Q4 2020 UBS Group AG Earnings Presentation

Clients employees and our communities.

And if we look what's behind that is our colleagues and and and the way our colleagues have.

And basically erosive location day and day out.

Yeah.

And that made us a UBS stand for.

The ability for confidence and we were able to maintain connectivity with our clients provided the advisor of the solutions that the clients needed in these uncertain times.

And you can see it.

That connectivity that reach out coming back in the more than $100 billion of net new money that caused the vessel with us across wealth management and asset management.

And and this has contributed to a record and invested assets of both businesses. So yeah and together, we're now over for trade and dollars and totaled.

We achieved on the back of of this commercial success of our highest net profit and a decade with every reach and delivering over one and a half billion profit before tax and.

And as a result, which we hit or exceeded each of our targets for growth.

But also for reinsurance and.

Well, we delivering what was delivered on the strategic priorities that we laid out at the beginning of last year.

Reflecting these 'twenty 'twenty results and our solid capital position and we will propose to pay of 37 and.

Our dividend per share at the upcoming AGM. In addition, we're planning to resume buybacks.

And targeting up to $1 $1 billion and the remainder of ultra first quarter.

I'm now turning to the next slide slide four.

Well basically I mean this just the slide tells it all of them.

You know, it's it's it's momentum across all different dimensions, and we look back and 'twenty 'twenty, one and you can basically look back with the sense of pride and supporting the clients through the challenges they face.

The four trillion dollars of adjusted assets across wealth and asset management and twice turns for us.

To help them to achieve their investment goals 80 billion of net new money generated and asset management of alone of this around half was directly related to providing our wealth management client it's clients better access to the separately managed accounts.

We also saw strong demand for Chinese equities for sustainable and investment products.

And both confirming and the strategic priorities are.

Being the right ones.

And also on the slide you see the 26 billion of net new loans for wealth management clients and other strategic priority.

On the transaction side, we build on our strength to identify and execute on trading opportunities for our clients and on the back of the global markets income group by nearly a third doing well across products on the higher client activity.

And it's actually based income and the wealth manager increased by 17%, reflecting enhance productivity, but it is for leverage the investment bank and you see the both of any of the asset management side as well as the investment bank are really looking as to how we can support the global wealth management.

And and focus that we have and and you see.

And the first signs of true success there.

We have really endeavor to make it simpler for clients, who transact with us as well on the investment banking side.

We were there for our corporate clients to going on through the primary markets throughout the difficult year, we helped over five for the corporate clients raise the debt.

Debt and equity and the capital markets.

And last but not least and important set.

Second for US is of all of the family office clients and.

Clearly the ones with the most sophisticated and complex needs.

As you know, which juice and integrated call for model.

In order to service, the better and ensuring that they would get the broad range of capabilities across wealth management and the investment bank as one UBS and and working as one bank for all of applies we grew our revenues here by 29%.

So quite a quite a success from the commercial fronts and seeing first signs of.

The the the move towards you know ensuring capabilities and the investment bank and the asset manager and the wealth manager of life serves our clients is one and <unk>.

And turning to the next slide and specifically.

Specifically on sustainable finance.

It's clearly an area of which we have for all of which we have been focusing on for years.

The 'twenty 'twenty and different was no exception and.

And we became the first major global financial institution to of recommend sustainable and fastest over traditional investments and.

And that mandate and has attracted 7 billion of inflows over the year and asset management, we rollout climates, and where strategies across additional asset classes and if that's the baskets and the strategies increased nearly fivefold 215 billion last year.

<unk> two of sustainability focused assets and.

And now more than doubling to nearly $100 billion.

But you can't just go out there and and recommended that the was the right thing to do is if you as a company.

If you're not there. So it's also reported what achievement UBS itself does on the on the sustainability side and and and all we are recognized.

And in that area as well and therefore, we're proud that we are on the Cdp's climate a list.

And Oh of companies don't lead the way against climate change and we've been the global industry leader and the Dow Jones sustainability index for six years running and I were rated double a by M. A C I <unk>.

And so you've seen we were a kind of a.

Our early part of two of sustainability and what we do ourselves, but also what we recommend to our clients and.

And we see that this is becoming more and more mainstream and our clients of truly interested in it and I won't try and good returns and do good investments.

And the investments for the for the good and and through this we can truly help them.

On their journey.

And so where does this position us I'm now on slide six.

Yeah.

I believe the future financing belongs to firms that have scale, where it matters.

And leverage that scale for all of our clients and our leverage and scale also for sale or for share holders of traffic.

And that's basically what you see here you see here those areas that you know that we really are our top player and whether it's on the wealth management side and now with more than three trillion.

Invested assets of clients really shown of trust and this on the asset management side close to one one trillion and our invested assets also showing that we're doing the right thing there and.

And we're the largest bank in Switzerland.

We're the largest wealth manager in the Asia Pacific and.

And if that's from bank of a top five and equities for top three and the FX trading and we're having strong momentum on both sides.

Shows good doctors use of cash in there as well and that's the good basis to build on the positions as well and the competitive landscape where winner takes most if not all are and and and we know that scale benefits and shoot and yet also go towards the clients and the shareholders and that's what we're certainly focusing on.

Which gets me to how we have done versus our targets in 'twenty and 'twenty and that's the nice summary, right here on slide seven.

It's actually the demonstration of our scale of Cros.

And then the page speaks for the breadth and of our business and the that the strength of our of our.

For a business at all of our client franchise.

Revenue is up 12% leading to an earnings per share of $1.79.

Return on CET, one capital of 17, 6%.

Our success was broad based.

And really and you know across all business lines, and all geographies and you see as the garden business is comprised of the comprised of wealth and asset management recording double digit profit growth there as well right.

Be achieved almost a 20% return on equity.

Super performance right, there, originally and profits and Asia Pacific and the Americas grew by over $1 billion for the year.

Yeah.

The 1 billion more profit and Asia and in the Americas.

And our Swiss personal and corporate bank, which is most directly affected by the crisis did well true.

We're on a return well above cost of capital still even in and in the difficult our economy and managing through the.

And the pandemic supporting as the knees, and and and and mid course and of course and and and the households.

And doing really doing that really well and.

It's.

It's especially.

And what we can do is the rollout and we play here in Switzerland, and standing by the Swiss corporate.

The sector of providing the liquidity and support.

And of the economies throughout this crisis.

And all of that we have been able to do while staying disciplined on cost and delivering on the operating leverage of the expenses were up 4% I'll give you that and but if you look into it and and the Christmas show you and that is really driven by a foreign of change as well as variable comp the.

And that's the change on the increased by 12%. So is there and you see very strong.

And the positive jaws and improving our operating leverage.

Clearly if you have a good year you generate a lot of the capital contributing to a stronger capital ratios the continued to be strong.

And that's after offering attractive returns to the shareholders and.

We delivered on our two for $6 million of dividend for 2019 and bought back three and the 50 million francs of shares already and the year recruit and another one for $3 billion for 'twenty and 'twenty dividend.

And we set aside 2 billion for share buybacks.

And two.

Turning to slide eight then and if you if you don't ever of churn on CET, one capital of 18% closer to 80%.

Positive operating leverage and.

It basically shows you our true potential and.

And as we focus on our clients and as we care for society support our employees I am also convinced that we kind of chief leading shareholder returns.

And so what you see here.

And and the sink also going forward and you know, we can achieve good and attractive leaving and shareholder returns.

But what we're doing here is it's really mobilize the entirety of UBS team to unlock all of a full potential.

I'm asking the questions like how can we grow as capital and the for it and in a capital and cost efficient manner. How can we think for it or how can we become fitter and how can we ex faster and so we're thinking about ways to make UBS, even better bank for our clients for our employees and for our shareholders.

And that actually brings me to our two my first impressions.

And I know you're involved with.

And expecting DS and and and you know I can also tell you that you will not get a full strategic updates two day and but I wanted to take you a long and in my first impressions you know now.

And some five months with the with UBS.

And and and gift, giving you you know some of the things that I see that really impressed me and I suppose some of the opportunity you see going forward too and look or tomorrow.

So clearly when I joined before I joined I.

UBS had a superb reputation.

For a strong and stable of French lies for its premium brands and Symbolising quality.

And if you know no after of the and I haven't been with the with the company five months.

And having spoke to many clients many employees investors and stakeholders and.

I can only say it or is it much more of the practice of me and that's and you here you see a couple of these areas. So impressed by the quality of our thought leadership and.

Well the leading equity research for example, the C. L. A CIO of house you are the insights that we offer on the most relevant topics such as sustainability, how we use the switch fires the nuc.

And then guide our clients through uncertain times and.

And I'm impressed by the breadth of of our capability set and allow us to support our clients no matter their return objectives or risk appetite.

And I'm impressed by the strength of the client franchise and with the relationships that were often forced over many many years.

But.

Behind all of this.

And is what really show up on the true value of UBS and that's our people.

Now and then the strong reputation of the room at UBS I I would say, we fully live up to it.

If there's one thing.

