Q2 2021 UBS Group AG Earnings Press Conference (Q&A)

Good morning, and welcome its Marshall Atkins. Thank you all for joining us I'm. It's a good day at UBS and we're pleased with the strong set of results I'm joined this morning by our CEO, Ralph with where CEO, Rob Hammers and CFO.

We will answer your questions over the next 20 or 30 minutes. So let's go to our first question.

The first question is from Maryland, <unk> from Bloomberg News. Please go ahead.

Hi, Good morning, everyone I, just I've got 3 questions quickly. So from the analyst call I noticed you mentioned just sort of building capital and you mentioned the word strategic so I'm wondering what you are if you can elaborate on what strategic needs, there and where you would maybe consider buying.

For example in terms of digital companies.

With J P. Morgan just bought a digital bank in Brazil for example.

And then secondly, I was wondering if you could give any indications of what you're doing to make sure you don't necessarily Miss the boat on banking any crypto millionaires.

Given it's an asset that's hard to bank and also whether you might have any expectations or needs. In this in the next couple of months to add to the provisioning for the French case.

Yeah, Mark I'll start with the first 1.

Yes.

Well actually kind of simplify the question.

<unk>.

So our strategy go forward clearly our default strategy is to grow organically.

As you can see we do quite well this quarter has been tremendous and chosen to success.

If over growth.

On the back of clarity.

Ford if market circumstances, but absolutely also because of the relentless execution debt.

Show on delivering to our clients.

So that's certainly the depot so strategy.

And that as you know last quarter, we indicated that building debt the debt <unk>.

Ecosystem for investing we wanted to do around 5 different strategic imperatives English. The first 3 are truly about how can we.

How can we move from here, which is all around developing the ecosystem getting new clients getting your providers focus where do we want to grow.

In terms of regions and we have indicated that we expected wealth pools to grow the fastest in Asia as well as in the U S.

So our strategic growth and all of our resources, which would go there a while ensuring that our European franchise on our Swiss franchise also continued to do well.

And that we would look at how we can move technology from an enabled through a different shade or because we feel that also on our business.

The day roll that technology plays in terms of not just the stability of our assistance audio operational resilience of volume is having to go through.

But really in terms of decline experience.

On the technology is becoming increasingly important.

If that is the organic growth story, which is our default story. There you can also think that if there were.

Interesting.

Organic growth opportunities, how we would look at that so clearly it would.

It would have to be opportunities debt.

Improve our scale.

Or it would have to be opportunities that improve our capabilities.

In terms of product offering could also be capabilities on the <unk>.

On the more the technology side like Fintech ex U S. You were hinting at.

And from a ratio perspective, it would very much.

We would very much look at that.

<unk> scale and capabilities to support our businesses.

In the U S and in Asia.

So that's the that's the first 1 yes.

Net equipped 1 billion millionaires and billionaires honestly Marian.

How how our clients have generated there was.

Certainly.

1 of the factors that net debt that we look at.

Before we accept them as a client.

But once they are.

Millionaire, a billionaire and they need our services also to diversify into other assets.

Of course.

We feel that we are very well equipped to support.

Deb.

And this is what we do really well as you know unless you have seen this quarter as well.

So we would not shy away from servicing them as well so Kurt yes in terms of your third question Maryanne. Firstly of course, we feel we're adequately provisioned based on the results of the first instance court.

Naturally we will not be able to assess the implications.

On the appeal decision until we see the decisions and all the legal facts that are communicated related to the decision itself. So there is there is no way that we could we could project what the implications might be from an accounting standpoint.

Yeah.

Okay. Thank you both.

Yes.

The next question is from on Jim Miller from handsets at please go ahead.

Yes, good morning, I have got 3 questions.

The first question related to the U S money market and dose I think around 7 billion outflows you already mentioned at the analyst calls you mentioned the spec business tapering off.

Could you guide us through debt development and a bit more detail why why those outflows happened then where are where those assets are went after all.

Second question also a bit on a specific detail.

