Q2 2023 UBS Group AG Earnings Call
Ladies and gentlemen, good morning, welcome to the UBS second quarter 2023 results presentation.
Speaker 1: Ladies and gentlemen, good morning. Welcome to the UBS second quarter 2023 results presentation.
The conference must not be recorded for publication or broadcast you can register for questions at any time by pressing star one on your telephone she.
Speaker 1: conference must not be recorded for publication or broadcast. You can register for questions at any time by pressing star and one on your telephone.
She didn't need operator assistance, please press star zero.
Speaker 1: the need operator assistance please press star in zero. At this time it's not pleasure to hand over to Sarah Mecky, UBS Investors Relations. Please go ahead, Madam.
At this time, it's my pleasure to hand over to Sarah Mackie UBS Investor Relations. Please go ahead Madam.
Speaker 1: Good morning and welcome everyone. Before we start, I would like to draw your attention to our cautionary statement slide at the back of today's results presentation.
Good morning, and welcome everyone before we start I would like to draw your attention to our cautionary statement slide at the back of today's results presentation.
Speaker 1: Please also refer to the risk factors filed with our group results today, together with additional disclosures in our SEC filing.
Please also refer to the risk factors filed with our great results today together with additional disclosures in our SEC filings.
Speaker 1: On slide two, you can see our agenda for today. It's now my pleasure to hand over to Sergio Moti, Group CEO .
On slide two you can see our agenda for today, it's now my pleasure to hand over to Sergio multi group C E O.
Yeah.
Speaker 2: Thank you Sarah and good morning everyone. I hope you had a relaxing summer break for us. The past eight weeks were intense as we were busy writing the next chapter of UBS's history.
Thank you Sarah and good morning, everyone.
You had a relaxing summer break for us the past eight weeks were intense as we were busy writing the next chapter of UBS is history.
This is the first ever acquisition involving two global systemically important banks. It was announced all of these five months ago, and we close at less than 100 days ago.
Speaker 2: This is the first ever acquisition involving two global systemically important banks. It was announced only five months ago and we closed it less than 100 days ago.
Speaker 2: This would not have been possible without extraordinary effort and dedication from my colleagues across both organizations.
This would not have been possible without the extraordinary effort and dedication from my colleagues across both organizations.
Speaker 2: It also required extensive cooperation from the Swiss government and regulators in Switzerland and around the world.
It also required extensive cooperation from the Swiss government and regulators in Switzerland and around award.
Yeah.
We are swiftly executing on our integration plans, our radius achieving a number of important milestones.
Speaker 2: We are swiftly executing on our integration plans, already achieving a number of important milestones.
We established a target operating model.
Speaker 2: We established a target operating model, created a dedicated integration office, and rolled out responsibilities with management appointments up to three levels below the group executive board, just to name a few.
We added a dedicated integration office and rolled out responsibilities with management appointments up to three levels below the group Executive Board just to name a few.
Speaker 2: We are also making progress on our cost savings and the risking plans and resolving some legacy matters for both firms.
We are also making progress on our cost savings and Derisking plans and resolving some legacy matters for both firms.
Following a detailed analysis, we determined it and hand it back we terminated and added back all Swiss government support a few weeks ago.
Speaker 2: Following a detailed analysis, we terminated and ended back all Swiss government support a few weeks ago.
Speaker 2: Lastly, we decided to fully integrate the Swiss business of Credit Swiss after a thorough strategic review.
Lastly, we decided to fully integrate the Swiss business of credit Suisse. After a thorough strategic review.
Yeah.
Speaker 2: The thing I'm proudest about is that clients have rewarded our unwavering commitment with extended trust.
The sink I'm proudest about is that clients have rewarded our unwavering commitment we would extend that trust.
Speaker 2: Thanks to their restore release in the combined firm, we were able to swiftly stabilize the Critics' Swiss Corps, its wealth, asset management and Swiss bank franchises.
Thanks to their restored belief in the combined firm, we were able to swiftly stabilize the credit Suisse score, it's wealth asset management and Swiss Bank franchises.
We are happy to see markets, recognizing our ongoing war.
Speaker 2: markets recognizing our ongoing work.
Our strategy is unchanged and the credit Suisse acquisition will act as an accelerant to our plants.
Speaker 2: and the Credit Suisse acquisition will act as an accelerant to our plan.
Speaker 2: We will strengthen our position as the only truly global wealth manager and as the leading Swiss Universal Bank. We've scaled up asset management and a focused investment bank.
We will strengthen our position as the only truly global wealth manager and as the leading Swiss Universal Bank with scaled up asset management and a focused investment bank.
Speaker 2: With a highly complementary footprint, we will reinforce our position in key growth markets including the Americas and APEC and build on our leadership in Switzerland and redistricting named India.
We had a highly complementary footprint, we will reinforce our position in key growth markets, including the Americas and APAC and built.
<unk> on our leadership in Switzerland and EMEA.
We believe our rental fleet focused on clients and continuously improve and expand our services and products.
Speaker 2: We will relentlessly focus on clients and continuously improve and expand our services and products.
With $553 billion in assets across the combined firm the transaction adds to scale that will lead to increased efficiencies.
Speaker 2: with $5.53 million in assets across the combined firm, the transaction adds a scale that will lead to increased efficient.
This will allow us to better focus our resources.
Speaker 2: This will allow us to better focus our resources and target investments that provide superior level of client service.
And targeting investments that provide superior level of client service.
We will achieve our strategy, while remaining disciplined in our resource management across the entire firm.
Speaker 2: We will achieve our strategy-wide remaining discipline in our resource management across the entire firm.
Yeah, it'd be consuming no more than 25% of the group's risk weighted assets and the round down of the non core and legacy portfolio are just two of the more visible examples of our approach.
Speaker 2: The AB consuming no more than 25% of the groups resquitted as it and the round down of the non-cor and legacy portfolio are just two of the more visible examples of our approach.
Unknown Executive: Ladies and gentlemen, good morning. Welcome to the UBS second quarter 2023 results presentation. The conference must not be recorded for publication or broadcast. You can register for questions at any time by pressing star in one on your telephone. She didn't need operator assistance. Please press star in zero.