And that's where you're gonna affirming of you recognize forces.

For global wealth manager and it's <unk>.

Absolutely unique in terms of its global scale and reach the supported by a world class investment bank strongly of asset management capabilities, leading Universal Bank and switch.

So that's where we are switches of unique and that's where we bring and clarify and such.

And that's where our biggest growth opportunities lie as well.

Clearly you know if you look back of the last year.

And joining the bank and I was also impressed by the strength of the balance sheet, the the risk management rigor.

And the operational resilience and we have shown no misses the crisis with lots of.

Activities coming through our Orange and our execution engine.

And then she can say and see as well of disability and the prescription of the for revenues and the capital generation.

And but and there was always the bus right. There's always the bet and and you have to look for it and the passage of the past. It gives you a position, but there's no guarantee for the future.

And that's why you know we'd have to look at the future and get a sense for what's coming out of <unk>.

And there's a couple of things that that are coming out and it's the first thing is that you know it's clear that this pandemic has accelerated the clients' digital expectations and.

And the need for technology assessments and.

And and.

I think that need has been accelerated by at least three if not for five years.

And that requires far greater and faster and by financial firms and.

And dose and have the scale will benefit from it the most.

The only thing that's still out there and that will not go away is the persistent low and negative rate environment.

We know it's a challenge for banks and but there also are opportunities for investment for them. So it's for us.

This has two sites and so on on on the banking side on the end of the eyesight clarity. It is of it as the point through a record with but I guess your opportunities also of where we can actually advised clients are to invest in the and other means cents and the posting of the money, but that's.

So it's also an opportunity.

And.

We know that you know the the 80 trillion dollars of negative yielding depth of the pension funds are.

Looking for its funds and I sort of location.

And and compelling investment opportunities, they're looking for those.

Yeah.

The other trend is the trend of climate change a couple of 26 estimates of private finance, including pension fence will provide 3.5 trillion needed annually for a fast foods.

We can certainly play a role there and we can play a leading role there we can play and advising them all day or we can play and management role there and can play of structuring role there.

And so quite an area of opportunity.

For them.

But there's a lot of of some certainties level.

Continue to be there and you know increased competition from non traditional providers and as you know a complex geopolitical environment.

The continued regulatory change coming out is we have to stay ahead of the.

And each of these trends requires to change to adapt and for dose and get it right.

There's the question of opportunity and those changes as well.

And that leads me to the focus areas and and I know you know he's a pretty channel and.

The third of focus points as we are working on our strategy. So I'm on I'm not giving you the strategy here no I'm not I'm not giving you the focus points that we are discussing all the time here and and and and further developing our strategy going forward. Just these are the ones and.

And <unk>.

So these are the themes of the management team and I are aqua true concentrating on and for our strategy and and working on these for the next years.

We're not wasting time and.

We are we have launched quite some work streams and all of these directions to get a little of both of them up.

The input as well from our people who are very close of the client or very close to and the execution.

Of our activities, who know what clients want to know where are we kind of improve our client <unk>.

Service, who know where would you kind of improving the efficiency and.

So it's very important that this is not some kind of day.

No and kind of at the top door strategy that we developed and it's truly a combination of topped on in terms of direction and the areas, where we see the trends and bought them up and trims of how to fill these trends and.

And and how to make sure that were affected and the coping with each of these trends, we want and got it right and and that's why we need the details and and and when we're ready we will certainly be kind of update are updating you on our strategic plans and as we go.

But to take you through these three of these are focus areas first and foremost.

Yeah.

Being laser focused on supporting our clients building on the positive momentum that we have in 'twenty and 'twenty.

B of wage if you lose that yeah. So we'll have to keep delivering on on the trust of clients put on us and and our brand.

And I think UBS like many firms, but the here there's quite some upside opportunity. If we truly were all together if we truly work seamlessly together and seamlessly delivered of whole front of our clients.

And when we focus on the arrow needs and Dara and experience and we look at how to fulfill those needs and regardless of which this is deficient has the right solution that is where we can make the difference and we hear this from many clients and and we kind of proven that and that's what we will be we were working on and on.

Yes.

The.

The number one priority for US is you know how can we be one UBS.

Now of UBS also has a strong culture.

But we also need to be faulty sculpture and to be more flexible to be more agile and <unk> and that will first benefit our clients.

But it will also help us to respond to.

The two changed faster as well in order to be more flexible and agile I think for after all grit and and.

And in the more simple for them and we have to be a little bit more pragmatic.

Programmatic take decisions faster and will need to empower people and make them more accountable as well.

And then on the efficiency side. Its clear you know the self funding and the vessels for growth has become a necessity for any bank to the successful today.

Yeah.

For that well have to operate even more efficiently going forward that means driving operating leverage and making optimal use of our skill being relentless when it comes to the discipline around costs well.

And well have to be critical of what we invest and.

And we'll have to systemically crowd out of the investments that are not delivering and audit are just not good enough or just not strategic and all so.

That's where I think we can further improve I'm keen on building on that our etch and sustainable finance, it's the strength is the super opportunity.

It's something we firmly believe and across the whole for them. So I think that's our that's what we have to work on.

And clearly technology.

And I'll, let it places the central role here at UBS, and and I see some real good practices and that.

And in the technology area itself, but the ultra and in the client's technology for example in hours and that's from Bank clearly of Trump are the front of some of these department there and.

And.

But we have to.

And I think we're able to take offense, if the consistent investments that we made to date and.

And well have to meet these benefits and we should and has to be a winner on the digital.

The corporate and the only way to do that is if we turn technology from and the neighborhood or something that was at the end of the decision making process to making technology differentiator, which is at the beginning of the decision making process and at the beginning of how we improve all of our services to our clients not lastly, as you may know of a strong believer of.

On purpose led organization. So the first thing I picked up here literally and my first week is okay, guys, where are we on purpose, whereas our true DNA and.

Why do we come to the to work and what is behind the.

And how we do things here and why do we do the things we do here and it's truly important to get that sense and to get the and it's a big project that we're working on and I'm sure. Once we get it it will really guidance and give us direction of the reputation for the future.

True now.

And if we get these things right and convinced we can consistently the there for all of them, leading shareholder returns and not too close and.

I'd like to since this is also of the end of the year, I guess and and and not.

Not the easiest of years I'd like to thank everybody of UBS for their dedication and.

And work over the past 12 months and I know some of them and difficult personal circumstances, and our employees went out of their way to serve our clients and support each other.

The support there.

Communities, while managing the stroke risk liquidity capital and are to maintain our financial strength.

'twenty 'twenty, one is already shaping up and and this is already shaping up to become quite of an eventful year and.

And with what we see across the globe and.

But I'm convinced that also this year, we can positively differentiate ourselves and.

With me and with this and let me hand over to Kurt to take you through some more details before we get to Q&A. Thank you.

Thank you Ralph and and good morning, everyone. I would also like the to join Ralph's and extending my hope that you and and your families are healthy and coping well with the current challenges and we're all facing.

The net profit for the full year was $6 6 billion, which translates into a 17, 6% return on and see tier one capital and nearly a 13% return on tangible equity.

P. B T of 8.2 billion was up 47% driven by 10 percentage points of operating leverage before credit loss expenses.

And this improved our cost to income ratio in the 73%.

Three out of our for regions were up year on year.

For the Americas, delivering the largest contribution of group PBT.

Turning to expenses.

As we said before under on operating income growth scenario, we aim to manage to flat costs, notably excluding variable compensation and key onetime items to drive positive operating leverage and as Ralph referenced and when you can see here on this why the.

This is what we indeed did deliver on 'twenty and 'twenty with year over year operating expenses, excluding compensation and FX flat.

And also as we funded over $1 billion and investments with savings during the year.

Now with the events over the last year of limiting travel and this gave us a natural offsetting factors for increased expenses and investments that were also directly related to COVID-19.

Examples include the one week of additional salary and we granted to our less senior employees.

Thank you from us in October or suspending staff reduction was during the pandemic, which also means we start 2021 with the higher run rate than we originally planned.

Turning to the quarter PBT and net profit both more than doubled year on year.

P. T reached $2 1 billion with the 16% increase and revenues and a slight reduction and cost driving a 13 percentage point reduction to our cost to income ratio to 74%.

With net profit of one 7 billion are returned on see tier one capital was 17, 5%.

Even after we added <unk> 4 billion or more than the 10% to our capital base over the last 12 months.

Moving to our businesses.

And for the full year global wealth management reported pretax profit growth in every region and.

And the 20% increase globally.

The Americas and APAC, both reached new highs with APAC above 1 billion for the first time.

We've been diligently executing on the plans the Tom and equal set out a year ago and this is an important driver of these results.

And for Q PBT was up 22% year on year, partly on higher invested assets. The past the three trillion mark for the first time as well as transaction activity and loan growth.

Expenses were down 1% and.

Against 3% higher revenues, leading to a three percentage point cost to income ratio of improvement.

We had another quarter of high net new loan volume and 8 billion with the largest contribution from the Americas and also good flows and APAC and EMEA.

