Q3 2021 UBS Group AG Earnings Press Conference (Q&A)

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Oh, yes with comprehensive Rex Ryan.

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Yes, Hi, I'm here for the U B S Group Press Conference Q&A.

Yes, Matthew Alaska and first name.

Yes last name is Smith S M I T H.

First name is Rachel are H E.

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And no company.

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Yes ma'am.

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Okay I'll jump to the Congress by several questions.

Yeah.

Over the last couple of years and because of that experience and a further development of the model. We think works well for UBS, we are now piloting it.

In in Switzerland.

With our local business were piloting it in.

Global wealth management, as an eye and we're putting in.

Our HR environment.

Currently 3000 people are in that pilot and we will basically.

A large that too.

9000 people.

As a next stage and 25000 in total by the end of next year.

Well, thanks a lot.

The next question is from sung Yoon seem from AWP. Please go ahead.

Okay.

Yes. Good morning, I also have a question on agile at UBS.

You said 9000 people after the transition to <unk> with UBS.

I would like to know what does this exactly mean.

How is this editor at UBS, we understood it.

Is this like a new division because.

Understood that you want to become edge over than the whole company, but I don't quite understand the expression of the transition of the people and regardless of that and second question did.

Did I understand you correctly that you are in regards of your strategy the strategy refresh and growth initiatives.

That you're aiming to that you're more focused on your existing clients and a first step.

Also a lot about the attraction of new clients. Thank you.

Well to start with your second question.

Clearly, it's always important to ensure that you focus on your existing clients I mean, they have been there.

They are loyal and they should get the attention they deserve.

There is always an opportunity to do more with your existing clients.

Generally it's also the easiest way to grow your businesses with you.

Okay.

And that's for example, while we plan to do in the U S. A.

Where we feel that we are we have the opportunity to introduce a digitally digitally led.

With remote advice are offering to our work.

Place a workplace wealth.

Service clients already and we can also attract new clients with that service concept as well same goes for Switzerland by the way, where we feel we can grow faster than the market in some areas like like sustainability like.

Mortgages.

Like Oh.

You know private pension activities.

Activities as well so we will also be able to attract new clients around new products there as well.

Going back to the agile way of working.

Yeah. This is really difficult to explain to you over the phone I think there was so much. There's so much material on Youtube that you can watch in order to educate yourself around agile way of working.

In essence, what it means is that if you work and if you change processes or if you want to go after an opportunity in the market.

Italy.

The marketing function would spell.

Spot this opportunity they would develop a they would do customer research that would come up with the business plan.

Our business case to introduce a new product or a new service.

And then they would send it to the product department.

<unk> developed a product in order to cater for that new service they will send it to the a to D processed.

Process Department and they will develop a process in order in order to make sure that the product is delivered to the clients for the service and they will set up the requirements for it Andy.

Technology Department to actually make it a digital offering or any bank offering as these days digital anyway. So now you can already hear on my explanation that is like four different departments with Handovers.

We are aware of which will take long lead times and generally the stakes like 12 months 14 months with all of the research and before you to the market. The opportunity is gone. So what you do is rather than do you have these four large departments that work by themselves as islands you make sure you have two people from the first department.

Two from the second department to from the third Department and two from the Forest Department now suddenly you have an eight person.

Walt as we call up and.

And these eight persons. They go after this opportunity they spoke to the opportunity to develop the product the develop the process and they automate the process all within the same team then you get much faster to market.

And and you do it and then so this is called HOA or can you do it faster and.

And you have a larger chances of success.

But the 9000 people.

Jimmy transition they are not actually physically transitions.

What day will am I correct, Okay, yeah, there will be transitioned in and go out.

Yeah.

We're I mean, so worried I now sit on Florida number 123, or four there will be mix over floors, one two or three or four but there will be mixed.

And they will mix that they will work in parts.

Every two weeks they may change even parts every three months. They may even chase are they are the leaders date I have as well.