In essence, we will repeat what this bank successfully accomplished during the last decade.
Speaker 2: In essence, we will repeat what this bank successfully accomplished during the last decade.
Yeah.
Sarah Mackey: At this time, it's my pleasure to hand over to Sarah Mackey, UBS investor relations.
Before I discuss the Swiss Bank decision, let me give you a brief overview of our assessment of credit Suisse as of March 19th.
Speaker 2: Before I discuss the Swiss Bang Decision, let me give you a brief overview of our assessment of Credit Suisse as of March 19th.
Sarah Mackey: Please go ahead, Madam. Good morning and welcome everyone. Before we start, I would like to draw your attention to our cautionary statement slide at the back of today's results presentation. Please also refer to the risk factors filed with our group results today together with additional disclosures in our SEC filing. On slide two, you can see our agenda for today.
Speaker 2: Since then, and especially after we closed the acquisition in June , we conducted an in-depth analysis that has only confirmed the necessity of the decisive actions taken over that weekend.
Since then and especially after we close the acquisition in June we conducted an in depth analysis.
As only confirmed the necessity of the decisive actions taken over that weekend.
Speaker 2: It was not just a matter of liquidity drying up.
It was not just a matter of liquidity drying up.
Sergio Ermotti: It's now my pleasure to hand over to Sergio Moti, Group CEO. Thank you, Sarah and good morning everyone. I hope you had a relaxing summer break for us the past eight weeks were intense as we were busy writing the next chapter of UBS's history.
Speaker 2: Credit Swiss business model and business mix was deeply flawed and its reputation severely damaged.
Credit Suisse. This business model and business mix was deeply flawed.
And its reputation severely damaged.
With its structural lack of underlying profitability unsustainable capital allocation and negative revenue and cost prospects. The bank was no longer in a position to continue on its own.
Speaker 2: With its structural lack of underlying profitability, unsustainable capital allocation, and negative revenue and cost prospects, the bank was no longer in a position to continue on its own.
Sergio Ermotti: This is the first ever acquisition involving two global systemically important banks. It was announced only five months ago and we closed it less than one hundred days ago. This would not have been possible without extraordinary effort and education from my colleagues across both organizations. It also required extensive cooperation from the Swiss government and regulators in Switzerland and around the world. We are swiftly executing on our integration plans already achieving a number of important milestones.
Speaker 2: This is clearly visible from the year-to-day losses Chris Swiss reported today, a culmination of the Bank's two loss-making years.
This is clearly visible from the year to date losses credit Suisse reported today.
A culmination of the banks to loss making years.
Thanks to our financial and balance sheet strength UBS was in a position to answer a rescue called from the Swiss government, helping to stabilize the financial system.
Speaker 2: Thanks to our financial and balancing strengths, UBS was in a position to answer a rescue call from the Swiss government, helping to stabilize the financial
Importantly, the transaction preserves the best of credit Suisse's excellent client relationships people and industry, leading products that he knows in older plausible scenarios would have been weakened or lost.
Speaker 2: The transaction preserves the best of credit Swiss's excellent client relationships, people and industry leading products that in other plausible scenarios would have been weakened or lost.
Sergio Ermotti: We established a target operating model created a dedicated integration office and rolled out responsibilities with management appointments up to three levels below the group executive board just to name a few. We are also making progress on our cost savings and the risking plans and resolving some legacy matters for both firms. Following a detailed analysis, we determined it and ended back, we terminated and ended back all Swiss government support a few weeks ago.
Unlocking credit suisse's strengths as part of UBS will allow us to build some things of a more enduring value for all stakeholders.
Speaker 2: Unlocking Credit Suisse's strength as part of UBS will allow us to build something of a more enduring value for all stakeholders.
This combination will reinforce our status as a premier global franchise, one that our own market, Switzerland can be can be proud of.
Speaker 2: This combination will reinforce our status as a premier global franchise.
Speaker 2: One that our own market, Switzerland, can be proud of.
We are humbled by this task and the responsibility entrusted to us.
Speaker 2: We are humbled by this task and the responsibility entrusted to us.
Sergio Ermotti: Lastly, we decided to fully integrate the Swiss business of pretty Swiss after a thorough strategic review. The thing I'm proudest about is that clients have rewarded our unwavering commitment with extended trust. Thanks to their restore release in the combined firm, we were able to swiftly stabilize the currently Swiss core, its wealth, asset management and Swiss bank franchises. We are happy to see markets recognizing our ongoing work. Our strategy is unchanged and the Credit Swiss acquisition will act as an accelerant to our plans.
But let me make one thing absolutely clear.
Speaker 2: But let me make one thing absolutely clear.
Speaker 2: Our ability to stabilize Credit Suisse and return the government guarantees in a timely fashion should not take away from the gravity of the situation we inherit.
Our ability to stabilize credit Suisse and returned the government guarantees in a timely fashion should not take away from the gravity of the situation we inherited.
Nor should diminish the scope and scale of the task ahead.
Speaker 2: nor should it diminish the scope and scale of the task ahead.
Okay.
Yeah.
Speaker 2: So that being said, let me walk you through how we come to our decision on the future of critical power.
So that being said, let me walk you through how we come to our decision.
On the future of credit Suisse strides.
Speaker 2: As I promised when I returned as a CEO a few months ago, the decision would be driven by facts, not emotions, and mindful of the extraordinary circumstances of the transactions.
As I promised when I returned as CEO , a few months ago. The decision will be driven by facts not emotions and mindful of the extraordinary circumstances of the transaction.
Sergio Ermotti: We will strengthen our position as the only truly global wealth manager and as the leading Swiss universal bank. We've scaled up asset management and a focused investment bank, with a highly complementary footprint, we will reinforce our position in key growth markets, including the Americas and APEC, and build on our leadership in Switzerland and in the US. We will rental sleep, focus on clients and continuously improve and expand our services and products.
We conducted an extremely total review involving teams comprised of some of the best people across both firms with support from external experts where needed.