For the full year net new loans for 26 billion.

System with our strategic focus on this growth level.

The quality of the our loan portfolio remains high and we have achieved the substantial loan growth without increase the risk.

On a portfolio of level.

We continue to gain momentum with our one UBS initiatives, our separately managed accounts initiative and the U S drove 26 billion of inflows in the asset management in the quarter and over 62 billion since the inception at the end of 2019.

And G F O income of course G Wm and the IV was up 25% as you heard from Ralph.

Recurring fees grew 5% driven by higher average invested assets.

Was partly offset by lower margin, mostly as a result of flow into funds and mandates with lower fees are true.

And that we've highlighted in prior quarters.

Sequentially recurring revenues were also up 5% supported by growth and invested assets and 13 billion and net new mandates.

And market performance was one of the drivers of the double digit growth year on year and sequentially and invested assets.

Which includes around one five trillion of invested assets and accounts with direct investments and cash that do not generate additional recurring piece.

Hence, having some impact on our margin.

Yeah.

Net interest income was up 2% for Q, 19, and 5% quarter on quarter.

Sequentially higher lending net interest income offset lower deposit net interest income.

On the lending side, and we get higher volumes and margins improved despite the increase in deposit volumes. The positive income decrease on lower margins, mostly due to lower U S. Dollar interest rates for the quarter, we expect to offset for the first quarter, we expect to offset the pressure from lower interest rates.

The continued positive one the net interest income and anticipate around $1 billion of NII.

Transaction based income would've been up 9%, excluding the 75 million fee related to a shift of business. The P&C page of GW on the year ago.

This is our best for Qs since 2014.

Reflecting continued high levels of client activity, mainly in the final two months as clients remained on the sidelines and October ahead of the U S election.

Looking ahead for <unk> 'twenty, one while we can expect normal seasonality sequentially. The year on year comparison will be impacted by the unusually high trading volumes.

And <unk> 20.

Coming into 'twenty and 'twenty comedy all reposition G. W wanted to get closer to our clients and bringing them more tailored salute services and solutions as well as more of UBS has full capabilities. This focus is clear and the gws full year results reported profit.

With the for tax rose to $4 1 billion up 20% year on year with profitability growth across all regions.

The double digit PBT increases in Switzerland, and EMEA and record results and America.

Yeah.

P. B T for P&C increased by 4% to 318 million francs operating income was up 3% mainly reflects the higher transaction based income as for <unk> 19, and included a 73 million fee paid to GW and related to a shift of business.

Yeah.

And that I also referred to and G. W. M.

Excluding the fee transaction based income would've been down $32 million on $40 million lower income from credit card and <unk>.

Foreign exchange transactions and as a result of reduced travel and leisure spending abroad by clients due to COVID-19.

And I I came down on lower deposit revenues, mostly related to U S dollar rate headwinds on our corporate and institutional clients, but also reflecting the continued drag from the negative Swiss franc and your range ex.

Excluding the shift of business early in 2020 loan NII was slightly up as volume increases offset margin contraction from increasing competition.

Net new business loan volume and the personal banking was four 8% for the quarter and a record six 9% for full year of 'twenty 'twenty.

As part of our continued focus to just digitize, our Swiss Universal Bank, and recognizing and accelerated preferences of our clients to access our services through digital channels, we announced that we would close 40 for smaller branches and first quarter 'twenty one after having already closed around 30.

Branches and 'twenty and 'twenty.

We will ensure that our clients remain well served with continued enhancements and broader access to all the leading digital channels and other improvements to our remote services.

And Switzerland largest universal bank, we prioritize supporting the Swiss economy and its people throughout 2020.

Apart from our Swift and effective deployment of the government backed loan program. We were active in deploying our balance sheet and providing advice to help them through these challenging times with 6 billion and net new loans to our corporate and personal clients.

We have contributed the relief through donations increase employee volunteering, while partnering with organizations that provide counseling health support and education, and Switzerland and of course, the communities of which we operate.

Asset management had another exceptional quarter capping off.

A successful year for Q P. B T more than doubled to $401 million on 40% higher operating income in the flat costs for.

Full year PBT was up 66% to $884 million, excluding the farm center gain and <unk> 20 of 571 million.

For Q performance fees increased by over 150 million to $255 million, mainly driven by increases and our hedge fund businesses. As a result of strong investment performance and of constructive market environment and annual performance the recognition for certain products. This was the highest.

What we've seen and over a decade.

Next quarter's performance fees are likely to be more in line with the levels that we've seen and prior first quarters.

Net management fees were up 14% as we benefited from the higher market levels and continued net new run rate momentum, reflecting both the strong volume and quality of our net new money flows.

We had inflows of 38 billion, excluding money markets and invested assets passed the one trillion Mark and November and the first time.

We're benefiting from our consistent investments and strategic execution, and our asset management business, we're driving growth with new ideas and best and content with recognition for our success and performance from various surveys, notably in APAC and the sustainability space clients are also record.

And ICD and our differentiated capabilities of the innovation and we see it and the net new money inflows of nearly 80 billion during 2020 or not are of 9% growth rate with positive contributions from all channels and regions.

The IV delivered its best for Q P. B T and almost a decade full year of PBT was $2 5 billion up over 200% and return on attributed equity was nearly 20%.

For the quarter global markets revenue increased by 21% derivatives and solutions was up 40% driven by equity derivatives and credit.

The execution and platform improved 25% with higher client activities and cash equities, particularly in the Americas and APAC. We also believe we have once again gained market share and electronic trading and the effects.

<unk>.

Global banking was up 33% with the significant increase in equity capital markets and advisory ECM was the main driver.

The increase of IPO and follow on issuance and the U S APAC and EMEA within advisory or M and I M&A revenue rose outperforming the seed pool and all regions.

The ib's cost to income ratio improved to 71% as income grew by 25% and operating expenses decreased by 13% ex.

Expenses and the prior year quarter included over 200 million charges from restructuring and the goodwill impairment. Excluding these operating expenses would have been flat.

Throughout 'twenty and 'twenty, we maintain our focus on deploying capital with discipline and for appropriate returns and this is best illustrated by the comparisons for our peers.

Our credit losses for the quarter were $66 million with 33 million and stage, one and two of leases more than offset by 99 million and stage three impairments the <unk>.

Stage, one and two net releases resulted from a combination of book quality, including exposure of migrating to the stage III and book size of movements as well as model updates during the quarter.

Updated macroeconomic factors and formed a further release of expenses, however, as and the third quarter, we considered such of at least premature and applied post model adjustment to overlay and fully offset these effects.

During the quarter, we increased our reserve for buybacks by $500 million to $2 billion.

A year and our CET one capital ratio was 13, 8% and our see tier one leverage ratio was 3.85%, excluding 10 months of temporary exemption for site deposits and central banks.

I'll finish my remarks, with and update on capital returns.

For 'twenty and 'twenty, we will propose a dividend of 37 U S cents per share representing a total pool of one 3 billion. In addition, early in 'twenty and 'twenty, we completed 350 million francs of buybacks and as I just referenced we also established a further re.

<unk> for buyback of $2 billion out of earnings.

And aggregate this was $3 $7 billion.

We won't resume buybacks tomorrow and.

Completing the remaining 100 million francs under our current 2 billion Frank program.

We are establishing a new three year 4 billion Frank buyback program. Once this is in place we plan to repurchase up to 1 billion and chairs during the remainder of <unk>.

With that we'll open up the lines for questions.

We will now begin the question and answer session for analysts and investors.

He comes out of the class the tiers on the handsets and what else can of course and anyone who has a question on my press star two lung and this time the fed.

The question is from Andrew Coombs from Citi. Please go ahead.

Hi, Good morning, two questions. Please firstly on the from the points you made on strategy on slide 11, and I know one of your key focus points wrap on G was to pay for some primary customers in order to drive profitability and and you Youll the.

On the slide talks about growing the client franchise more broadly.

So perhaps you could comment on that do you see more opportunity if you're the guy down and pay the global family office routes.

Or is there more opportunity for you to extend my way to a broader mass affluent client base. For example, so that would be my question.

Question on the buyback.

On the 4 billion of buybacks and flex point once you've come out with a three year target I thought you keep the 'twenty 'twenty, one guidance and perhaps update the market on the three of target.

The French tax ruling in March I'm, just thinking of why you felt the need to come out and without buyback number today, and what sort of at the heart and thoughtful Billy and what that might change the time. Thank you.

Okay.

Thank you Andrew and.

I'll take the first one and the critical take the second to the question.

So and indeed, the the LNG, we're very much focused on on primary customers and the definition there was a customer of that basically so that buying as their primary bank to churn true.

And for their normal banking businesses.

Think UBS and all of the normal bank from that perspective, and so the way, we and I look at how to grow the client client franchises.

Clearly you know the the the wealth clients second the different second are of true importance to see what it is that we can do for them at scale, which basically means that in some countries. We can have a much broader product offering where you have.

A and onshore scale opportunity.