So so so for sure they work in different constellations, but then again that everybody can work remote as well. So it's always as you can always say chase teams as well. So it was just yeah. They will they will move from one physical.

Department to a.

An area, where they work altogether right. So.

It will certainly be mixing of people absolutely yep okay.

Okay. Thank you.

The next question.

From Olin will incur from financial times. Please go ahead.

Thank you very much good morning, Ralph Thanks, so much for your time today.

Hi, I'd like to know a little bit more about the the U S. Digital advice model and I. Appreciate you will you be providing more details in February but at this point is is there anything more you can say in terms of you know presume. This is for the mass affluence.

Especially given it's in the U S a and it sounds like it's a it's a 2025 vision, but are you expecting it to launch before then or soft launch before then are we looking to foods acquisitions to support this and also has perhaps the the experienced who come through during the pandemic.

Helped with this because maybe people in that category, there's myself once their expectations of dealing with our.

Advisors and banks has changed somewhat because they've been using both digital tools over the past 18 months and your thoughts on those would be much appreciated.

Well, it's true that our I think the adoption of digital channels has increased very rapidly during the pandemic and it's absolutely true.

That is both on basic banking services as well as these these these wealth services.

Having said that you will always suddenly if you start managing your wealth somewhere in your decision, making you would want to have somebody kind of.

Confirming to you that what you're doing or what your robo algorithm is advising you to do is the right thing to do for you. So so that's a little bit what are your advisor comes in right. So I think the did the strength of our offering will be and what makes us strong already which is going back to our DNA, we're very strong on.

Content, we have strong CIO advice on one side and we're very good at advice in terms of you know building that relationship with clients or at least giving giving the trusted advice to our clients and that combined with a digital offering that people will access for so basically all of it.

Or is that these are indeed affluent clients well it got got axis to.

To that digital offering that generates the.

Within their own profile and risk appetite at the best portfolio of assessments and that to the extent they want to make changes to that because they see something they don't like or to the extent they want to know for sure that is the right thing for them to do they can kind of.

<unk> got access to a remote adviser to take them through a D. At five Europe before it takes the decision and pushed a button that this is indeed the best for that we do think this is a growing market.

Ah is a tacit proposition.

Oh.

On the back of the research that we've done.

So that's why Ah, yeah, where we're quite positive about this one.

Yeah.

Great. Thank you and then just in terms of timing is this something you expect up and running by 2025, all that's our plants don't they or.

No.

So up and running by 'twenty five for sure no. So we would not kind of announced that was something that we would love to have up and running by 'twenty five.

So it's a digital play.

So it will hit the market somewhere next next year.

Okay right Okay.

Okay.

The next question is from Paul dates from Bloomberg. Please go ahead.

Oh, hi, good morning.

So I guess a couple of things one on within the sort of the equities trading business or investment banking prime brokerage I supposed to know a bit more about.

What's going on that you mentioned record balances and you referenced I think are some new hedge funds going too, but I'm interested in how much do you think you might have taken market share from from others and in growing that business.

Yeah.

And then within the wealth business I mean again in Switzerland, I think you've seen pretty strong you know new asset growth. There I'd love to know whether you think that's market growth for weapon rigor and youre, taking market share from local rivals.

And philosophy in the U S and global wealth.

You know, obviously very strong big new lending you use driven your kind of net interest income growth.

You're seeing a result kind of result that none of your U S peers. The thing I don't think so what are you. What are you doing differently. What are the risks that you're taking what is the business that youre winning that expanding your interest income on your wealth business that others aren't guessing right.

Yeah, Paul I think in the U S. It's a very it's actually pretty pretty simple Oh, we're just not baking lending.

And we don't have our fair share and in the relationships that we have with our wealth clients. If it comes to their lending.

And offering to lending.

E. The penetration that we have on the well site gives us quite some upside in doing more lending without taking more risk are more risk than what orders with two or more risk than what would be our appetite. So this is just a I.