Why did we see only moderate loan growth in Asia, I think it's about 200 million compare say to the U S.

Traditionally the Asian clients, they are quite eager to to take up loans.

U K produced growth on purpose.

And smart cautious.

And then maybe the third question about the momentum you mentioned, there's quite a few times already.

If you look at our T. W. M.

Important whilst our the elevate program and disrespect to create this momentum that exists obviously now.

And how do you sustained its momentum going forward. Thank you.

Yes, let me take your first question Andre I make I did allude to the stack dynamics as contributing overall commodity market flows.

Now obviously that wasn't the only the only exclusive trend I would just note that we did see clients during the quarter look for enhanced yield on that.

That led to some movement out of money markets. In addition to that though specifically related to specs.

The dynamics are firstly as investors as facts are formed and investors actually leave their money in spec. So spacs in general the proceeds from the investments are held in money market.

And then as and when of course the debt. This fact moves to its second phase on Ipos you see those outflows.

And given the fact that we saw a significant.

The increase in spec activity in the first quarter and then as we saw those facts come to market of course that resulted in that dynamic in the second quarter. There was a much more muted overall spec levels of new Spacs formed out partly because of the regulatory scrutiny as youre aware.

I would just note that in the third quarter, we have started to see a little bit of pickup in spec activity overall.

And on your on your second question in terms of loan growth in the Asia Pacific.

Andre this is.

It's not a specific concern of our clients is also known as.

A specific policy on our site and the actual loan growth in the first quarter was really high in Asia Pacific was up $3.4 billion.

So.

I wouldn't read too much into it.

From that perspective.

Then on your last question and true.

This is the growth.

We have over the last.

I think 4 quarters.

Really focused on how do we bring the best of UBS to our wealth clients and how can we translate that into into growth.

And that's what you see coming coming through.

So.

It's a combination of how can we support our clients.

Lending or you see that's coming through.

Asia and.

In the U S. This quarter.

As well with gws.

GW on net.

New loans of 7 billion.

Of which over 5 billion actually in the in the U S and so so you see that debt growth is coming through on the lending side on the back of debt.

We see much more money coming in as well to manage.

Have worked on the different offerings there.

In order to support our clients to get a more professional offering we have launched then also and at that time is zero.

Zero fee separately managed accounts.

We have increased the options and the opportunities with <unk>.

I have 2.

First in private markets.

<unk> as we call it that as you know we've also really stepped up on our sustainability offer for our wealth clients. So really look net assurant is for our clients to invest in in order to support that growth plan that you mentioned Ah and also on the lending side in order to it's 2 to provide.

Our clients with liquidity where that was necessary.

Okay. Thank you.

The next question is from Holger Ali from some idea. Please go ahead.

Yes. Thank you for taking my questions I have 3.2 first on.

Ostrogoth, you'll see on total roughly $800 million.

And you stop at any time in Colombian debt. So what are the consequences.

Learnings out of this.

Was there any change we scanning in the prime business, that's raws anything per.

<unk> so.

So what I, what I've been on.

Earnings in the consequences on the articles the case.

Secondly on on a follow up on the M&A question from the calling from Blue book.

Yeah Andy.

On site you can give us for example, I suppose this will be bolt on acquisition as opposed to anything for example on other companies get always some indication about the maximum size too common vessels.

I'm thinking on <unk> is there anything you can tell us down.

1 is about the downtown.

On the virus, which is now splitting on the globe do you feel that that's might jeopardize the economic recovery, we see at the moment. Thank you.

Yes.

Thanks, Thanks for that to start with your third 1.

There is clear to you certainties around.

How quickly economies.

Develop on tobacco.

Off the locked on them.

Being lighter in regimes or having gone altogether and all of that is debt.

Correlated to 2% is infection nation.

The world and so.

So for US what we are looking at.

We're looking through it is kind of this suddenly there's this uncertainty around the spread of the Delta variant.

If you don't look at the underlying fractionation.

Programs are.

They are still up to speed and that's an important signal and then in terms of the correlation between the cases on.