But and some of you won't have that and if it if we don't have the onshore scale opportunity, we would certainly want to be.

And important bank for those clients, but we would seek and.

The collaboration and joint ventures, like we're doing and Brazil for example, and in Japan, as well, where the underlying normal banking need if that is what you want and it may want to call. It the ASP.

Provided by the local skilled player, whereas the additional well aspect of of dealing with the clients could be and lending in order to support and investment portfolio could be and and and and advise on the investments.

And it could be on global investment opportunities.

And that that the that is for us to provide.

So that's the way, we think about us of where we can have the full slate of products like we do and Switzerland, We will suddenly offer at the goes we can reach our own global our own scale. If that is not the opportunity. We we we we won't and we will just focus on those things that we globally Camden and have scale and.

Kurt.

Thank you Ralph and good morning, Andrew just to clarify the the 4 billion program is a three year program, it's not a three year target.

Clearly, we have flexibility to repurchase.

More than that $4 billion over a three year period and and once we complete the repurchases under the 4 billion program. We can open a new three year program the requirement and Switzerland is that that all programs are by definition three years.

Also I would note as well there there is some some technical requirements as well that you cannot open up the program, where the potential repurchases would exceed the up to 10% of your share count that also on formed overall the the size of the 4 billion program that.

We're currently and the process of confirming.

Great. Thanks, you bet.

The next question is from cannot Hussain from J P. Morgan. Please go home.

Yes, Thanks for taking my question congratulation Ralph to a strong first start.

Hum.

And I have two questions. The first one is related to.

Corporate center and clearly you have stumps the.

All of confirmed of management change cleans. It opens up a position was and the corporate center and I, just wonder first of all of who or what kind of person or how would you expect the corporate center to be managed in the future.

Are you looking for somebody to run that or how how else will you manage it.

And in that context.

How do you think about the heavily centralized cost space around corporate center of Us and UBS.

And how it should be run in the future.

Going forward.

And the second point I'm interested around the businesses that might be not big enough that need to get bigger or my task to get exited can you talk a little bit about our business, specifically, where you think.

They could be potentially changes to be made in order to improve performance.

Thank you.

And thank you Ken are well on the corporate center and that's an interesting one and as.

It happens just to be Cold corporate center, and then it gets some kind of and attention that this is true.

To be regardless of overhang, which is far from over half because the corporate center that you referred to to see all function of the groups, who all function is literally where all of our execution activities reside where all of our I T activities reside and the clarity both are for the benefit of all of our business and for our clients now.

Having said that in the past and the sink and.

For the right reasons.

The UBS has been looking at how can we find the synergies managing these operational areas and these I T areas across rather than for a business division.

And then there was a shift to make it more bits of sufficient aligned which is something that we have been working on for the last two years.

And now the now the jury is a bit out and and I'm undecided as we speak in terms of Okay is this the moment that you go completely.

Horizontally, but it's basically starts with declines and then you do your front to back full optimization.

And.

And you get technology to work.

The and Digitization to work on each and every client process, both and improving the client experience as well as improving the the efficiency and.

Or do you continue to look for the cross on.

Operational activities and cross technology activities synergies and I think.

It will always be of matrix honestly, whether you go more and the result of one but then you need the vertical alignment on standards on how you manage this or you continue to be more horizontal and vertical but then you would need to ensure that there was an alignment of the way. We currently have it. So it's it's certainly subject to a two.

Who are the discussions that we currently have and its certainly determined by by and some of the tweaks, we may want to make and the strategy of having said that it is an area of of utmost importance and for further our opportunity for scale as well as a oh.

And improving the different trading client service and that we can deliver that.

And that is also why.

And the the salt at GAAP level and it is not replaced yet and because I I don't want to kind of.

The front run a decision around how we as a team want to take the next step and that and I'm very happy that the the Sabine takes the and the Swiss challenge on her Ursula on how to take the Swiss business for the next level of where a lot of transformation and and dispute.

She needs to happen as we know and and that gives us all the time to read and look as to how we want to organize so bear.

Bear with me a bit there but.

And I see benefits in both ways and so on the end of it will always be a bit of a matrix and.

And that is one and then and you ought to stay on the other side and the other question is about you know.

I have I already identified areas, where we can either of our scale up or where you're basically free we cant of Ah got.

Got to scale well.

Well.

I think we have to we have come to two and a.

The conclusion for example, and the Austrian and wealth management case and.

And so basically and this is also kind of ties into my answer to Andrew.

And the earlier, which is that and you have to look at.

What kind of skill can you accomplish a.

From an onshore perspective versus what is the scale that you can accomplish with services that you have that you can do cross border on the offshore.

And I think that's where are some of the optimization the cause.

And happened and that's certainly what we are looking for as well.

Thank you.

Thank you.

Yeah.

The next question is from Concha Y and got them from Royal Bank of Canada. Please go home.

Yeah. Thank you for taking my question and welcome to the last the last of course.

Just two questions. Please firstly on the cost control, which was obviously very impressive portfolio on 2020 and then.

And just one that what do you see and tons of flexibility for and.

The revenue is not quite as strong on might come down and 2020 in order to provide flexibility and when you look at the vibe of the expenses. He said 500 made and what kind of empathy ex ex the one off and no pause.

The general expenses down from five point of three to $4 8 billion and 2022. So just I'm trying to understand the of course flexibility and and I don't think of Stephanie is supposed to come down.

And then secondly on.

The comments you would provide the strategic update them into the top and Q2 and beyond just trying to understand and tons of your targets, let's focus on beyond should be think about most of it mobile and flexing of the targets.

And where they start with I'm, a sudden area and I applaud the area I'm going forward. Thank you very much.

Okay Oh.

I will take the second question and on a critical do the the first one.

And so on your second question and.

No.

It's just that.

This is the first time and I do results and it's a bit early for me to come up where the complete strategic update in terms of the direction focused points as well as our financial targets.

And we are working on this we do expect to be able to come up with they update and in the second quarter.

And and then around.

The strategic update them.

You should see that more of that suddenly we will give you a strategic update and but if you of many of the things that are still happening and the world I mean, the world is certainly not a stable place.

And and and see and and and.

And depending on how the economies really get through this pandemic, depending on how someone's geopolitical tensions broke out.

You should expect from us even after a strategic update a more agile way of working with our with our strategy and not so much as the and points that we see basically the zoom out perspective, but certainly the zoom in perspective as to what do we do and the next three months to six months.

The <unk> to 12 months in order to get to the ER to the and perspective. So that's a little bit are the just the style of our work that's what I think one needs to do in the world that is changing at accelerating speed.

And so that's sort of any what you could expect in terms of Oh actions being taken now if it comes to the financial targets that that come with the strategic update and.

And we will see and the second quarter, where we are and dose and how we can kind of from them from them up.

Without the Kurt yes.

Yes, Thank you Ralph and good morning, Okay and in terms of our overall cost management and and we've discussed this before and if you'd think about the flexibility that we have and in an environment, where we see challenges on the top line.

Actually the most flexibility and variable on F E Com and just since you saw variable and S. E com up and 2020 a year. When we saw good operating income growth is for.

We saw operating even come down you would I think accordingly, see reductions and both of those lines and.

In addition to that if you think about other areas for the flexibility and you saw this in 2019, when we had a more challenging environment, we announced the immediately at the beginning of the year that we would see $300 million of related costs come down during that the the first half of the year and clearly relates back to the pace of our investments and that's something that we would certainly scrutinize.

And quite closely some of the other areas you know frankly as the consequence of Covid are already at all time lows and that includes a T and E marketing spend on consulting spend right now all of those lines are alright, and exceptionally low and on the <unk>.

Other hand of course, if if we were to look at the the need for further flexibility we would consider layoffs naturally I commented and and my my speech that our we have purposely postpone layoffs and response to Covid.

But that is something that would have to be brought back into focus and clearly any layoffs would also come with.

And on additional expense of restructuring and expense that you would see in the period itself that we executed on the layoffs.

Okay. Thank you.

Yeah.

The next question is from Jeremy Siggi stomach from Cusco.

Thank you and good morning, and welcome to Ralph for me as well I spoke of.

Two questions. Please the first one is if you could come back to the topic of gross margins in the global wealth management business. I think you commented on and some of the lag effect of the new money coming in but if you could talk a bit more and particularly about the the Swiss business and also the Asian business, which seem to have had the most striking.

Declines in revenue margin and the quarter that would be very helpful.

My second question is and this is partly to inform the capital discussion and just if you could give us an update on litigation.

In terms of the timing when you expect any developments around the French tax case, but also the U S. R. M. B S case in terms of the Doj, but also any comments on civil cases, which has sort of become topical off to credit Suisse's news flow and if I could also just out of request linked.

For the discussion earlier on about the corporate center, if you could think about allocating the corporates and more fully to the divisions are I think it would be beneficial it's frustrating for us, but all of the divisional returns of much higher than the group return on and I don't think it can create clarity and your internal discussions as well and so you don't need to comment on that it's just a request but are the two.