I mean, we've always been a wealth manager we've seen the success of our banking services to support our financial advisers to build up that relationship on the mortgage side specifically.

I would feel there's an opportunity to do more on the entrepreneurial lending side and the cash management side.

Are the products that we want to kind of digitally make digitally accessible and for our financial advisers joints, you choose to our clients there and and just build up a portfolio that is just getting closer to the penetration level as to where we are from a well site, but and and and.

You know if you grow for Murray from a low base you can show big numbers right. So to but again, it's just it's just nothing more than just going after the opportunity and ran our our fair share of the business.

With our with our clients.

Correct Yeah.

Paul in terms of our prime brokerage business and we indicated it was a very important contributor overall to our our equities result for the quarter. We also indicated that we had a record balances.

Client balances from that business Ralph mentioned that.

We did see some some some new clients or new hedge funds, but I think overall at this point, we couldn't make a comment as to market share. Obviously, we haven't seen our European peers report yet we did see our U S peers referenced prime brokerage as well as areas, where they've they have seen significant growth so on balance.

We couldnt really conclude one way or another if we've taken share I would mention though and this is an important point that if you look at the overall capital that are IV deployed this quarter, they always and consistent with what they've done in the past they stay within the one third.

And you'll see that as a discipline that our investment bank actually maintained even when there are quarters when they could have deployed more capital and generated even better results and that's just consistent with our overall model.

In terms of our wealth management business in Switzerland. Indeed, I think if you look at the the last 12 months, we've generated $8 billion of net new fee generating assets, which is overall and 8% growth.

Also within PNC and of course this is more of an affluent statement, we generated $2 1 billion of net new investment products, which are quite similar in nature to net new fee generating assets and that's a 16% growth I'll certainly we know part of that has come out of cash deposits. So it's not a net net new share we had some.

Those deposits with our clients, but we also know that portions of both of those numbers are also net inflows.

Now again, I think I can only mention that we believe we gained share but I just don't have the the market details to be able to to support that or confirm that.

I'm, sorry, I'm very quickly on the American business, then so those clients that you all know lending too with a underserved in general before by the market. If they don't have mortgages or are you convincing them to bring that over to you.

It's the latter one it's the latter one yeah. So we certainly don't want to lever some are more per se, but this is really you know having a competitive offer.

It seems to be the competition. That's currently does their banking.

And I was doing there well.

Yeah cool thank you.

The next question is from Christian Hudson Therefore, please.

Please go ahead.

Yes, good morning, and many thanks two questions from my side just the.

The first one regarding your comments earlier during the analyst call on.

Advising oh, not advising about crypto currencies.

Your customers, whether they're hedge funds or beat them.

Wealth management customers.

You know you advise them on complex structured products.

Where there's all sorts of difficulties trying to determine risk and value.

How is crypto any different could you. Please elaborate on that Ah I understand where we're in a situation where.

We're sort of in a bubble in general if you look at Tesla.

Cup rising 100 billion just yesterday.

Overall wouldn't be entire environment would be very difficult.

Determining accurate value and how are you then advisory clients to react in this sort of potentially stagflationary.

Market and then secondly on the issue of.

Sort of a political issue for your bank in Switzerland.

Swiss Federal Council is holding a vote I think on the 28th of November if memory serves.

This could potentially have ramifications for the Swiss economy in general if they vote.

People vote no.

Do you have any concerns and would you support vaccine mandates going into winter.

We're a Swiss stuff. Thank you.

Okay, well the last question I Didnt read in a sense, so which one are you referring to the confirmation of the COVID-19 facilities in the past or.

Basically the a b agreement with a U but people can travel back and forth.

And freedom of movement for a Swiss citizens I believe that's the COVID-19 law.

People have to vote on the 20th Okay.

Okay.

So on the first one let me let me first tackle the first one that.

So Christian.

So a crypto versus some of the structured products right. So it is I.