Off of Corona in this version versus the deaths.

You see that that has a much lower correlation.

And then in previous variants. So although there is this uncertainty on I think we have to be careful around how this list as far as threats.

Looking through all of that we think that the economies will continue to reopen that momentum will continue but it will be sometimes with some uncertainties whatever it is now on the Delta variant.

It was a month ago around the.

The inflation rates, which we also think are transitory ROI on our structural so and it's literally these things hunger for which UBS is the it is the client adviser right. So I mean all clients.

I talked to them.

Have these questions I'll show, how do I have to take it to a dozen to a kind of my if investment opportunities how do I protect against.

On a potential inflation.

Are the economies really opening up these are literally the discussions that we're having with clients and advising them through that on your second question Oh.

Well on M&A.

We are well capitalized and that is because we're a highly capital a capital generative.

Business, we have accelerated the share buyback.

It's good to be well capitalized.

It's not like we feel there is theres money burning in our pockets.

Yeah, that's always a poor way to just think about inorganic growth.

So we just go back haul it or to our strategy and we have to be focus of our strategy and there was a couple of elements that will make our strategy further successful 1 on scalability. The other 1 is additional capabilities and the third 1 is around the regions I mentioned, where we want to grow.

And Ah if we can accelerate some of your organic growth opportunities.

Inorganic moves we will consider it but again you know the growth.

Money is not burning it off on because I don't like that.

So we will all have to comparator to what we can do ourselves as UBS and we are the global wealth manager so that on the first question on <unk>.

It's good that you follow up on that as I indicated on the back of the first quarter we.

We did start.

On a review of our risk controls.

And a further review of specific activities.

And the lessons learned are a S S. As we discussed.

<unk> taken up already in the organization that they are around concentration risks.

Around a crowded trades.

Around clients debt provides insufficient transparency around their total position.

Those lessons learned are being are being integrated.

While at the same moment I can tell you that as 1 of the market leaders in the Prime services businesses.

With Prudence, we actually have had a very good quarter this quarter.

I don't know have we have actually been <unk> been able to grow the business, a little bit, but clearly with prudence and taking these lessons learned very seriously.

Just a quick follow up if I may.

I remember in the first could you just said.

Well actually it was probable that the banks didn't know that all the other banks had roughly the same position on when everyone attitude. The exits it's not hard to get rid off the shelf, which will you all securities in a way.

Did you did you end business with family offices that are not give you. The transparency that you need now and you ended business relationships because of lack of transparency as it consequences on Bob.

We have a we I mean I cant go into details on clients, but we have exited the clients. If we felt that either the concentration in their positions on the transparency that they were giving around their business was not up to our standard on the back of the lessons learned.

Absolutely okay.

Okay. Thank you.

Oh.

Next question is from Stefan <unk> from financial Times. Please go ahead.

Good morning can you just talk a little bit more about this on.

Increase in lending to some of your ultra wealthy clients I think you said.

The $7 billion net loans 5 billion of that well.

The wealthy and the U S. Can you just talk a little bit about whether this is a continuation of the sort of a deliberate strategy.

The Qualcomm moved across from credit Suisse, where he.

<unk> made that kind of a centerpiece of what he was trying to do over there on how much of it is just responding to client demands.

Are they taking these loans out to do.

In particular at the moment.

And secondly, you'll great rival credit Suisse's, obviously, not doing particularly well at the moment how much of your day.

The increase in your performance today in wealth management or investment banking, which you put down to maybe risk aversion or weakness.

With that.

Yeah. Thank you, Steve and then on the first question.

As we indicated the out of the 7 billion of net new loans in the second quarter.

I think some 5.3 billion actually to be exact was in the U S.

And.

We see an opportunity to increase our lending in the U S. Because we compare our lending present day.

Penetration on our loan penetration with our client base with our with our peers and then we see that that's.

There was scope for growth and on the back of debt.

We have approach clients to see whether we can help them in their liquidity management and therefore make loans available. So it has nothing to do with our with any anything else. It's just an observation in the market, where we feel there is an opportunity for us to also further increased our loan penetration in our.

