tuckner
Hi, Ben. So, in terms of the run rate of net
 
new assets from $100 billion, I would say as Sergio
 
just highlighted
in response to the last question, you know, we for sure will grow. And once we feel like the balance sheet
 
is
in a better spot, we think that that will build
 
quickly in terms of, you know, us focusing on growth. So, the
bridge to $200 billion, while we're not disclosing specifically
 
what we think the numbers are, you can expect
that, you know, certainly in 2026 we should start to see that
 
come up pretty significantly and then build to
$200 billion by 2028. So, I would say it's
 
not necessarily just, you know, linear straight line. We should see a
bit of an acceleration early on in 2026, but
 
I think there's some hard yards that we have modeled in to get to
the $200 billion in the latter part of
 
that five-year cycle.
In terms of IB productivity on the markets side, I mean,
 
one of the key points that I highlighted
 
was, you
know, actually onboarding on the markets side, fully onboarding not only the traders
 
but their positions,
which is now – it's been 4Q but really it's an intense piece
 
of work in 1Q where we expect the majority of the
positions to then be onboarded on UBS infrastructure.
 
Once that happens, you know, we think that the
markets personnel should be able to start
 
generating, you know, appropriate revenues. Yes, there's a ramp,
but it's not the same as in on the banking
 
side where that productivity is going to take a longer
 
ramp as you
might appreciate it, but we should see and we expect
 
that we'll see better productivity pretty quickly once the
positions are onboarded on to the UBS infrastructure.
Benjamin Goy, Deutsche Bank
Understood. Thank you.
Tom
 
Hallett, KBW
Morning. Yeah. Hi, guys. So, most of my questions have been answered, but just
 
maybe going back to NII.
You say it will grow again in the second half of the planning period. Am I right in just assuming
 
that's the
second half of 2025? So, i.e., kind of NII should
 
decline three to early 2025? And then secondly, you know,
one of your peers in the US said that deposit
 
mix changes were kind of ending. Is that what
 
you're seeing as
well? And could you maybe just clarify the
 
wider international business, what's
 
going on with deposit mix
changes there or what you expect going forward? Thanks.
28
Todd
 
Tuckner
Sure. Hey, Tom.
 
So, in terms of NII, yeah, we see the
 
recovery coming from more mid 2025. So that's correct,
that's the right read. So, you know, again, just given how we're pricing in rate reductions,
 
you know,
whether they come, I think as you know
 
the different views. But whether they come over 12 months
 
or 18
months, we're running our models, but we definitely
 
have rate reductions before we see stability, you know,
into 2025 for sure. And then that stability then corresponds as
 
well with what we think would be a pick-up
 
in
loan volumes and loan revenues overall on top of,
 
of course, the funding efficiencies that I talked about
 
at
length during my comments that really start to accelerate
 
the recovery in NII in the latter part of the or the
second half effectively of the three-year planning cycle.
In terms of deposit mix effects, absolutely. We've seen a tapering in the US. We started seeing even last
quarter, even in 3Q, we're seeing that continue to taper. Still seeing a little bit of that, though, where there's
spillover and higher rates in some of the non-US
 
dollar currencies in particular in Switzerland. So,
 
we're still
seeing a bit of deposit mix shifts, but we sort
 
of price them more or less out of our outlook, you know, once
we get beyond 1Q. And in terms of
 
how that looks across I think the US, we're now – we've seen stability
first time since 4Q 2021 that we've had net
 
deposit inflows so that's good. In APAC, we've actually seen
some good deposit inflows also not least
 
just given win-back. So, there's that impact as well.
 
And in
Switzerland, we're seeing a bit of a slightly downward move
 
in terms of deposit inflows. So, just to give
 
you a
sense of sort of the deposit volume as
 
I see it across the spectrum.
Tom
 
Hallett, KBW
That's very clear. Thank you.
Andrew Lim, Société Génerale
Fantastic. Thanks for taking my questions.
 
So, the first one, on capital. I'm really trying to
 
square your RWA
guidance with how you feel about buybacks.
 
So, looking at that equation, you know, that $510 billion on
RWAs, obviously quite low versus consensus. But if you
 
take consensus capital of, say, $80 billion, $81 billion,
then you are looking at about 15.8% CET1 ratio.
 