Questions on the margins and the litigation please.

Well I could actually start with your first the common Jeremy because I do think that I mean, the relaunch that we do this.

But it's I think in the guidance you you have to kind of show the true.

True cost of operating.

So I I can relate to your suggestion there and.

And because if you want to have the full incentive for people to to see where the confer the decreased cost or increase further efficiency on a relative scale basis and I think it is important that the did you see those pictures management of Congress and see it. So I mean, it's not like it's not there and but.

As for any one of the things that we're collectively looking at and and it's also a request from the business in order to two of two two to see that the on the on the gross margins.

If it comes to it and the the Swiss business, that's current alluded to or suddenly being pressure on the NII and coming from the the the the replicating portfolio on on the U S dollars mm mm the we've seen that and the pass and the Swiss francs clarity and we do expect.

And two more quarters, maybe off of off of <unk>.

Russia, there from the Euro zone or perspective.

And what are we doing with that so the first thing is we have started to introduce our deposits.

Yes.

And we've also announced that as of mid year, we will start charging negative rates on deposits beyond 250000, and the Swiss business.

And then we are looking at introducing investment opportunities to our clients as alternatives to keeping deposits with us.

And of course it is also the other way on the Ida and I saw that they used to compensate for margins is very much also to look at your loan business and whether you can increase some of your marches there and.

And which is what we do see by the way, we see healthy margins coming through on the wealth management side across the.

And.

But you know the the the D to the the low if not negative rate environment.

And has this pressure on on marches on the NIM site, although all of them.

Wealth management side, most of that has already been kind of taken on overtime, a dollar in dollar and Swiss francs perspective.

Kurt if you could you help me maybe I can extend some from some comments of <unk>.

Jeremy on the wealth management gross margin and cause is of course, we saw during the quarter of there was the overall reduction of the margin.

And the the broader comments I made in my speech and first of all we do continue to see our sales overall into new mandates that come in at a lower margin relative to the back book.

I think and in addition to that within the limits of non mandate dynamics of the business on where we also see and the U S. For example, a reduction and trailer fees as we place clients into C class shares versus a class shares and responds to Reg.

True to be which we view as and the best interests of our clients now for the quarter itself because of the very significant growth and invested assets that were up almost 10%.

And my comment around the the dynamic whereby we have one five trillion and.

And investments from clients that do not attract additional recurring margin also had an impact overall on margin and this dynamic, particularly was evident in Asia Pacific You know first I would know we manage the business for P. B T. So so what is what is most important is on a full year year on year basis, our P. B Ts.

20%, we're very pleased with that now and Asia Pacific actually our pvt, almost doubled and was up 90% year on year. However at the same time on.

Our invested assets in that region were up 500 of up to 20.

24% to 560 billion and given the fact that we have the highest concentration and transaction revenue revenue and the only 13% mandate penetration. He saw this margin dynamic play out in the Asia Pacific Finally in terms of the Swiss business. One of the things you have to look at year on year, if that I referenced is that there was.

A 75 million fee that was paid to P&C. The G. W. M. A year ago and that also had an impact year on year on our overall transaction margin.

But absent that fee our transaction revenue was up 9% again, which is what is most important to us.

On the couple of force litigation the capital plan for litigation on.

And how.

And how we look at at all risk events. The Jeremy as it is naturally we we are we consider our overall deployment of capital and we think about the pace of deployment and return of capital to our shareholders and light of any kind of risk event that we have on the horizon and.

And so the announcement that we were going to repurchase up to 1 billion and you know clearly we're sitting on a quite significant excess buffers. There's the 2 billion of reserves that we built and if you look at the 80 basis points of 13.8 versus 13% that suggests another $2 4 billion of buffer.

We will naturally of course.

C and and observe the outcome of the the French case and and in March which is scheduled for March eight to March 23rd.

And that of course will inform them, how we think about the the pace and timing of buybacks beyond the the French case.

And just to conclude that on the RMB S case, but she referred to that one as well and it's just wanted to kind of clarify they're all league of position is different from from somewhat our colleagues and we've already settled most of our private cases, where they just sort of yum and yet our obs matters of what is left for us to Korea and matter that is true.

The month.

And and basically.

We have just started the discovery on that one and.

And we expect this to be.

The 22 23 event more than anything else.

Yeah.

That's really helpful. Thank you very much okay.

Yeah.

The next question comes from stuff on the spot on from Autonomous Research. Please go ahead.

Yes, good morning, gentlemen, and welcome again Ralph.

And I actually look on your one question. Please and it comes back to the point of that.

Many of our compensation.

On this.

500 million run rate increase year on year, but again, if you take all of the accelerated.

Amortization of the pros from it.

From a from an employees of perspective is probably hardly any queens and.

And the bonus award and.

The year, where you generated more than $3 billion increment of revenue underlying incremental revenue.

So those are obviously very very advantageous and <unk>.

Operational leverage and metrics.

Do you think that's sustainable.

Yes, basically the bolus for now for all intents and purposes six both for the upside and the downside on the revenue side.

Maybe you could comment a little bit the wrong for US also on the question of whether there has been let's say some political considerations and keeping with the bolus will lower than the poorest otherwise been and and.

And maybe you can already and where the there has been a change and the cash versus Earl and mix in your 2020 of war. Thank you very most of them.

[laughter], that's a lot of the other question stuff on them. So.

No.

So it created the bowl of this phone is not fixed and it is also the end of it.

It is really related to our performance. So the the change that we did and this.

This year.

We basically did a change from the fixed this year.

And and despite that we have been able to keep our.

Operational expenses before five of compensation.

The flat so that's that's that's really a good accomplishment.

So that's the although it's still a show of euro effect and that was in there.

And then we clearly have corrected T. The their variable compensation pool for that.

And but the way we accrue for her conversation is that we have.

Our way of looking at the the different performances of the different divisions. The each have their own guidance framework to accrue type of compensation.

And and if you take the full accrual and then we have kind of corrected that for whatever and has gone into fixed away from variable compensation. That's the way you have to look at it.

The year is of very good year.

From a revenue and the and the result perspective, and therefore, you see different of of compensation going up last year was sort.

And the mother Goodyear and you saw on it the pool was really down from 2018.

And and therefore, you know you see it going up again this year now and the way. We go about is clearly of the pay for performance we have to kind of we.

We are and a competitive business across the globe are we'll.

And we'll have to take into account and local market circumstances everywhere and.

Which we do in terms of sort of making sure that we are and attractive employer of from a compensation perspective.

But of set.

Also by like Curt in terms of giving recognition to for example, the of the pandemic. We have been awarding thank for your allowances to stuff that are left that are not eligible to to the specific for of our compensation schemes and or to reward them and us.

Specific to you as well and we've been really cautious and and and and restructuring of our.

And our company are leading to a two specific redundancies and and we're really looking at how can we ensure that people find new jobs within UBS is clearly you have to continue to trust for him and restructure but of course, she called stop to change vis vis the decline each having set that at the same time and we've been really mindful of the fact that.

This is not the the this that this is a time and which we have to ensure that people feel the havoc with the opportunity to fine tune of new positions within UBS.

I hope that helps.

Yes, thank you for most of them.

Yeah.

The next question is from Mark Malone Us to close the from Morgan Stanley. Please go ahead.

And thank you very much and good.

Good morning of couple of quick two questions. One thing about you're kind of thinking about the a couple of the returns and then the other one the kind of focus just on the on the investment bank. So of course, we talked about on the various aspects of your announcements.

And this quarter on global more interested about your thinking slightly longer term becomes of course, 'twenty and 'twenty brought the quite significant changes from the perspective of the lowering of the dividend and and.

On the higher share buyback.

The numbers now and two.

And from here one of them.

How do you think about share buybacks and that she sees the valuation because of course, you know when you look at the kind of return on investment yet.

And much more attractive to the buying back shares below book and then Bob focused on just.

And just your thoughts back and of course, good dividends growth trajectory, how do you see that makes the kind of shifting and.

The.

And 2020 and.

And do you think about your capital generation coming forward. So that's one and second really is.

Yeah about the investment bank because of course of 'twenty 'twenty revenue trajectory plus that you performed and the C.

Year on year across the businesses.

Very strong, but we have kind of two things and when we think about the sustainability of it.

Into 'twenty, one 'twenty two from one perspective, you'd actually on page 2020, with the restructured the business and so a part of the and parts of the revenue I think uptake and would have been structural about of course, the parts of it once and for cyclical on the strength of the market how should we think about it into let's just say the next the next day.

And this sustainability of that of that depending on your profile on.

And maybe even a PBT level.

Hum and some kind of.

And look at it and it's on target.

Okay.

[laughter] bucket of things and [laughter] and I'll take the second question of curriculum.

Chris will take the first one.

In terms of the investment bank no clarity and.

And and that's not only for us and social for the other and fashion. Thanks.

As most of them have already come out with their numbers, our 'twenty and 'twenty was of particular.

And constructive year of says we say here.

And and so although we are not and the and the warehousing business, we are and the flow business.