I agree with you that the market seems to be priced for perfection.

Which and we see that also with the with news coming through.

On on Central banks, you know starting to taper or.

With geopolitical tensions freeing up you see the market reaction reacting already so you see that we are priced closer priced for perfection.

It doesn't mean that we are that we don't understand how to value is built up right now in terms of the products that we offer.

Because it's just the fundamental analysis of the parts of it.

Ah.

You know central Bank policies have helped in terms of the level of asset prices et cetera.

But nevertheless, we know that because all central bank policies.

Some assets are more in demand than others.

Yeah.

I wouldn't be able to tell you what makes the price of a crypto currency.

I just wouldn't so.

So to the extent I.

I don't know how to do it and I don't know what liquidity will truly be there when things go wrong.

I don't think this is a category for investment this is a category for speculation.

And we're not in the business of that it's just what it is so it doesn't mean that for some clients. It was a reverse inquiry, we will we will own or some of that.

From a reverse enquiry perspective, but it's certainly not something that we advice.

So it is a sort of a branding riskier few you feel that the image of the bank could be damaged running Christian is another branding risk.

It's not it is just that if you don't understand it.

How can advise it.

Okay.

Very clear thank you.

Okay. Yeah on the second one is a sale. So just looking at this with one of them.

Yeah.

Right.

Okay.

They will come up with.

Yes.

Traveling.

Yes.

Yeah.

It doesn't have any.

Yeah.

Okay.

Yes.

Well, let me go back to your second question because.

First of all to understand what the real point is here whether that is put to a vote. So yep.

Well, it's good because it's clearly not on our radar as an issue. So I guess, we don't see that as a ramification for our business, but it was it was suddenly have hit my desk, but.

Maybe that's the answer already Christian I, just remember comments from the president of the confluence of controlling government, saying that it could be devastating to the domestic economy. If the outcome of the vote was no.

And as you said Paul.

Out from under their feet in this crisis situation.

So there were some clear concerns on the part of the government that are its populace.

Bolt on this measure.

But perhaps then on them.

The underlying issue it would would you support vaccine mandates for your switch our employees.

A universal bank.

If you haven't already you know we live in a democracy, we go by what the what the Swiss our federal government.

<unk> rules as losses are we a bite but that for us the way. We currently work as you know as we.

We are slowly, but surely coming back to work we have introduced a hybrid way of working so people.

Can manage are the days of work in the office and they work from home.

And not enough earlier said that that also provides a four.

<unk> solution for people, who are who rotter work from home or.

Or don't want to kind of be a source to affect all of us to the extent or not infection. It themselves, but again, you know that is up to them and apart from that we abide by the laws that this that this country house.

Thank you next.

The next question is from Andre Miller from <unk>. Please go ahead.

Yeah. Good morning, just two questions from my side, the first concerning Switzerland than net interest income and more specifically the production of negative interest rates or does deposit pricing scheme.

If you look at that from today's point of view, how important wants to step in improving your your fee revenues your mandate penetration here in Switzerland.

During this year now.

And so are you happy with the way you have introduced its night are these new pricing scheme or is there something you can put some better and then the second question concerning the tax environment in the U S that you have mentioned quickly in the analyst presentation.

Could you give us maybe a possible scenarios, how would could UBS adapt to well not how your business tax rate and would also higher Texas, Florida, well see what that would be very specific concern for you where are you you would have to we need to adapt and in some ways.

Yeah.

So on your first one Andre I think that the introduction of negative rates.

And we've done that in a in a very careful way and you know that we have introduced that for deposits over 250000 francs.

And that we have done it in a way that we actually engage with our customers to see and know how to manage their surplus cash.

Whether we're all alternatives and what would be the what a better way for them to solve.

It is this issue and I think we've done that really well and.

You've seen that suddenly the N O I has a bit improved on the back of that.

Some of the investment products flows have also originated from that as well, but again you know this is all within the way we approach clients, which is on a full in a transparent and.