Speaker 2: We conducted an extremely thorough review involving teams comprised of some of the best people across both firms, with support from external experts, where needed.
Speaker 2: Our analysis focus on four key aspects that for us would determine the long-term viability of the
Our analysis focuses on four key aspects stats for us vote to determine the long term viability of the business.
Speaker 2: We examine what the decision would entail for our clients, shareholders and employees.
We examine what the decision.
It would entail for our clients shareholders and employees.
Speaker 2: And we gave special consideration to financial and funding sustainability.
We gave special consideration to financial and funding sustainability.
Sergio Ermotti: With $5.53 million in assets across the combined firm, the transaction adds scale that we lead to increased efficiencies. This will allow us to better focus our resources and target investments that provide superior level of client service. We will achieve our strategy wide remaining discipline in our resource management across the entire firm. The APEC consuming no more than 25% of the groups resquitted assets and the round-down of the non-core and legacy portfolio are just two of the more visible examples of our approach. In essence, we will repeat what this bank successfully accomplished during the last decade.
We started with a broad spectrum of possibilities ranging from IPO sale partial or full integration to a spin off and even a dual brand strategy.
Speaker 2: We started with a broad spectrum of possibilities ranging from IPO, sale, partial or full integration to a spin-off and even a dual brand strategy.
Speaker 2: Eventually, based on our criteria, we narrow down our selection to the two best
Eventually based on our criteria, we narrowed down our selection to the two best options.
Speaker 2: full integration or a spin-off of a focus perimeter, which would exclude segments requiring global capabilities. Today's project is a shares a website in many instances as we know it has existing needs,
Our full integration or a spin off I'll say focus arena, there, which would exclude segments requiring global capabilities.
Okay.
The final outcome was crystal clear.
Full integration is by far the best choice.
It is not just that the financial merits of integration are greater.
Speaker 2: It is not just that the financial merits of integration are greater.
It is also the best way forward for our clients for whom the industry, leading offering will improve and broaden as we combine products and capabilities from both firms.
Speaker 2: It is also the best way forward for our clients, for whom the industry-leading offering will improve and broaden as we combine products and capabilities from both firms.
Sergio Ermotti: Before I discuss the Swiss bank decision, let me give you a brief overview of our assessment of Credit Suisse as of March 19. Since then, and especially after we closed the acquisition in June, we conducted an in-depth analysis that has only confirmed the necessity of the decisive actions taken over that weekend. It was not just a matter of liquidity drying up. Credit Suisse business model and business mix was deeply flowed and its reputation severely damaged.
The alternative would have been a bleak one considering the current situation combined with the necessity to carve out most of its global capabilities.
Speaker 2: The alternative would have been a bleak one, considering the current situation, combined with the necessity to carve out most of its global capabilities.
Even a more focused spin off a pretty switched rights would fail to meet the needs of many of its corporate clients as well as the entrepreneurs it considers core.
Speaker 2: Even a more focused spin-off of pretty Swiss White would fail to meet the needs of many of its corporate clients. As well as the entrepreneurs it considers core.
At the same time separation from the group would entail a costly risky and lengthy carve out of technology platforms.
Speaker 2: At the same time, separation from the group would entail a costly, risky and lengthy carve-out of technology plants.
Sergio Ermotti: With its structural lack of underlying profitability, unsustainable capital allocation, and negative revenue and cost prospects, the bank was no longer in a position to continue on its own. This is clearly visible from the year-to-date losses Credit Suisse reported today, a culmination of the bank's two loss-making years. Thanks to our financial and balancing strengths, UBS was in a position to answer a rescue call from the Swiss government, helping to stabilize the financial system.
Speaker 2: Cosing uncertainty for clients and employees for years to come.
Hosing uncertainty for clients and employees for years to come.
Moreover, our analysis revealed a substantial dependency of the Swiss subsidiary on financial resources and operational support from the parent.
Speaker 2: Moreover, our analysis revealed a substantial dependency of the Swiss subsidiary on financial resources and operational support from the parent.
As a result.
Speaker 2: It would have existed as a fragile entity, struggling to close its funding gap, unable to compete effectively and failing to deliver sustainable returns.
It would have existed as a fragile entity struggling to close its funding gap.
Unable to compete effectively and failing to deliver sustainable returns.
Speaker 2: We believe this would not have been an acceptable proposition for clients, employees, and very likely regulator.
We believe this would not have been unacceptable proposition for clients employees and very likely regulators.
Sergio Ermotti: Importantly, the transaction preserves the best of Credit Suisse's excellent client relationships, people, and industry-leading products that in other plausible scenarios would have been weakened or lost. Unlocking Credit Suisse's strengths as part of UBS will allow us to build something of a more enduring value for all stakeholders. This culmination will reinforce our status as a premier global franchise. Riz, one that our own market, Switzerland, can be proud of. We are humbled by this task and the responsibility entrusted to us.
Speaker 2: By contrast, being a part of UBS, ensure it will have continuous banking from one of the most stable and trusted global financial institutions.
By contrast, being a part of U B S. Ensure it will have continuous banking from one of the most stable and trusted global financial institutions.
The strength of UBS, we underpin the franchise and provide access to efficient funding as demonstrated by our ability to return all extra ordinary government and central bank facilities.
Speaker 2: The strength of UBS will underpin the franchise and provide access to efficient funding as demonstrated by our ability to return all extraordinary government and central banks a well-defined and uniform world as our nation
We take our social responsibilities very seriously.
Speaker 2: We take our social responsibilities very seriously.
Speaker 2: This is why I have repeatedly emphasized the fact that employment related consideration must be a key decision making factor in our evaluation.
This is why I have repeatedly emphasized the fact that employment related consideration must be a key decision making factor in our evaluation.
Sergio Ermotti: But let me make one thing absolutely clear. Our ability to stabilize Credit Swiss and return the government guarantees in a timely fashion should not take away from the gravity of the situation we inherited. Nor should it diminish the scope and scale of the task ahead.
Speaker 2: We have analyzed their impact in both absolute terms and in relation to the Swiss job market. Every
We have analyzed their impact in both absolute terms and in relation to the suites Java market.