Our with our clients on the back of a comparable information from them from our peers.

On your second question.

Steven.

Yeah.

Yeah.

I always go back to growth strategy and so.

And you can expect this asset to come for years to come here.

Whatever happens in the market or whatever opportunities are there we know our strategy. We know what we wanted to we want to build the global ecosystem for investing.

From that perspective, we are looking at growth.

In and and the number of clients, we're looking at growth in the in some of the contributors to providers of new product to our ecosystem. We're looking for growth in the U S. We're looking for growth in Asia Pacific.

If it comes to where we expect the wealth to to grow faster than anywhere else. No. We are growing faster than some of the competitors and and clearly that could also be because some of our competitors may not have had a good quarter.

But that is not what we're after where actually our strategy and we don't go after and optimistic.

Way off of looking at it was weak we are.

We're very convinced about our story and that's what we are that's what we are that's why we implement it clearly if we can hire good people in Asia and they happen to come from some of our competitors. We will certainly do so as the higher from us as well, but it is quite normal market practice.

Okay.

Uh huh.

Yeah.

Next question is from Brian <unk> from <unk>. Please go ahead.

Hi, good morning.

Got a few questions. The first 1 is regarding <unk>.

Net investment Bank growth you mentioned on the analyst call gaining market share in investment banking and I'm wondering if you could give us a little bit more context about which business areas and geographies you've been seeing these market share increases within them and where is that related to hiring on new class.

<unk> relationships.

How do you see that progressing into Q3.

The next question is about restructuring expenses.

Which were much lower than the 300 million you previously flagged.

Both in terms of net but also growth expenses and I'm wondering if you could provide some of the reasons for that.

Were there any restructuring measures, perhaps layoffs that you put off maybe due to COVID-19, or otherwise and do you expect that to ramp up in coming quarters.

Thanks.

Thank you Brenda on.

On your second 1.

That's.

So we signaled a.

That we were going to have a 300 million a restructuring provision.

I think in the first quarter.

Quarter now after that announcement, we've user on a half of that.

It's a mix of some of these restrictions to be a little bit later in the year so bit of a delay.

Some of the people are being re skills into new jobs, which are which were open and some of them are having left as well so so and that tasty share. All this money I guess, so that's that's a good thing.

And on your first question in terms of market share the way, we the way we measure market share on the investment bank as we look at for example in the banking sphere or we look at the fee pools, the global and the original fee pools.

And and it turns out and in the traditional banking ranking.

We have gained market share.

Hum.

By almost 30% so from 1.6% to 2 per cent and the global M&A ranking.

We improved to number 8.

And our market share is up 2.3 per cent there.

Hmm.

So so across the board also in EMEA cash equities, our market share is now.

Well above 6% you know worked on 5 global player in equities.

So across the board whether it is in the banking business.

Or in some of the markets businesses.

Bye Bye bye bye real focus over the last 4.5 quarters. So does not only for this quarter because it doesn't work that way.

We have I mean, we're really focusing on our client franchise on specific sectors.

<unk> opportunities.

And a crazy day have chosen the UBS over others and now to have a decided to to be active for example on the M&A side or to be active in the capital issuance side. So.

It is just a focus share focus on our clients.

Opportunities are understanding their strategies and coming with the right proposals.

And that's how we've gained market share.

Thank you.

Next question is from Michael Patrick from Wall Street Journal. Please go ahead.

Hi, thank so much on for taking that.

I just wanted to follow up on a kid on them.

You had mentioned you finalize the review from regulators I'm, just wondering what you might share publicly.

Since it wasn't you know an insignificant loss.

And I understand the points on transparency that you've talked about but I'm. Just wondering if if you've also made any changes in how you.

You know calculated risks in your overall security financing business.

Typically equity swap.

I believe some analysts have noted that your counter party credit risk is very small on these on these very large portfolios and you know.

Clearly from sometimes it's got burned by that I was just wondering if there have been like if it was if a client specific or if it also had read across for on how you manage risk across those different from here.