So, we even get to the conclusion that your
 
buyback
potential is quite a lot higher than what you've
 
indicated or maybe your expectation
 
for CET1 capital is maybe
materially lower than $81 billion. So, I just
 
wanted to see how you feel about that.
And then the second question is on the NII guidance
 
that you've given. Obviously, we've drill down into the
deposit mix shift there. But you’ve noted that
 
one of your competitors are also one of the big
 
drivers there
has been deleveraging of Lombard loans and I wanted
 
to see if that was actually a big driver for
 
yourselves as
well and how this has impacted your thoughts
 
on NII for this year and going forward?
Todd
 
Tuckner
Yeah. Thanks. Thanks for that, Andrew. So, I'll take – on the second one, no, we're not seeing – I mean,
we've had some deleveraging that we've
 
highlighted in prior quarters but we're not seeing
 
that as a major
factor in our guidance at this point other than
 
around the impacts from the resource optimization that I've
highlighted. But in particular around Lombard deleveraging,
 
we're not pricing that to any significant degree
into our guidance. And I was just trying to pick
 
up on your first point where you were, sorry, you were trying
to square if – where the RWA levels are in terms of how that informs the way you
 
want to think about share
buybacks? I just want to understand your
 
point if you can repeat them.
29
Andrew Lim, Société Générale
Yes. So, let’s say we’re taking that consensus of $81 billion CET1 capital, you’ve indicated
 
$510 billion on
RWA. So, that would be 15.9% CET1 ratio. So, actually
 
it is quite a lot of buffer, maybe $5 billion or so above
$5.5 billion buybacks that you might be pointing
 
towards for 2026. So, you know, there’s either a lot more
capacity for you to actually push up your buybacks
 
there or maybe you’re thinking that CET1 capital might
 
be
a bit lower than what consensus think. So,
 
I just want to see what you think about it.
Todd
 
Tuckner
Yeah, I think – okay.
 
Clear. So, yeah, I think in terms of your CET1 capital calculations, I'm not sure that
squares with how we model under one baseline scenario.
 
But I think it's fair to say that, you know, if we
generate as we go out to 2026, the extent to
 
which we're able to generate the returns that
 
we expect to
generate at the end of 2026, that there will be sufficient
 
capacity, as Sergio said, to be able to undertake as
much share buybacks as we had, in fact, more so than pre-acquisition
 
levels. So, I think, you know, I won't
comment specifically on whether your CET1 number
 
is the same number we consider under
 
one scenario but
I think it's fair to say that there is share buyback capacity naturally
 
if we hit these targets that we've set
 
out.
Andrew Lim, Société Générale
Great. Thanks.
Nicolas Payen, Kepler Chevreux
Yes. Morning. I have two questions, please. Two on Wealth Management. The first one would be on your
pre-tax profit margin targets in the US. You're targeting mid-teens by 2026 and still significantly below what
your US peers are doing. So, I wanted to know what
 
kind of levers you can pull through to have this
convergence towards the profitability levels that we are seeing
 
of the US peers. And the second one will
 
be
on the net inflow that you are targeting. Is there any geographies
 
where you see the most potential or where
you are the most excited about where you – where the CS merger is bringing
 
new capabilities and new
outlook? Thank you.
Todd
 
Tuckner
Yeah. Thanks, Nicolas. So, on the – look, on the pre-tax profit, you know, as we've laid out, I think Sergio in
his prepared comments and mine in response to a question earlier, you know, we're building back to mid-
teens through the work that we've described, which
 
we think is quite important at that point
 
in time, getting
to what we think is an appropriate level given, you know, where we are now. Then at that stage, we have,
you know, options to consider beyond that to narrow the gap further, and that's certainly the plan. So, you
know, it's a little bit of walk before we run and we wanted to just be clear that
 
we, you know, the things that
we think that need to happen in the US business
 
that we’re going to do over the next three years will set
 
us
up for success and being able to sort of then,
 
at that stage, drive greater returns and narrow the gap
 
further
beyond 2026.
In terms of the geographies in GWM that
 
we're excited about, I mean, just off the top, and I've talked
 
about
this before, but certainly places where we become really meaningful,
 
we're excited about many places that
the CS integration brings to bear on Wealth. But, you
 
know, when it comes to minor places where,
meaningfully, change is what we had in the particular region just given maybe a focus
 
on different client
segments, maybe we exited. So, two examples
 
come to mind would be Brazil, more on
 
the former in terms of
the client segment we focused on. Another
 
is Australia where we exited, again more of an affluent practice
that we had many years ago, and we have
 
an opportunity now to inherit a business
 
in Australia aligned, by
the way, with the IB in Australia which is quite exciting. And that business is more, you know, the high net
worth and the ultra that is our bread and butter. So, two examples where, and for different reasons of what
excites us in terms of the acquisition.
30
Nicolas Payen, Kepler Chevreux
Thank you.
Piers Brown, HSBC
Yeah. Good morning. Most of my questions have been answered, but maybe just
 
a final one on litigation.
Just whether there's anything in the plan for
 
a sort of a business as usual normalized charge
 
for litigation. I
know you've taken a lot of adjustments on CS acquisition
 
and you've gotten the $4 billion of balance
 
sheet
reserves at this stage, but having had a good chance
 
to look at the case book at this point.
 