And if there was a lot of kind of this rotation and the investments then a lot of flow come through our system.

How do we have to make sure that we anticipate on the client needs and we execute those transactions. So that has led to a basically a good performance across almost all of our areas of the investment bank over the year and what are what is the the more prime brokerage business and the ECM LCM business.

A lot of it is the the cash.

Equities the equity derivatives are specifically also on the.

And and in the fourth quarter and across product lines as well so you've seen a basically the.

Investment banking and working across almost all of their activities now.

And if you are more a a flow house like we are and basically we generate a lot of those flow the flow and the back of our clients and rather than the warehousing house, we don't take as much risk of some of the others do they clearly are you where you will see some volatility with the market being.

And either a quiet or not and.

And and that will.

Give rise to some volatility on the revenue side. So how do you go about that and Matt.

The different ways first you make sure that you have those products and which you can actually generate the scale and sort of the extent you call them generate the skill.

And you have to approve the scale or you have to make the analysis one of the outages with the necessary for your for your clients. So for US, it's very important to stay top of and the equity business and the effects business. Because we know these are core franchises to all of our clients.

And we absolutely and fast N B's and execution platforms and that's what we actually see the company as well and there's a lot of our initiatives and round rock for Digitalized, the execution of platforms and that with what the through which we further decreased our our cost.

And get the scale opportunity, we know that this is very well and we have a good team also on the digital effort. There. So I do think that the that the.

That can help us now across all of the other areas. You know you know it is really depending on where the market is but I can tell you that you know we're going into the and.

And so the new year with a good pipeline on the.

On the on the prime brokerage business as well as on the on the advisory business and you've heard of smaller firms as well and so and so on one side short term, we think that the market activity will be a quite elevated and that's good and we see good pipelines and longer term.

It's all about you know how can we ensure that we stay top three to the top five in those products that are out of truly important and how can we be efficient and it doesn't.

And that's what we're actually looking at.

Okay.

Yes, Mark the just to address your question on capital returns and I guess as we think about our mix.

And the decision to increase the.

The the proportion of capital return with higher levels of the buybacks and he certainly consider our current valuation as of as you have highlighted naturally when we're trading below one times book, It's a it's a very attractive time for us to buyback our shares but it's not just from what we don't just look at how we're trading versus book value and we also consider.

Of our what we think the the fair value of our of the firm is and and we referenced on our three year plan and if we believe that our three year plan suggests that we should be trading above what our current valuation is it also informs and for us and it's a it's a good time to repurchase shares but away from his valuation consideration of.

So we like the fact that it gives us more flexibility we can return capital when we have it we don't have to wait a year for AGM to approve and for us to payback of the cash dividend and.

It also gives us a better ability to manage our stress and how it impacts stretch versus a cash dividend and then finally it reduces overall of the the capital that we hold once as we accrue our cash dividend and go throughout the year and therefore, the difference between tangible equity and see tier one capital and.

In terms of our dividend overall, how do we think about dividend growth of our intention to be progressive and for us of progressive could mean, a half of center of center of share of and that's something that we'll look at is as we go through each year of of what the the right level of cash dividend is but and as I said with the intention to be progressive problem.

Minimally progressive because we do want to optimize buybacks at this point.

Great. Thank you very much.

The next question is from Tien Tsin Huang from solicitation of I'll just go ahead.

Hi, good morning, and a warm welcome from me to the house so.

So one of my two questions first of all of that I'd like to post. The father. Please on the Central Pennsylvania and case, you of ER visits and the official buyback program and it seems to be the case of Youre, losing too.

And maybe differences in timing on the buybacks depending on the outcome.

Lots of change and the quantum of and I'm just.

Just wondering if you didn't have the worst case outcome.

And the one of four and a half billion euros would that look.

The change took it the quantum on for your buybacks and specific to bidding for the sphere.

And then maybe type of all of them for that would the process look like going forward and if he didn't lose that appeal all of the.

For the.

Stages on the place where you can appeal of the appeal and I don't know how on them.

Would that take and.

And then and then secondly.

And you've been noted for you on the success in bringing digital banking on on G.

But you know looking for wealth management arguably people have this perception, maybe that's the digital banking or let's say of digital offering and what management and clients. So it hasn't really taken.

<unk> taken most of the minimum wage should be looking.

And looking to UBS, and maybe wealth management and general.

Do you see specific opportunities to improve the digital offering for for wealth management clients.

I appreciate your thoughts anything.

And.

[noise] points on the.

In terms of our buyback program.

Okay.

Yeah.

Ladies and gentlemen, thanks for all the lines of the context of a continuous okay. Thank you.

For sure.

Cause disruptions on the line.

And what happens.

The.

The reason for that.

Are you kind of.

Yeah.

Yeah.

Yeah.

And I can and Okay can you hear me.

We can hear you I can hear you, okay, I'm, not sure where where we dropped off but as I mentioned.

Naturally a worst case outcome, which is something that as you as you would expect we certainly model and we look at.

That of course.

For them or our buyback capacity, just given how it would impact our overall CET one ratio along with other factors.

Finally in terms of of the French process after.

After the Appeals court there is one more level of appeal that we can make to essentially the equivalent of the Supreme Court and so we would look at the outcome of the French case naturally we would consider what that informs and terms of probability of of of potential outflow on the way we would account for it accordingly, and we would also take into.

Consideration, what we would view as of any opportunity for us to appeal and how strong that case would be.

Okay.

And yes so.

Picking up of it and so and.

Maybe also on cap of distribution clearly you know, we generate a lot of capital and what you do as a firm and its okay, where can we deploy the capital and a.

And with the with the right and mature and how can we build our franchise. So that's why you see some of the lending coming in and that's where we will allow the wealth management and and the B and C business too to use from capital clarity.

But as our scripts that we will have to be kind of conservative around how we manage our CET one.

And then clearly we generate a lot of excess capital, which we won't overtime to dispute and then this fall and coming back to the question Andrew on the on digital and where do I see the biggest opportunity for digital and it's actually in three areas.

And I put them on one of the at least three hours I mean, the the opportunity for digital is the almost everywhere.

And in my view, but the three areas and that we're are.

We're already looking at and where we can schroeder and more of you accelerate strategically, but also tactically and is in the investment bank as of Sept.

We have quite some initiatives there in order to for the Digitalized and some of these execution platforms of some of the services that we go through and those products and those services that we know really well and the second one is clarity and the Swiss bank and where the demand for perfect and and really good.

Different shading digital services is increasing rapidly and and we really have to step up on dose and.

So that's where we need to do it as well and then also on the wealth manager and and and you may find it strange, but I do think that if we do a very good job at a and analyzing the data and and applying artificial intelligence and.

And and.

Understanding our clients better and and understanding of the timing of our clients better and predicting their needs better.

Oh I I am convinced we can further support our financial advisors all of our client advisors to be much more supportive and and effective with our clients or would that be more productive as well while at the same time really investing and all of those corp.

Processes that support them and make them digital but goes.

They still and it was quite some time and a lot of processing all of the business I do and I think so to support all of the financials on the client advisors and make them.

Everything digital that you can.

And make digital but it's also generated and declined and intelligence to really support and to be.

To be a personal to be to be there. It's a ride moments to of half of bespoke product offering and bespoke pricing I think those of the components, but I firmly believe and we can improve and and where we can support the the wealth manager.

Yeah.

That's great and thank you very much for that.

The next question is from Darden, Yamaha and from Goldman Sachs. Please go ahead.

Yeah, good morning from my side as well.

And welcome relative to your first results call of UBS.

I have two questions left the.

First one is on page 16.

Of your presentation.

And what I'd like to ask you is the following so.

The loan volume went up by 12 billion of quarter on quarter.

So looking for billion year on year. So that's an 18% increase you say in the commentary here that the margins have expanded as well.

Do we tally this 18% increase in volumes.

Expanding margins and only a 2% increase and net interest income.

If the explanation really is the lower deposit revenues and the U S that most of in one month or a contraction.

Of the deposit the margin in the U S. And then just the sub question given the the curve and the U S and is both deepening and rising.

What's the how should we think of all of these for.

The coming period.

That's question one and then the question two on page 22.

The pulp price exhibit.

What does that show.

Thank you very much.

Could you repeat the second question. Please.

Page 22.

Right. The exhibit can you just explain what this actually shows.

I don't I don't understand where the components here and here are in the and the footnote. It says reported PBT divided by average contributing the equity but reported EBIT of one.

So you've taken the divisional Pvp of results of your U S peers.

Or what have you done here. Thank you.

What's the net.

And thanks to convey and we'd have to oil price hike I don't understand it. Thank you.

Yeah, and I I good morning.

So maybe just in terms of your first question. So I think if you look at our deposit volumes.

348 billion and deposits. If you think about the overall U S dollar interest rate contraction year on year, and how that translates into margin.

And that is 130 basis point contraction in margin.

So when you apply that to this level of volume you can see how there is very substantial net interest income headwinds across our U S dollar book.