Advised way to make sure that we do what is good for them.

Curt on the U S taxes on the U S tax side, if you look at.

On the business tax side, the corporate tax side of course, there are still some speculation I guess right now if you think about what might be a reasonable compromise that it could be in the in the area of up 25% that would imply a four percentage point increase in the tax rate, which for us would imply that.

We would write up our DTA by $1 2 billion, so that equates to the 300 million per percent increase that I referenced.

Now also of course the advantage for US is the fact that we do have available net operating losses, we can shield ourselves from from paying taxes.

True around 2020, a so so this would have virtually no impact overall on our cash taxes, and importantly, though it would increase our tax rate.

Because we would see amortization of DTA that would have to take place now in terms of more broadly any impact and theres still a lot of speculation around what the tax what the wealth tax might be it's not even.

Of course sure that there will be a wealth tax and there continues to be a fair bit of debate. So it would be hard for us to speculate right now how that might impact our business overall.

Okay. Thank you much.

Yeah.

The next question is from Nicolas Vontobel from Th Media. Please go ahead.

Yes, Hello could you say something about the Chinese market. How do you view how are you viewing the political risk there that there have been some rule changes, which have affected men business was quite severely embarrass. This new strategy of common prosperity and the last thing I saw from UBS. Your we're still quite enthusiastic.

In recommending to clients to increase their exposure. So I wanted to ask what's the.

Karen what is currently your views are.

Well Nicholas this is not a call to give investment advice. So that's that's.

Let's put that proviso [laughter] here on the table and so this is a call as to how we see China as a market and how we as U B S. A fair around that as you know we have been very.

Committed to the Asian market in general we've been there for the last 60 years Asia is a fast growing region always has is a bit of a ups and downs, but over the cycle. It grows much faster than many other regions and we know that in a in a fast growing economies. So no.

And you will have disbalances for which new policies will have to be introduced to correct some of that.

I don't think that's what our that's what are what's the Chinese policy for common prosperity is bringing basically what they're trying to do is making sure that the the buildup of wealth in China moved from a pyramid.

The two are two more like an oval. So that you know the wealth is more evenly distributed now.

It changed from one policy to the other can always lead to short term AR.

Disruptions or adjustments, let me put it that way and some of which we have seen it doesn't make us.

Les a strategic around what we want to do in China actually we actually feel that they owe to them.

Move to a common prosperity and the way the wells will be built up will actually be good for us as well. We are we have a wealth management approach there, we havent asset management approached ear and you know we are at.

Very strong player in the investment banks, both onshore and offshore.

And we think that the combination of the three are will continue to make us successful in China. So.

Clearly there will always be some some some short term adjustments.

With policies changing but that is not that that we see everywhere in the world right. So and that is something we'll have to deal with ourselves as to how we go about our own plants.

Clearly, our CIO, who basically delivers the the investment advisor will take that into account as well.

Thank you.

The next question is from Brian <unk> from <unk>. Please go ahead.

Mr. Hughes your line is open.

Yes, we can hear you maybe you're line is on mute.

Hi.

Hi, sorry can you hear me now, yes, we can hi.

Hi, Okay.

Apologies if this is.

This is repeating anything from before but I missed a few minutes I wanted to ask about the U S rollout and whether you already have any figures on how much you plan to be.

Investing into the especially the rollout for affluent clients next year.

And then Furthermore, on the various tech initiatives.

And that you previewed whether those are going to fall within the budget.

What you previously advised regarding 1 billion in gross cost savings by 2023 and the reinvestment.

Yeah.

And then finally on time and Asia more broadly I know you mentioned that you are planning to continue investing in hiring but I'm wondering if we could get any more granularity on your hiring plans at the moment and whether you see.

Our ramp up or.

Possibly slowing from from previous plans given the current environment.

Okay.

Thank you Brenda so oh.