Is there anything
in there which you think might still burden the P&L over the
 
course of the targets that you’ve laid out this
morning? Thanks.
Todd
 
Tuckner
Hey, Piers. Thanks for the question. Yeah, I mean, just refer you to the litigation note which, you know, gives
both the UBS heritage and Credit Suisse heritage
 
legacies there, say that's the best bet. Otherwise,
 
I’ll just tell
you that our provision levels are augmented by the PPA that I described in August. We're comfortable with
the levels we're at just given the – where those matters
 
sit, but that's, you know, all I would comment in
terms of litigation at this stage.
Sergio P.
 
Ermotti
I won't abuse of your patience. You have been with us, thank you, for 2 hours-plus.
 
Thanks for the questions.
Thanks for attending. I hope you got enough
 
information. But most importantly, if you have any further
needs or any further questions, please reach out to Sarah's
 
team, IR, or I'm sure between myself and Todd,
we'll have a chance to catch-up with many
 
of you in the next few weeks.
Thank you for attending and enjoy the rest of
 
the day. Thank you.
 
31
Cautionary statement regarding forward-looking
 
statements
This transcript contains statements that
 
constitute “forward-looking statements,” including but not
 
limited to management’s outlook for
 
UBS’s financial
performance, statements relating to the anticipated effect of transactions and strategic initiatives on UBS’s business and future development and goals or
intentions to achieve climate, sustainability and
 
other social objectives. While these forward-looking statements
 
represent UBS’s judgments, expectations
and objectives concerning the matters
 
described, a number of risks, uncertainties
 
and other important factors could cause
 
actual developments and results
to differ materially from
 
UBS’s expectations. In particular,
 
terrorist activity and conflicts in
 
the Middle East, as well as
 
the continuing Russia–Ukraine war,
may have significant impacts on global markets,
 
exacerbate global inflationary pressures, and slow
 
global growth. In addition, the ongoing conflicts may
continue to cause significant population displacement, and lead to shortages of vital commodities, including
 
energy shortages and food insecurity outside
the areas
 
immediately involved
 
in armed
 
conflict. Governmental
 
responses to
 
the armed
 
conflicts, including,
 
with
 
respect to
 
the Russia–Ukraine
 
war,
coordinated successive sets of sanctions
 
on Russia and Belarus, and
 
Russian and Belarusian entities and nationals,
 
and the uncertainty as
 
to whether the
ongoing conflicts will
 
widen and intensify, may continue
 
to have significant
 
adverse effects on
 
the market and
 
macroeconomic conditions, including
 
in ways
that cannot be anticipated.
 
UBS’s acquisition of the Credit
 
Suisse Group has materially
 
changed our outlook and strategic
 
direction and introduced new
operational challenges. The integration of the Credit
 
Suisse entities into the UBS structure
 
is expected to take between three
 
and five years and presents
significant risks,
 
including the risks that UBS Group AG may be unable to achieve the cost reductions and other benefits contemplated by the transaction.
This creates significantly greater uncertainty about
 
forward-looking statements. Other factors that may affect
 
our performance and ability to achieve
 
our
plans, outlook and
 
other objectives also
 
include, but are
 
not limited to:
 
(i) the
 
degree to
 
which UBS
 
is successful in
 
the execution of
 
its strategic plans,
including its cost reduction and efficiency initiatives
 
and its ability to manage its levels
 
of risk-weighted assets (RWA) and leverage
 
ratio denominator (LRD),
liquidity coverage ratio
 
and other financial resources, including
 
changes in RWA assets and
 
liabilities arising from higher
 
market volatility and the
 
size of the
combined Group;
 
(ii) the
 
degree to
 
which UBS
 
is successful
 
in implementing
 
changes to
 
its businesses
 
to meet
 
changing market,
 
regulatory and
 
other
conditions, including
 
as
 
a result
 
of
 
the acquisition
 
of the
 
Credit Suisse
 
Group; (iii)
 
increased inflation
 
and interest
 
rate volatility
 
in major
 
markets; (iv)
developments in the macroeconomic climate and in the markets in which UBS operates or to which it is exposed, including
 
movements in securities prices
or liquidity, credit spreads,
 
currency exchange rates,
 
deterioration or
 
slow recovery in
 
residential and
 
commercial real estate
 
markets, the
 
effects of economic
conditions, including increasing inflationary
 
pressures, market developments, increasing
 
geopolitical tensions, and changes
 
to national trade policies on
 
the
financial position or creditworthiness of UBS’s clients and counterparties, as well as on client sentiment and levels of activity; (v) changes in the availability
of capital and funding, including any adverse changes in
 