Every last drop is painful for us.
Speaker 2: Unfortunately, in this situation, cuts were unavoidable, regardless of the selected scenario.
Unfortunately in this situation cuts were unavoidable, regardless of this of the selected scenario.
We are committed to minimizing the impact on employees bites treating them fairly providing them with financial support outplacement services and re training opportunities.
Speaker 2: We are committed to minimizing the impact on employees by treating them fairly, providing them with financial support, out-placement services, and retraining opportunities.
Sergio Ermotti: So, that being said, let me work you through how we come to our decision on the future of Credit Swiss Shrides. As I promise when I return as a CEO a few months ago, the decision would be driven by facts, not emotions and mindful of the extraordinary circumstances of the transaction. We conducted an extremely total review involving teams comprise of some of the best people across both firms with support from external experts were needed.
Speaker 2: Our aim here is to enable tools affected to take advantage of a quite healthy Swiss job market where more open positions in finance are available than there are job seekers.
Our aim here is to enable those affected to take advantage of a quite healthy suites job market, where more open positions in finance harder available than there are dropped seekers.
Speaker 2: Let me emphasize, the vast majority of the cost reduction will come from natural attrition, retirement and internal mobility.
Let me emphasize the vast majority of the cost reduction will come from natural attrition retirements and internal mobility.
Sergio Ermotti: Our analysis focused on four key aspects that, for us, would determine the long-term viability of the business. We examined what the decision would entail for our clients, shareholders and employees. And we gave special consideration to financial and funding sustainability. We started with a broad spectrum of possibilities ranging from IPO, sale, partial or full integration to a spin-off and even a dual brand strategy. Eventually, based on our criteria, we narrowed down our selection to the two best options, a full integration or a spin-off of a focus perimeter, which would exclude segments requiring global capabilities.
Around 1000 redundancies will result from the integration of credit Suisse flights.
Speaker 2: around 1000 redundancies will result from the integration of Credit Suisse Schwite.
Speaker 2: This will be spread over a couple of years, starting in late 2024. Importantly,
This will be spread over a couple of years starting in late 2024.
Importantly, the alternative spinoff scenario.
In the alternative spinoffs scenario restructuring would also have been necessary.
Speaker 2: In the alternative spin-off scenario, restructuring would also have been necessary and resulted in about 600 redone.
And resulted in about 600 redundancies.
In addition, the necessity to profoundly restructure other parts of <unk> Suisse is expected to lead to about 2000 additional redundancies in Switzerland over the next couple of years.
Speaker 2: In addition, the necessity to profoundly restructure other parts of Credit Suisse is expected to lead to about 2,000 additional redundancies in Switzerland over the next couple of years.
After waiting all the above factors, we come to the view that a full integration is the best way forward.
Speaker 2: After waiting all the above factors, we come to the view that a full integration is the best way for
Sergio Ermotti: The final outcome was crystal clear. Full integration is by far the best choice. It is not just that the financial merits of integration are greater. It is also the best way forward for our clients, for whom the industry leading offering will improve and broaden as we combine products and capabilities from both firms. The alternative would have been a bleak one. Considering the current situation combined with the necessity to carve out most of its global capabilities.
Our decision reinforces our commitment to clients employees and the Swiss economy.
Speaker 2: Our decision reinforces our commitment to clients, employees and the Swiss economy.
Speaker 2: Our goal is to make the integration and the transition for clients as smooth as possible.
Our goal is to make the integration.
And the transition for clients as smooth as possible.
The two suites ring fenced entities will operate separately until their planned legal integration in 2024.
Speaker 2: The two Swiss ring fence entities will operate separately until their planned legal integration in 2024.
Speaker 2: Criticis brand and operation will remain separate during that time.
Credit Suisse brands and operation will remain separate during that time.
Speaker 2: We will gradually migrate clients onto our system and expect to finish this process in 2025.
We will gradually migrate clients onto our system and expect to finish this process in 2025.
Sergio Ermotti: Even a more focused spin-off of pretty switch-wide would fail to meet the needs of many of its corporate clients, as well as the entrepreneurs it considers core. At the same time, separation from the group would entail a costly, risky and lengthy carve-out[inaudible] and other platforms, causing uncertainty for clients and employees for years to come. Moreover, our analysis revealed a substantial dependency of the Swiss subsidiary on financial resources and operational support from the parent.
Speaker 2: Given this, nothing will change for clients in the foreseeable future and they do not have to take any immediate action.
Given this nothing will change for clients in the foreseeable future.
They do not have to take any immediate action.
Speaker 2: We will continue to provide the premier levels of service that they have come to expect.
We will continue to provide the premier levels of service that they have come to expect.
And with the time, they will begin to see the further benefits of the combined franchise.
Speaker 2: and with the time they will begin to see the further benefits of the combined franchise.
Speaker 2: As we progress in the integration, we remain fully committed to our personal, private, institutional and corporate clients.
As we progress in the integration, we remain fully committed to our personal private institutional and corporate clients.
In terms of lending.
Sergio Ermotti: As a result, it would have existed as a fragile entity, struggling to close its funding gap, unable to compete effectively. And failing to deliver sustainable returns. We believe this would not have been an acceptable proposition for clients, employees, and very likely regulators. By contrast, being a part of UBS, ensure it will have continuous banking from one of the most stable and trusted global financial institutions. The strength of UBS will underpin the franchise and provide access to efficient funding as demonstrated by our ability to return all extraordinary government and central bank facilities.
Speaker 2: Thanks to our even stronger capital base, our intention is to keep the combined exposure on chain.
Thanks to our even stronger capital base.
Our intention is to keep the combined exposure unchanged.
Speaker 2: We are sensitive to the important role both firms play in the lives of our employees and their communities.
We are sensitive to the important role both firms broke play in the lives of our employees and their communities.
Speaker 2: We want to remain an employer of CHI's in Switzerland offering attractive career opportunities.
We want to remain.
An employer of choice in Switzerland, offering attractive career opportunities.