By way back up to your first question, So I'll sure I'll start with Asia and China.

Actually we think that that so at the core of the analysis as to our strategy has been so worried a largest wealth pools and where do you expect wealth to to grow forces because that's so all of our ecosystem of asset management capability and assessment capabilities, well I'll skip abilities are geared to words.

Many of our clients to build up their wealth.

And in.

In my previous updates have indicated to you that the westphal in the U S is the largest and we will continue to grow fast in the world on the back of entrepreneurial wealth and and then Asia is his second launches will will also continue to grow faster in the world.

And then also.

Generally are growing that's true entrepreneurial wealth and therefore, you know the way.

What we offer both in the U S as well as in Asia.

Is we we actually go after dose clients that represent that.

Those future wealth pockets, whether it is in the technology.

And in technology.

For example in cater for them and adding therefore also advisors.

In order to support these clients so.

We don't think that a.

Maybe a short term adjustment adjustment leads to a review of strategy on the contrary as I said before I think our strategies just confirmed for China, but also for Asia. So it's a it's one where we will continue to invest in our people on the ground.

Investing in knowledge and making sure that we have the right approach as well in China and in Asia. So it's Oh, so and the granularity is it's literally to the number of Ftes and we don't give that Brian so.

So, but what is important for you to know is is that we focus on Asia, and China up there as well.

Your second question around you know our plants in.

And technology. This is about you know how do we move away from legacy technology to new technology, how do we move to the cloud. This is about how do we get better engineers and how do we develop an engineering culture and how we would do we actually invest.

Invest in technology.

Work agile in order to make sure that we do incremental investments rather than big Bang investments that sometimes don't pay off or you have to write off.

So so what we're doing on the technology side is making sure that we are much more effective with the same but yet so that we get more bang for the Buck.

So to say and we deliver faster and those two components I think.

As we we kind of proof within the way we manage.

And therefore, we don't necessarily have to increase the technology budget that'd be one where we are currently at least not to a large extent we have to to the extent we need to invest.

Going forward in this initiative or any other investment initiatives. Indeed that will be largely funded from the 1 billion saves that we have announced and are in April and that.

That will come to fruition two two.

Large extent in 'twenty two 'twenty three.

And then on the U S side I went there was just no more details to be given order and that we feel that our 2 million workplace wealth clients that gruny.

Have there a retirement plan.

With the pension plan.

With us or their stock plan with us that we feel that is good for us to offer them.

Our wealth.

Digital wealth offer.

Beyond this or instead of this the wood the moment, they basically well actually cash on their stocks.

Make sure that they find a place to manage their wealth going forward as well and that's why we're developing this this this offering and there was no further details at this moment that we want to get.

Thank you.

We will now take the last question from Marion After my ear from Bloomberg News. Please go ahead.

Hi, Ralph Great. Thank you am I know, it's getting late in the day and.

Almost didn't make the cut time I appreciate it.

Just a question on my side again on the U S Central Bank.

Order to create this sort of destination, where are you pulling the talent from are you are you going to be hiring a certain selection of people or are you moving some people from your your brokerage business or how is that going to work.

It's it's a mix of the three mm.

Do you know if if we do a play like that we want to do it do U B S way in terms of that it has to be representative of our superior content that we that we developed and that we are known for and that the clients really like us for but also the experience that we have built up.

Over the last couple of years and building a remote advice and the U S already supporting our our financial advisors.

And basically those two experiences are our starting point there. So we can actually work from there and then on top of that clearly you know for for the digital offering and developing such an offering.

We would have to attract additional talent as well.

You already have an idea like how many people you need or is that something else.

But we do propose a.

But we're not disclosing it for you.

No worries thank you.

Thank you [laughter].

I will now hand over to Ms Huskins.

Thank you operator, and thank you all for joining us if you have any further questions or follow up please reach out to your communications and media contacts either here in Switzerland or in your local area I appreciate you being with us. Thank you.

Yeah.

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

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