UBS’s credit spreads and credit ratings
 
of UBS, Credit Suisse, sovereign issuers, structured
 
credit
products or
 
credit-related exposures,
 
as well
 
as availability
 
and cost
 
of funding
 
to meet
 
requirements for
 
debt eligible
 
for total
 
loss-absorbing capacity
(TLAC), in particular in light of the
 
acquisition of the Credit Suisse Group; (vi) changes
 
in central bank policies or the implementation
 
of financial legislation
and regulation
 
in Switzerland, the
 
US, the
 
UK, the
 
EU and
 
other financial centers
 
that have
 
imposed, or
 
resulted in,
 
or may
 
do so
 
in the
 
future, more
stringent or
 
entity-specific capital,
 
TLAC, leverage
 
ratio, net
 
stable funding
 
ratio, liquidity
 
and funding
 
requirements, heightened
 
operational resilience
requirements, incremental tax requirements,
 
additional levies, limitations on permitted activities,
 
constraints on remuneration, constraints on
 
transfers of
capital and
 
liquidity and
 
sharing of operational
 
costs across the
 
Group or other
 
measures, and the
 
effect these will
 
or would
 
have on
 
UBS’s business
 
activities;
(vii) UBS’s ability to successfully
 
implement resolvability and related regulatory requirements
 
and the potential need to make
 
further changes to the legal
structure or booking model of
 
UBS in response to
 
legal and regulatory requirements and
 
any additional requirements due to
 
its acquisition of the Credit
Suisse Group, or other developments; (viii) UBS’s ability to maintain and improve its systems and controls for complying with sanctions in a timely manner
and for the detection and prevention of money laundering to meet evolving regulatory requirements and expectations, in particular in current geopolitical
turmoil;
 
(ix)
 
the
 
uncertainty arising
 
from
 
domestic stresses
 
in
 
certain major
 
economies; (x)
 
changes in
 
UBS’s competitive
 
position,
 
including
 
whether
differences in
 
regulatory capital
 
and other
 
requirements among
 
the major
 
financial centers
 
adversely affect
 
UBS’s ability
 
to compete
 
in certain
 
lines of
business; (xi)
 
changes in
 
the standards
 
of conduct
 
applicable to
 
our businesses
 
that may
 
result from
 
new regulations
 
or new
 
enforcement of
 
existing
standards, including
 
measures to
 
impose new
 
and enhanced
 
duties when
 
interacting with
 
customers and
 
in the
 
execution and
 
handling of
 
customer
transactions; (xii) the liability to which
 
UBS may be exposed, or possible constraints
 
or sanctions that regulatory authorities might impose on
 
UBS, due to
litigation, contractual
 
claims and
 
regulatory investigations,
 
including the
 
potential for
 
disqualification from
 
certain businesses,
 
potentially large
 
fines or
monetary penalties,
 
or the
 
loss of
 
licenses or
 
privileges as
 
a result
 
of regulatory
 
or other
 
governmental sanctions, as
 
well as
 
the effect
 
that litigation,
regulatory and similar matters have
 
on the operational risk component of
 
our RWA, including as
 
a result of its
 
acquisition of the Credit
 
Suisse Group, as
well as the amount of capital
 
available for return to shareholders;
 
(xiii) the effects on UBS’s business,
 
in particular cross-border banking, of
 
sanctions, tax or
regulatory developments
 
and of possible
 
changes in UBS’s
 
policies and practices;
 
(xiv) UBS’s ability
 
to retain and
 
attract the employees
 
necessary to generate
revenues and to manage, support and control its businesses, which may be affected by competitive
 
factors; (xv) changes in accounting or tax standards or
policies, and determinations
 
or interpretations affecting the
 
recognition of gain or
 
loss, the valuation
 
of goodwill, the recognition
 
of deferred tax assets
 
and
other matters; (xvi)
 