Speaker 2: Last but not least, as we combine, we will honor all agreed sponsorships of civic, sporting and cultural activities in Switzerland at least until the end of 2025.
Last but not least as we combine we will own or all agreed sponsorships of civic sporting and cultural activities in Switzerland at least until the end of 2025.
Speaker 2: I have made it abundantly clear to our colleagues that they must not be distracted by the integration.
I have made it abundantly clear to our colleagues that they must not be distracted by the integration.
Sergio Ermotti: We take our social responsibilities very seriously. This is why I have repeatedly emphasized the fact that employment related consideration must be a key decision making factor in our evaluation. We have analyzed their impact in both absolute terms and in relation to the Swiss job market. Every lost job is painful for us. Unfortunately, in this situation, Katz were unavoidable regardless of the selected scenario. We are committed to minimizing the impact on employees by treating them fairly, providing them with financial support, out placement services, and retraining opportunities.
Speaker 2: We cannot take our eyes off our vision and must remain focused on client needs. After all, competition in the Swiss market remains robust.
We cannot take our eyes off our vision and must remain focused on clients needs. After all competition in the Swiss market remains robust.
Speaker 2: The Cantanal Banks in aggregate will continue to have the highest market shares in all relevant personal and commercial banking products.
Cantonal banks in aggregate will continue to have the highest market shares in all relevant personal and commercial banking products.
Speaker 2: And our branch network, even after the merger, is the third big
Our branch network, even after the merger is the third biggest.
Speaker 2: We welcome the challenge. Competition is what makes all of us better and what makes the Swiss financial system stronger.
We will come to challenge competition is what makes all of us better and what makes the Swiss financial system stronger.
Now given the events, leading up to the acquisition stabilizing the credit Suisse client franchises globally has been our most immediate priority.
Speaker 2: Now, given the events leading up to the acquisition, stabilizing the Credit Suisse client franchise is globally as being our most immediate priority.
Since closing in June we have.
Speaker 2: Since closing in June , we have won back clients' confidence as evidenced by the positive asset flows and strong engagement across wealth management and the Swiss business. We saw formidable momentum in deposits with $23 billion in inflows for the quarter, $18 billion of which came into Credit Suisse's wealth management and Swiss banks.
One back clients confidence as evidenced by the positive asset flows and strong engagement across wealth management and the Swiss business.
Sergio Ermotti: Our aim here is to enable those affected to take advantage of a quite healthy Swiss job market, where more open positions in finance are available than there are job seekers. Let me emphasize, the vast majority of the cost reduction will come from natural attrition, retirement, and internal mobility. Around 1,000 redundancies will result from the integration of credits with Swiss. This will be spread over a couple of years starting in late 2024.
We so formidable momentum in deposits with $23 billion in inflows for the quarter 18 billion of which come into credit Suisse's wealth management and Swiss Bank.
Speaker 2: Meanwhile, UBS welts a manager as the lever, the highest second quarter net new money performance in over a decade.
Meanwhile, UBS wealth management has delivered the highest second quarter net new money performance in over a decade.
We are pleased to share that this positive trend as Kerry.
Speaker 2: We are pleased to share that this positive trend has carried on into July and August .
One into July and August .
While the quarter is not over yet so far we have attracted net new assets of eight billions for the combined wealth management businesses.
Speaker 2: While the quarter is not over yet, so far we have attracted many new assets of eight billions for the combined wealth management business.
Sergio Ermotti: Importantly, the alternative spin of scenario, in the alternative spin of scenario, restructuring would also have been necessary and resulted in about 600 redundancies. In addition, the necessity to profoundly restructure other parts of credits with is expected to lead to about 2,000 additional redundancies in Switzerland over the next couple of years. Rtters, After waiting all the above factors we come to the view that a full integration is the best way forward. Our decision reinforces our commitment to clients, employees, and the Swiss economy.
Speaker 2: It is encouraging and rewarding to see the franchise stabilize so-
It is encouraging and rewarding to see the franchise stabilized so quickly.
Speaker 2: Winning back the more than $200 billion of client access that left Credit Suisse over the past year, one B is...
Winning back the more than $200 billion of client assets that less credit Suisse over the past year one BZ.
Speaker 2: But recapturing as much as we can is one of our top priorities.
About recapturing as much as we can is one of our top priorities.
Okay.
Let's move to assets that have been designated as non core.
Speaker 2: Let's move to assets that have been designated as non-core.
First let me briefly touch on the 9 billion risk weighted assets that will be included in the combined investment bank.
Speaker 2: First, let me briefly touch on the 9 billion resquited assets that will be included in the combined investment bank.
These assets were selected through a disciplined process.
Speaker 2: These assets were selected through a discipline process designed to enhance our global banking and the riveties operations.
Sergio Ermotti: Our goal is to make the integration and the transition for clients as smooth as possible. The two Swiss ring fence entities will operate separately until their planned legal integration in 2024. Credit Swiss brand and operation will remain separate during that time. We will gradually migrate clients onto our system and expect to finish this process in 2025. Given this, nothing will change for clients in the foreseeable future and they do not have to take any immediate action.
<unk> to enhance our global banking and arrive at these operations.
The transfer businesses are expected to be accretive from next year.
Speaker 2: Transial businesses are respected to be accreted from next year.
Speaker 2: They will help dry the economy's skill while adding only 13% to the investment bank's current non-op risk weighted <expletive> .
They will help drive economies of scale, while I think all of the 13% to the investment bank's current non op risk weighted assets.
The remaining 17 billion of credit Suisse's investment Bank as you can see from the chart will be transferred to the newly formed noncore and legacy unit.
Speaker 2: The remaining 17 billion of Credit Suisse's investment bank, as you can see from the chart, will be transferred to the newly formed non-cor and legacy units.
This will also include credit suisse's entire capital release unit as well as selected assets from the combined wealth and asset management businesses that are not aligned with our risk appetite or strategy.
Speaker 2: This will also include Credit Suisse's entire capital release unit, as well as selected assets from the combined wealth and asset management businesses that are not aligned with our risk appetite or strategy.