Well.

Actually it's a very good question. There goes if you go through and I think all institutions will have that if you go through the.

Do your analysis.

<unk>.

Clearly this was a unique event.

And whatever it was in place with banks.

Either did not kind of Saudi law valves.

Because of the monitoring board of transparency the absence of transparency.

And so so as I indicated before you know the risk was very much in it.

And detecting concentration.

In detection.

Crowded trades, because then you know there was a large player in.

The specific stock in.

And in the transparency.

And of course, you know there's a lot you can improve.

Long on.

Other dimensions.

But there's no 1 single kind of factor that would have.

In short there's not to happen. It's just it's just it's just not there and so.

The biggest factor is that we were not aware overshot his position with the same client which is true transparency factor.

And that's.

And that is something that we have taken up with many of our clients and and reviewed the activities that we have with those clients.

The next question is from Donald Zulauf from person cycle. Please go ahead.

Good morning.

Just would like to Oh.

I'll ask you to be a bit more specific on the.

Staff reduction that you're on.

Do you reported in Switzerland.

And the second question is boom.

Huge sustainability investment Oh.

Offerings.

From what I'm gathering all over the place there is more and more evidence that.

Our sustainable sustainability.

As a as a nice word often.

To cut through which does not really hold whether its promises.

In other words sort of suitable to screen the worsening in Cleveland.

In the market.

I guess this is also the case with <unk>.

Many UBS product.

I'm wondering how you want to.

You want to address this issue.

Yeah, Danielle I just start with the latter 1.

So.

I think it's a it's a friday.

Any prejudice show way to ask a question on.

I guess this is also the case with many of the UBS products.

So.

Turn the question around let's just talk about the importance of sustainability and the focus that we all need to have in supporting investments in renewable energy fighting climate change and any order of sustainability goals I think that's important in this in this case.

And there is many factors at work.

Whether it is in the banking sphere to financials fear or whether it is with the companies that have to comply with specific taxonomies that they have to report about their carbon footprint.

And whether some of the projects that were done years ago, or whether we would now see them as greenwashing. It is also on the beholder I should know.

And so markets nuclear power is a very green source of energy, whereas in autumn on because it is absolutely.

Differently so.

So just just trying to put a label thinks is not as easy and therefore, I think we have together together, meaning all stakeholders whether its regulators.

As lawmakers, whereas banks, whether it's industry or media, we have to help in order to really support the net zero.

Wrote 2 words, 2050, and and we as as as UBS I've done. So we have come out with our net zero statements both on our own activities.

As well as our our supply chain.

As well as on on on the third dimension of our of our footprint, which is what we do for our clients and specifically if it comes to what we do for our clients we have.

On a.

Indicators since 6 months now that we prefer sustainable investing in our mandates over normal investing so basically we advise our clients to go 40 sustainable alternative.

Where you have a good combination of return on impact and that's how we try to support these.

These.

Ah well there's debt there's movement.

So so that's on sustainability and your first question will be answered by Kurt.

In terms of our layoffs, it's not specific to any 1 geography, it's broad based across all business divisions are all geographies and all functions.

However, you mentioned in your.

In your report.

These are 59 million isn't affected.

Affected per pension from the Swiss pension from.

Yeah that just pertains to to those employees that are Swiss space and also members of our Swiss pension plan that as a consequence of weaving UBS. There there is a a game that we see.

Cause of the reduction in our defined benefit obligation.

That's the figure on I'm looking to them how many people are behind this 59 million.

Theres no figure that we've indicated and as I said on.

Our layoffs are broad based across all geographies and across all business divisions.

When <unk> was taking place.

The layoffs that took place during the quarter were actually communicated during the course of the second quarter.

Okay.

Okay. Thank you everyone.

Yeah, our time is over and we appreciate you being with US today. If you have any follow up class questions. Please just reach out to our communications team across the globe.

You are.

Ladies and gentlemen, the media Q&A session is over you may disconnect your lines.

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