UBS’s ability to
 
implement new
 
technologies and
 
business methods,
 
including digital services
 
and technologies,
 
and ability to
 
successfully
compete with
 
both existing
 
and new
 
financial service
 
providers, some
 
of which
 
may not be
 
regulated to
 
the same
 
extent; (xvii)
 
limitations on
 
the effectiveness
of UBS’s
 
internal processes
 
for risk
 
management, risk
 
control, measurement
 
and modeling,
 
and of
 
financial models
 
generally; (xviii)
 
the occurrence
 
of
operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyberattacks, data leakage and systems
 
failures, the risk of which is
increased with cyberattack threats from
 
both nation states and non-nation-state
 
actors targeting financial institutions;
 
(xix) restrictions on the ability
 
of UBS
Group AG to
 
make payments
 
or distributions,
 
including due
 
to restrictions
 
on the ability
 
of its
 
subsidiaries to
 
make loans or
 
distributions, directly
 
or indirectly,
or, in the case of financial difficulties, due to
 
the exercise by FINMA or the
 
regulators of UBS’s operations
 
in other countries of their
 
broad statutory powers
in relation
 
to protective
 
measures, restructuring
 
and liquidation
 
proceedings; (xx)
 
the degree
 
to which
 
changes in
 
regulation, capital
 
or legal
 
structure,
financial results or other factors may affect UBS’s ability to maintain its stated capital return objective; (xxi) uncertainty over the scope of actions that may
be required by UBS, governments and others for UBS to achieve goals relating to climate, environmental and social
 
matters, as well as the evolving nature
of underlying science and industry and the possibility
 
of conflict between different governmental standards
 
and regulatory regimes; (xxii) the ability of UBS
to access capital
 
markets; (xxiii) the ability
 
of UBS to
 
successfully recover from
 
a disaster or
 
other business continuity problem
 
due to a
 
hurricane, flood,
earthquake, terrorist attack, war, conflict (e.g., the Russia–Ukraine war),
 
pandemic, security breach, cyberattack,
 
power loss, telecommunications failure
 
or
other natural or man-made event,
 
including the ability to function
 
remotely during long-term disruptions such
 
as the COVID-19 (coronavirus)
 
pandemic;
(xxiv) the level of success in the absorption of Credit Suisse, in the integration
 
of the two groups and their businesses, and in the execution of the planned
strategy regarding cost reduction
 
and divestment of
 
any non-core assets,
 
the existing assets
 
and liabilities of
 
Credit Suisse, the level
 
of resulting impairments
and write-downs, the effect of the
 
consummation of the integration
 
on the operational results, share price
 
and credit rating of UBS – delays,
 
difficulties, or
failure in closing the transaction may cause market disruption and challenges for UBS to maintain business, contractual and operational relationships; and
(xxv) the effect that
 
these or other
 
factors or unanticipated
 
events, including media
 
reports and speculations,
 
may have on
 
our reputation and
 
the additional
consequences that
 
this may
 
have on
 
our business
 
and performance.
 
The sequence
 
in which
 
the factors
 
above are
 
presented is
 
not indicative
 
of their
likelihood of
 
occurrence or
 
the potential
 
magnitude of
 
their consequences. Our
 
business and
 
financial performance could
 
be affected
 
by other
 
factors
identified in
 
our past
 
and future
 
filings and
 
reports, including
 
those filed
 
with the
 
US Securities
 
and Exchange
 
Commission (the
 
SEC). More
 
detailed
information about those factors is set forth in documents
 
furnished by UBS and filings made by UBS with
 
the SEC, including the Risk Factors filed on Form
6-K with the 2Q23
 
UBS Group AG report
 
on 31 August 2023
 
and the Annual Report
 
on Form 20-F for
 
the year ended
 
31 December 2022.
 
UBS is not under
any obligation to (and expressly disclaims any obligation to) update or
 
alter its forward-looking statements, whether as a result of new information,
 
future
events, or otherwise.
 
 
 
 
 
 
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
 
registrants have duly
caused this report to be signed on their behalf by the undersigned, thereunto
 
duly authorized.
UBS Group AG
By:
 
/s/ David Kelly
 
_
Name:
 
David Kelly
Title:
 
Managing Director
 
By:
 
/s/ Ella Campi
 
_
Name:
 
Ella Campi
Title:
 
Executive Director
UBS AG
By:
 
/s/ David Kelly
 
_
Name:
 
David Kelly
Title:
 
Managing Director
 
By:
 
/s/ Ella Campi
 
_
Name:
 
Ella Campi
Title:
 
Executive Director
Credit Suisse AG
By:
 
/s/ Ulrich Körner
 
_____
Name:
 
Ulrich Körner
Title:
 
Chief Executive Officer
By:
 
/s/
 
Simon Grimwood
 
_
Name:
 
Simon Grimwood
Title:
 
Chief Financial Officer
Date:
 
February 7, 2024