Sergio Ermotti: We will continue to provide the premier levels of service that they have come to expect. And with the time, they will begin to see the further benefits of the combined franchise. As we progress in the integration, we remain fully committed to our personal, private, institutional, and corporate clients. In terms of lending, thanks to our even stronger capital base, our intention is to keep the combined exposure unchanged. We are sensitive to the important role both firms play in the lives of our employees and their communities.
Speaker 2: Overall, the non-core legacy will comprise of 224 billion in LRD with a significant portion of high quality and liquid assets and 55 billion in risk-quated assets including excluding uprisk risk-quated assets.
Overall, the noncore legacy will comprise of 224 billion in LR D with a significant portion of high quality and liquid assets.
And 55 billion in risk weighted assets, including excluding op risk risk weighted assets.
Speaker 2: with the perimeter largely defined. We are already executing on our strategy to exit these assets in a timely and efficient manner.
With the perimeter largely defined.
We are already executing on our strategy to exit these assets in a timely and efficient manner.
We made a good start in the second quarter, reducing positions representing a total of 9 billion in risk weighted assets.
Speaker 2: We made a good start in the second quarter, with using positions representing a total of 9 billion in risk-witted assets.
Speaker 2: Around half of those come from sales that we actively pursue.
Around half of those come from sales that we actively pursued.
Sergio Ermotti: We want to remain an employer of choice in Switzerland offering attractive career opportunities. Last but not least, as we combine, we will honor all agreed sponsorships of civic, sporting, and cultural activities in Switzerland at least until the end of 2025. I have made it abundantly clear to our colleagues that they must not be distracted by the integration. We cannot take our eyes off our vision and must remain focused on client needs.
Yeah.
As I mentioned before it is just not the first time our organization as managed a successful round down of non core assets.
Speaker 2: As I mentioned before, this is not the first time our organization has managed a successful rounddown of non-corros.
Speaker 2: Our previous experience is a big part of why we are confident in our ultimate success.
Our previously previous experience is a big part of why we are confident in our ultimate success.
Our clear priority for us is to take out a substantial part of the operating cost associated with these units.
Speaker 2: A clear priority for us is to take out a substantial part of the operating cost associated with this unit. I will
I will touch on that and I mean, it's.
Thanks to our strong capital position and markdowns, we took as part of the PPA adjustments.
Speaker 2: Thanks to our strong capital position and markdowns we took a part of the PPA just
Sergio Ermotti: After all, competition in the Swiss market remains robust. The Cantonese banks in aggregate will continue to have the highest market shares in all relevant personal and commercial banking products. And our branch network, even after the merger, is the third biggest. We welcome the challenge. Competition is what makes all of us better and what makes the Swiss financial system stronger.
We have substantial flexibility in order to optimize the outcome.
Speaker 2: We have substantial flexibility in order to optimize the out.
These are not distressed assets. So we can maintain positions if they preserve value.
Speaker 2: These are not distress assets, so we can maintain positions if they preserve value.
Speaker 2: Our decision whether to do so will be based on economic profitability, taking into account funding, operating and capital costs of the portfolio.
Our decisions whether to do so will be based on economic profitability, taking into account funding operating and capital costs.
The portfolio.
On those positions, we do decide to exit we will move at the pace acting fairly and protecting our clients and counterparties.
Sergio Ermotti: Now, given the events leading up to the acquisition, stabilizing the credit Swiss client franchise is globally as being our most immediate priority. Since closing in June, we have won back clients' confidence as evidenced by the positive asset flows and strong engagement across wealth management and the Swiss business. We saw formidable momentum in deposits with 23 billion dollars in inflows for the quarter, 18 billion of which came into credit Swiss wealth management and Swiss banks.
Speaker 2: On those positions we do decide to exit, we will move at pace, acting fairly and protecting our clients and counterparts.
Speaker 2: The National Roadrunoff profile is a steep one. As you can see from the chart, we will have a 50% or 27 billion reduction in non-op risk risk-related assets by 2026, and a similar reduction in other LRDs.
The natural runoff profile is a steep one.
As you can see from the chart, we will have a 50% or 27 billion reduction in non op risk risk weighted assets by 2026, and a similar reduction in our LRT.
But let me assure you that our proactive approach to accelerate the wind down will continue.
Speaker 2: But let me assure you that our proactive approach to accelerate the wind down will continue.
Sergio Ermotti: [inaudible] David, I will touch on that in a minute. Thanks to our strong capital position and markdowns we took as part of the PPA adjustments. We have substantial flexibility in order to optimize the outcome. These are not distress assets, so we can maintain positions if they preserve value. Our decisions, whether to do so, will be based on economic profitability, taking into account funding, operating and capital costs of the portfolio. On those positions we do decide to exit, we will move at pace, acting fairly and protecting our clients and our counterparties.
Yeah.
Speaker 2: Now let's turn to cost reduction, a key element of returning to profitability and creating sustainable value across the combined firms.
Now, let's turn to cost reductions a key element of returning to profitability and creating sustainable value across the combined firm.
Speaker 2: First, as we speak, we are actively addressing the need for deep restructuring at reduced wisdom.
First as we speak we are actively addressing the need for deep restructuring at credit Suisse.
This is an acceleration and expansion of the work that the firm itself, so as necessary to put a stop to losing money.
Speaker 2: This is an acceleration and expansion of the work that the firm itself so as necessary to put a stop to losing money.
Speaker 2: Secondly, additional efforts are required to generate synergies across the combined business.
Secondly, additional efforts are required to generate synergies across the combined businesses.
Speaker 2: We aim to take out over $10 billion in gross expenses from the combined franchise, based on Fulure 2022 cost-based.
We aim to take out over $10 billion in gross expenses from the combined franchise based on full year 2022 cost base.
Around half of that will come from restructuring the investment bank and running down non core assets.
Speaker 2: Around half of that will come from restructuring the investment bank and running down non-correct.
Speaker 2: The other half will come from actions across the rest of our operations.
The other half will come from actions across the rest of our operations.
There is meaningful application that can be removed thousands of applications and platforms to be the commission.