No actually the volume is helpful and so the fact that we did increase volume that's partially offset the contraction, but that is a massive headwind.

Now offsetting that.

And as you rightly point out we have the the the increase overall in lending volume 34 billion year on year of your math is correct 12 billion quarter on quarter up 19, and 6% and addition to that we did have some margin improvement. So overall of the fact that we were able to offset that.

So there is a lower volume book and with less of a volume increase.

I think and some to me is the strong statement about the performance of our net interest income and what we delivered over and over the year and what we expect to continue to deliver over the quarters going forward and.

And I was specifically our loan net interest income on a year on year basis is up 152 million and up $52 million on a quarter on quarter basis. So again, I think quite significant momentum from Orlando.

And Sharon you yet the margin compression on the full book on your balance sheet basically and dollars.

Whereas you have your margin improvement on you and your production and and and that's and.

And those are the parameters that you have to work with so actually we think it's quite an accomplishment. It's what the team has done here, so maybe sort of slightly from the concert and can I. Just had the question here, so plus 18% year on year growth in loans and I think youre doing and what you said you would go here and then a bit more when you look forward do you.

Inc. UBS can sustain the space of growth here.

Yeah, I mean, our intention is to continue to very much focus on growth and our loan book right now as we look over the next couple of years. We just completed our planning process, we actually do see that GW and we believe that the plans are in place the capabilities are in place all of the investments and the actions that we've taken over.

The next couple of years day, the relationship and the joint venture with the IV around structured lending and we think we're well set up to increase and for US. If you look at our total loan penetration and you compare US for example to the other Swiss franc, our to our U S peers, you'll see that our long penetration overall is well below our peer.

And that also and it gives us good conviction that we can continue to take wallet share.

Yeah.

If we turn to slide 22, maybe and overall, we're trying to show is consistent with our model. So we have a model where we hold.

Relatively less inventory than our peers, we take less market risk as evidenced by the overall bar and the business and we're just relating that to revenue to show that or capital productivity and our productivity on risks that we deploy.

And is relative.

Relative to our peers is that the is that the upper end of overall and and that helps to lead to very good return on attributed equity. So we're just really reinforcing and we're providing proof points that our overall investment banking model works, well and works, particularly well and markets where there's a.

A lot of volatility.

But can I, just ask and answer.

And I understand that but what I was asking what does this actually show you.

You have taken divisional results of of your peer group.

And you've kind of divided them by allocating the equity has reported and so this is a division of the comparable.

That's correct that's right we've taken a division of results of our peers, we've looked at the bar and reported the revenue that they've reported and also the attributed equity and we compare that on a like for like basis across our peers and and of course looking at our business. Thank.

Thank you very much.

The next question is from Glenn and I made from Barclay.

Uh huh.

Alright, Thank you and let's say welcome for.

And for myself too and so.

Two questions and.

The first one actually.

Just going back to the profitability and and obviously, a very strong set of results for 'twenty and 'twenty.

Especially given the very various headwinds and.

And just trying im just trying to understand the percentage of as you think about this going forwards.

And kind of looking at slide seven.

Opportunity well above the target.

Do you think the level achieved this year is sort of in 2020 is sustainable kind of going into 'twenty one.

And beyond.

And do you see it has been exceptional and and.

How do you think about that when you when you're thinking about the the target.

And the second question and I mean not channel.

I was going to ask on the on the loan growth, but actually maybe.

On a different one.

Given the last question, we just had.

On the <unk>, just curious Ralph on the sea when you've had the.

The system for the processes et cetera, and.

And just maybe a bit more detail and senses.

So on the infrastructure and on the I T.

And so you see on TBS and thank.

Thank you.

Okay. Thank you Robyn Hey, yes, so all of it's clearly twenty's funny and.

And if you of you know the market volatility of the rotation and the market the the credit at.

As for our trust AR and the investment Bank. It also has worked for us in terms of being a very solid very trustworthy and very knowledgeable advisor to many of the clients are through which I haven't and trusted more money with us and and and you see that all across so.

And as the 'twenty and 'twenty number in terms of growth and absolute level is this one that you come back on going forward.

And not in true.

But underlying we see a much stronger franchise across all regions across all business divisions, and I think that's what what what provides the foundation also for us the work.

And on some strategic for us or a photo of a strategic fine tuning and how we can best kind of and move forward and if that warrants of shorter.

Kind of update on the.

On the targets are on on slide seven and.

And we will certainly take those along let me give you an update there and the second quarter. So that's so that's why on then on the it side I think that clearly put quite some time and it.

And with the of the had if I T here and I've gone through and how we manage it.

We prioritize I T and how we.

Where are we on infrastructure et cetera, et cetera et cetera.

And I think the risk you know, we do a good job and if it comes to the AR and the ability to use the cloud how we move towards cloud.

Can we do on the public cloud and what can we do on the private clouds, what do we want and continue to do on on mainframes and all of that sort of is the story there.

And there's also their hours of improvements and areas, where we can really step up and be a be more efficient I.

And I think that will the the way we go about our technology going forward. If you. If you. If you look at the technology spend that we have it's not like we need a higher spend per se going forward.

Our if you look at the benches and.

I have a looking at the technology spend versus revenue, where we're right up there. So I think and that shows that we're not under spending in technology, but I do think that and we can kind of change the rhythm through which we take our investment decisions.

And on the more quarterly basis, rather than once a year, we allocate tax spend for the different divisions I think we have to optimize it across the different divisions will have to optimize the.

Lots of different programs.

And I am not of a big believer and long term programs.

Although you could have a long term program, but you have to really set a target of the milestones on the more short term basis to ensure that you're delivering that youre, making progress rather than the after quite some time finding out that you haven't been able to deliver because that leads to a two impairments and and and basically not the.

And so.

On the how we're doing and technology I think we're doing well and.

What are we spending and technology I think we're up there I don't think of us when we need to do more and how we go about allocating technology has been prioritized and technology spend and managing technology spend I think that's where the change will be the effectiveness of the spend.

Okay. Thank you.

The next question will come out on the part of arc on the Mega Danke. Please go ahead.

Yes. Good morning. Thank you for the questions I had two on Gws margin dynamics, sorry to come back of on the fee margin and I understand your point on the non fee, earning AUM.

But the half Q on Q margin erosion that with the check without the element of the AUM is growing faster than that is finding the themes or is it a fixed fee on the AUM the dumping.

Doesn't growth sorry.

And it gets diluted over the overall higher AUM base.

And he's trying to understand why the Q on Q margin pressures and from a mix standpoint, and how sustainable or when do we sort of extrapolate that for the.

The relative element and start to grow with rising markets and.

And then on the the NII from a you mentioned 52 million of higher revenues from the lending Q on Q could you break that out and some margin on the business I'm trying to understand how sustainable.

And 50 million would be on Monday.

And the sort of number we can start modeling it.

The loan the momentum of loan growth momentum stays out for the thank you.

Okay. Yeah. Thank you Adam for the question. So just very simply mathematically if we have three trillion and invested assets.

And within the three trillion if theres one five trillion.

That are where we have relationships with clients that are not a contract based and so therefore, they don't attract recurring fees are they attract recurrent fees only relative to like custody and some of the other services, we provide to them and so therefore, when we see an increase and markets.

And we see those.

Those assets appreciate we're not seeing a corresponding increase and recurring revenue. So therefore, the recurring revenue that that that we are receiving and where we do see and increase is a is being allocated over a larger invested asset base and mathematically that just have results and some arose.

And and margin so.

Straightforward.

In terms of the net interest income and and what you should expect to see going forward.

I mean, I'm not going to break down the details frankly of the other $52 million as I've said, that's reflective of the lending that we did leading and to the fourth quarter and addition to partially reflecting the addition of light billion of loans during the fourth quarter, along with some margin expansion.

Okay.

Okay, So and we should expect mechanical margin pressure, if we continue to see market carrying on AUM on a multi and I think what what I indicated is and I think what's most important is that we still expect to offset incremental quarter on quarter U S. Dollar interest rate pressure or net interest income on our deposit book.

Through our continued.

The increase in net interest income from our lending and as we look at Q1.

We would expect net interest income of <unk>.

Of around $1 billion.

Okay, and then when the fee side the carry on the fees and there's always going to be lower than the AUM at market and also took and Greg.

Yeah, I mean, that's the big.

And so given that we have a portion of our relationships that are transaction based all the way and don't incur recurring revenue when we see appreciation and that's kind of provide margin pressure, but also when we say actually valuations come off you would expect to see some recurring margin benefit, but its pretty meaningless, which is why we report are we per week we.

Focus on growth and operating income and P. B D. We think of it could be very misleading. If you start to get involved in and all of the different mathematical impacts and and dynamics are that they're going to go into margin overall.

Great very clear thank you.

The next question is from Nicholas <unk> from Kepler Cheuvreux. Please go home.

Yes. Good morning. Thank you for taking my question and ask two please the first one is on the transaction comes in the wealth management and that'd be wary of you outside of the very strong year and how much of that do you think of sustainable and more particularly on much of that due to the joint venture between the IV and GW win and the stick on.