Speaker 2: There is meaningful duplication and can be removed. Thousands of applications and IT platforms to be decommissioned and others of legal entities to be merged or closed to make us more efficient and effective.
And under some legal entities to be merged or close to make us more efficient and effective.
Let me give you. An example of previous Suisse's current 3000, plus 80 application only around 300 will be integrated into UBS infrastructure contributing to our combined future business model.
Speaker 2: Let me give you an example of previous Swiss current 3000 plus IT application. Only around 300 will be integrated into UBS infrastructure, contributing to our combined future business model.
Speaker 2: importantly, we will continue investing to make our platforms and processes more resilient and support our existing and future growth ambitions.
Importantly, we will continue investing to make our platforms and processes more resilient and support our existing and future growth ambitions.
We will also absorb some further inflation.
Speaker 2: We will also absorb some further inflation.
All told we aim to bring the group's underlying cost income ratio exit rate below 70% in 2026.
Speaker 2: All told, we aim to bring the groups underlying costing commercial exit rate below 70% in 2026.
Okay.
Speaker 2: We are two and a half months into one of the biggest and most complex bank mergers in East
We are two and a half months into one of the biggest and most complex bank mergers in history. We are executing our plans at pace and wasting no time in delivering value for all our stakeholders, including shareholders.
Speaker 2: We are executing our plans at pace and wasting no time in delivering value for all our stakeholders, including Cheryl.
In the next four to six months, our focus will be on restoring underlying profitability, while progressing on other areas, including business transformation client migration and simplification of our combined legal entity structure.
Speaker 2: In the next four to six months, our focus will be on restoring underlying profitability while progressing on other areas, including business transformation, client migration and simplification of our combined legal entity structure.
On the latter a key milestone will be the merger of our parent operating entities UBS AG and credit Suisse AG.
Speaker 2: On the latter, a key milestone will be the merger of our parent operating entities, UBS AG and Credit Suisse AG.
Speaker 2: This step, plan for 2024, will allow us to simplify our structure and operating model, optimize capital and liquidity within the group, and will support achieving our cost savings ambitions.
This step plan for 2024 will allow us to simplify our structure and operating model optimize capital and liquidity within the group.
And we'll support achieving our cost savings ambitions.
We expect to substantially complete our integration program by 2026.
Speaker 2: We expect to substantially complete our integration program by 2026.
A key pillar of our strategy is to maintain a balance sheet for all seasons, one that supports our capital generative business and allows us to offer attractive capital returns.
Speaker 2: a keep pillar of our strategies to maintain a balance sheet for all seasons.
Speaker 2: one that supports our capital, generative business and allows us to offer a practice capital return.
Speaker 2: We expect to operate at around 14% city one capital ratio over the medium term.
We expect to operate at around 14% CET, one capital ratio over the medium term.
Speaker 2: And as we exit 2020-26, we aim to achieve an underlying return on city one of around 15%.
And as we exit 2026th we aim to achieve an underlying return on CET one off of around 15%.
Speaker 2: As you know, we have suspended share repurchases for the time being.
As you know we have suspended share repurchases for the time being.
Sergio Ermotti: The national road runoff profile is a steep one. As you can see from the chart, we will have a 50% or 27 billion reduction in non-op risk risk related assets by 2026 and a similar reduction in LRD. But let me assure you that our proactive approach to accelerate the wind down will continue.
Speaker 2: but we remain committed to growing our dividend and returning excess capital to shareholders through bye-bye.
But we remain committed to growing our dividend and returning excess capital to shareholders through buybacks.
We will update you on our plans in this regard with the fourth quarter results.
Speaker 2: We will update you on our plans in this regard with the fourth quarter results. With that, let me...
With that let me handover to Todd.
Thank you Sergio and good morning, everyone. It is a privilege to be with you today as group CFO , especially at this watershed moment for UBS.
Speaker 3: Thank you Sergio. Good morning everyone. It is a privilege to be with you today as Group CFO , especially at this watershed for UBS.
Sergio Ermotti: Now let's turn to cost reduction, a key element of returning to profitability and creating sustainable value across the combined firm. First, as we speak, we are actively addressing the need for deep restructuring at reduced risk. This is an acceleration and expansion of the work that the firm itself so as necessary to put a stop to losing money. Secondly, additional efforts are required to generate synergies across the combined businesses. We aim to take out over $10 billion in gross expenses from the combined franchise based on full year 2022 cost-based.
Speaker 3: Since my appointment, my focus has been on the financial consolidation of the two firms. Progressing the work done on transaction adjustments, optimizing
Since my appointment my focus has been on the financial consolidation of the two firms.
Progressing the work done on transaction adjustments.
<unk>, our liquidity and funding position.
Speaker 3: Firming up our cost savings and enhancing financial reporting controls for the expanded group.
Firming up our cost savings and enhancing financial reporting controls for the expanded group.
Regardless of whether staff come from credit Suisse UBS I've been extremely impressed with the dedication of the finance team.
Speaker 3: Regardless of whether staff come from credit Swiss or UBS, I've been extremely impressed with the dedication of the finance.
Speaker 3: I'm proud of what we as a unit have already been able to accomplish and we, like the entire firm, continue to execute at pace.
I'm proud of what we as a unit have already been able to accomplish and we like the entire firm continued to execute at pace.
We recognize that this is a complex deal.
Speaker 3: We recognize that this is a complex deal, but our aim is to be clear and forthcoming in explaining the financial implications of our actions during this critical period and beyond.
But our aim is to be clear and forthcoming in explaining the financial implications of our actions during this critical period and beyond.
Sergio Ermotti: Around half of that will come from restructuring the investment bank and running down non-corrasses. The other half will come from actions across the rest of our operations. There is meaningful duplication and can be removed, thousands of applications and IT platforms to be decommissioned, and hundreds of legal entities to be merged or closed to make us more efficient and effective. Let me give you an example of previous wishes current 3000 plus IT applications only around 300 will be integrated into UBS infrastructure contributing to our combined future business model.
Today I'll cover our second quarter operating performance the impact of the merger on our balance sheet and capital as of day one.