The one would be on Asia, and there you of the PBT, which almost triple the and idea almost doubling the one fund in the months. So what should we expect from there two weeks from the same kind of trend or decrease and the PBT for next year and any outlook on the switch and we appreciate it. Thank you very much.

Yeah and in terms of a few diary of them overall.

And the clearly the.

If you if you look at what we can drive and control. It. It's the flows and the volume and you see of the very strong momentum in lending and you also see the strong momentum and net new mandates and you see our focus and transaction revenue and that's something that's kind of continue as we go into 'twenty and 'twenty one.

Away from that of course were also impacted just by by movements in and equity markets just given the significant leverage for recurring revenue now.

Now, the IV and and VW laminate and <unk>.

The cause of the one firm revenue overall that that was an important part of our 2020 of result, you saw and we highlighted the G. F O growth of up 25% make more broadly our one firm revenue was up 17%.

And clearly that is growing faster than overall operating income by a fair bet. So we would expect one of the growth drivers for us going forward and actually be the revenue that we generate across the firm and we would expect that the continue to grow faster than the GW of Wham only revenue.

Now in terms of on T V T and Asia Pacific.

We still expect if you think about the structural trends in Asia overall that Indians kind of be our growth region going forward and hence the reason of that we play such strategic emphasis on Asia and it is important for us to see growth in Asia.

And in order to see growth overall for for GW on and stuff. So, yes, and think that wild and it's gonna be cyclicality and we see that we see here is why when Asia does less well, we think the trend over the next five years its kind of be for strong growth out of Asia Pacific, particularly and wealth management and we expect to remain the leader over that period.

So if you if you look at you know from of wealth manager perspective, where is it that you want to be and need to be as the global wealth manager.

Here's where the growth is and where the pool will accrual of the fastest.

And and and the U S for the pool is right now and that's why it's also important for us to be there.

<unk> certainly the growth region.

The well this year be Ah Ah.

The same parameters of <unk>.

Last year, and I think on the Chi Wm perspective, why not because this is this is a combination of oh for demographic trends and the and a further kind of improvement and and the middle class economy with pushing up also some on the wealth of side and on the other side. We also had a tremendous <unk>.

From year of trend and see strong year on the investment bank.

And Asia and.

And yeah, you know that that may be a bit more volatile but.

And if there was one area as well where you know that the the one UBS truly comes across to our clients. It is agent channel and I think the port very well in order to make it work and then of certainly the success formula for for Asian clientele and theirs.

Quite some question of growth for Central and that's also why that's the specific work stream out of the 14th of work streams that kind of I mentioned the.

Growth in the Asia Pacific as the as a cushion of one for us.

Thank you.

And the question is from Jon Peace from Credit Suisse. Please the hopper.

Yes.

Yes. Thanks can I just ask a couple of clarifications. Please so firstly when you talk about leading shareholder returns on slide eight and <unk>.

Do you see yourself and the European banking peer group core and a global bank peer group.

And the do you intend to turn on the T. One.

Still remain.

And we met Rick rather than return on tangible equity.

And then the second question is.

And we expect to hear the results of the French.

French tax appeal the tsunami.

During the peak.

In light of few months and just technically is the idea that you would pose youll buyback on the Q1 pending that decision. Thank you.

Hey, John Yeah. So on the French case, we actually don't know as of Sept. You know it starts on the March eight.

The eight will last until March 24th of zinc.

And normal procedures that got moment of we get a date at which we will will hear the ordeal.

And so I can't really look into the future there as to what that period will be but we will know on the 24th so so that's why in terms of you know return on our own capital CET, one capital and that's the parameters that we currently have this is not the moments of change these things.

And and and and.

And going through our strategic updates and we're also looking at that and and where we see return on capital going out, but we are in Europe and a lot of our business is also on sort of Europe and.

And so.

And that is certainly kind of be battered on Europeans and and and.

And I have an ambition to be there with the owners.

Yeah.

Thank you.

Okay.

The next question is from Tom Pollock from Kb Toppling and please go ahead.

Okay.

Hi, guys a couple of questions for me please.

I was just wondering what your strategic and Clemson Saar and asset management and the presentation. You mentioned the benefits from scale for clients and M&A is clearly, becoming a big theme for payers and particularly in the U S, which do seem to embracing the scale, but it will say loves the strategic shifts so I'm, just wondering or curious it won't.

Staged the UBS needs a change of cop and Inorganically grow the business on.

And what conditions would need to be met the become more April the such amazing.

And then secondly, I know, we're on a month and for me yet, but I'm just wondering how clients are engaging and positioned well for cross region.

Actually in the context of the Reflation trade and can you also just remind us what at the B Riley impacts, we should be expecting with N C. T. One of the coming yet.

That's a handful of tall.

[laughter] and we thought were the first one.

On the asset management, but I'm going to generalize a little bit here.

And so clearly we are we start.

And we start.

Our exercise from a position of strength are and you can see that the results that we have this year and not only and PBT, but also on invested assets and also on the is that on the asset manager is very clear of that lot. Soon he is doing is it's truly very successful in.

And growing the franchise and making the right decisions around what new product and needs to be there and so you know.

And the sustainability call is certainly one that that that the came from there and the the the Chinese active strategies has been very successful our Ashland has been very successful there and with that you know, we and we have been really successful with the with our clients building.

<unk> to almost $1 one trillion. So a is that sufficient scale and and asset management business. One never knows dawsey asset measure of support and capabilities are what we need also for the wealth manager absolutely now and all of these cases, whether it is the asset manager or not we do see.

Room for further organic growth.

But clearly if there is a inorganic AR opportunity out there that could accelerate some of the off the growth or efficiencies that we want to accomplish and watch out for business.

And we will have and we will take a and look at it and.

But that is the order we are looking for organic growth of course, we feel that we have the right management, we have the right product we have the right alignment between the different divisions and the last year, we have proven that we can do it organically.

But if a opportunity presents itself.

And to accelerate some of that we may consider it.

And that's on one than the other questions maybe on many of you know two I think that was a multiyear.

Multifaceted question, but in terms of RW and we expect are around 10 billion of increase overall from methodology and regulatory changes and.

And you know away from that I won't comment on on what of what business increases for likely to stay.

But naturally I think as we've highlighted pretty consistently you can assume that we're going to continue to deploy capital to GW and to support its ongoing growth and lending.

Yeah.

Okay. Thank you and sorry.

Yeah.

One on the question on the.

But I sort of talked about in terms of the how clients are engaging and positioned well.

And the complex of the replacement rate.

For what.

And in terms of the EM complex Reflation point power plant for sort of thing.

And I don't really have that detail available from here.

I think so she spoke of the settlement. So we do a call and second research and you see that the clients are positive tourist market. So.

I think the or the percentage of 64% of positive to us and.

<unk>.

The eight out of the 10 of our clients are seeking active advice given all of the things that are going on and that's where we are super well placed with all of our network of financial advisers and clients of places so clearly the.

Yeah, it's easier and certainties that are and the market play to the strength of our franchise clients need advice and that's what we can provide them.

Okay. Thank you.

Okay.

The last question is from peers problems from HSBC. Please go ahead.

Yes, good morning, gentlemen.

Just maybe one final one for me on on credit losses, and we've obviously seen as you had previously guided to the drop offs in.

The credit loss expense second half over the first half.

Non of fund up for the consensus for full year 'twenty, one and the markets looking for about another housing of the.

Credit loss expense charge, so and just in the context of the plethora of Lockdowns were seeing particularly in Europe over the last month of so.

Is there anything and the trajectory of economic recovery or change trajectory and the.

All of the economic recovery, which makes me think that.

And that sort of assumption might be might be and correct them.

And on how you would be thinking about some of the model updates you may be putting through.

And the first quarter for credit losses, thanks very much.

Yeah, Pearce overall cle of $66 million driven by stage three for the quarter, where we had $99 million of impairments, partially offset by $33 million of stage, one and two releases now and now overall as the consequence of updating our the.

The the economic factors for our scenarios that actually informed a a further release, which we overlaid and we felt it was premature to actually release.

Additional reserves into the P&L. In addition to that we also rebalanced the the weightings on our baseline versus.

The adverse scenario for the 70 30 to 60 40 and that is because we do see the despite the optimism around the vaccine we do see a fair bit of uncertainty around how the recoveries are going to unfold and what the impact of the current lockdowns are going to be so we acknowledge that that then of course.

Creates of course.

Quite a bit of range of potential scenarios for 'twenty and 'twenty, one and how that might that impact. The overall credit loss expense. So still a fair degree of variability and uncertainty around that overall, we would expect in 'twenty and 'twenty, one and to see more expense on the impairment side and we went on the stage one and two side.

Yeah.

Okay, great. Thanks, very much for us.

Yeah.

Ladies and Jonathan on the webcast and Q&A session for analysts and investors is over you may disconnect. Your lines, we will shortly start the media Q&A session.

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