Speaker 3: the impact of the merger on our balance sheet and capital as of day one, and finally, our integration plan and outlook.
And finally, our integration plan and outlook.
Let's start with the quarter on slide 17.
I'll refer to UBS group AG consolidated results, which this quarter include one month of credit Suisse's operating performance.
Speaker 3: I'll refer to UBS Group AG's consolidated results, which this quarter include one month of Credit Suisses operating performance, presented under IFRS, and
<unk> under I for us and in U S dollars.
On a reported basis the second quarter profit was 29 billion, both pre and post tax.
Speaker 3: On a reported basis, the second quarter profit was 29 billion, both pre and post-tack.
These results were largely driven by the net impact from items related to the acquisition.
Speaker 3: These results were largely driven by the net impact from items related to the acquisition.
Sergio Ermotti: Importantly, we will continue investing to make our platforms and processes more resilient and support our existing and future growth ambitions. We will also absorb some further inflation. All told, we aim to bring the groups underlying cost-income ratio exit rate below 70% in 2026.
Principally negative goodwill of $28 9 billion and integration related expenses and acquisition costs.
Speaker 3: principally negative goodwill of 28.9 billion and integration related expenses and acquisition costs.
Speaker 3: Excluding these items, the Group Pretax Profit was 1.1 billion, of which 2 billion from the UBS subgroup and negative 0.8 billion from the Credit Swiss subgroup.
Excluding these items the group pretax profit was $1 1 billion of which 2 billion from the U B S subgroup and negative 0.8 billion from the credit Suisse subgroup.
Turning to slide 18.
Speaker 3: The negative goodwill of 28.9 billion is calculated as the difference between the consideration UBS paid and the fair value of the-
Negative goodwill of $28 9 billion is calculated as the difference between the consideration UBS paid.
Sergio Ermotti: Thanks. We are two and a half months into one of the biggest and most complex bank mergers in history. We are executing our plans at pace and wasting no time in delivering value for all our stakeholders, including shareholders. In the next four to six months, our focus will be on restoring underlying profitability while progressing on all other areas, including business transformation, client migration and simplification of our combined legal entity structure. On the latter, a key milestone will be the merger of our parent operating entities, UBS AG and Credit Suisse AG.
And the fair value of the acquired net assets after taking into account the various PPA adjustments of negative <unk> 25 billion.
Speaker 3: After taking into account the various PPA adjustments of negative 25 billion.
The roughly 6 billion difference between the negative goodwill reported today and the amount included in form F. Four registration statement just prior to closing is principally explained by two factors.
Speaker 3: The roughly six billion difference between the negative goodwill reported today and the amount included in the form F4 registration statement just prior to closing is principally explained by
First credits.
Speaker 3: Credit's was generated operating losses over the first five months of 2023 that were not captured in the F4, which was prepared as if the transaction occurred on December 31st, 2022.
Credit Suisse generated operating losses over the first five months of 2023 that were not captured in the F. Four.
Which was prepared as if the transaction occurred on December 31 2022.
Speaker 3: Second, we applied additional net negative PPA adjustments to credits with his financial assets and liabilities, reflecting a more detailed fair value assessment post-close.
Second we applied additional net negative PPA adjustments to credit suisse's financial assets and liabilities, reflecting a more detailed fair value assessment post closing.
Sergio Ermotti: This step planned for 2024 will allow us to simplify our structure and operating model, optimize capital and liquidity within the group and will support achieving our cost savings ambitions. We expect to substantially complete our integration program by 2026. A key pillar of our strategies to maintain a balance sheet for all seasons, one that supports our capital, generative business and allows us to offer attractive capital returns. We expect to operate at around 14% city one capital ratio over the medium term.
The total net PPA adjustments of negative 25 billion consists primarily of marks of negative $14 7 billion in connection with financial assets and liabilities. This includes negative $12 4 billion on mainly fixed rate accrual assets and liabilities.
Speaker 3: The total net PPA adjustments of negative 25 billion consists primarily of marks of negative 14.7 billion in connection with financial assets and liability.
Speaker 3: This includes negative 12.4 billion on mainly fixed rate of cruel assets and liabilities, of which around 8.5 billion relates to our core businesses, and around 4 billion to
Of which around eight and a half billion relates to our core businesses.
And around $4 billion to non core and legacy.
In addition, we made negative $2 3 billion of further necessary adjustments to fair value positions.
Speaker 3: In addition, we made negative 2.3 billion of further necessary adjustments to fair value positions, mostly related.
Mostly related to non core and legacy.
The negative eight and a half billion of marks on core business accrual financial instruments include for example, PPA adjustments on the Swiss mortgage book, which were almost entirely interest rate driven.
Speaker 3: The negative eight and a half billion of marks on core business, accrual financial instruments include, for example, PPA adjustments on the Swiss mortgage book, which were almost entirely interest rate driven.
Sergio Ermotti: And as we exit 2026, we aim to achieve an underlying return on city one of around 15%. As you know, we have suspended share repurchases for the time being. But we remain committed to growing our dividend and returning excess capital to shareholders through buybacks.
Yeah.
Speaker 3: The majority of the accrual basis positions are expected to mature within the next three to four years, and if held to maturity, will pull to par.
The majority of the accrual basis positions are expected to mature within the next three to four years and is held to maturity will pull to par.
Of the total marks on accrual positions 6 billion pretax or 5 billion net of tax.
Speaker 3: 6 billion PRETAX or 5 billion NETAX or CET-1 capital neutral, as FinMa has granted us transitional relief, which mainly applies to Swiss Mort GG
Sergio Ermotti: We will update you on our plans in this regard with the fourth quarter results.
Our CET one capital neutral.
Todd Tuckner: With that, lend me and over to Todd. Thank you, Sergio.
FINMA has granted granted us transitional relief, which mainly applies to Swiss mortgages.
Speaker 3: The transitional treatment is subject to linear amortization concluding by June 30, 2027. The transitional treatment is subject to linear amortization concluding by June 30, 2027.
Todd Tuckner: Good morning, everyone. It is a privilege to be with you today as Group CFO, especially at this watershed moment for UBS. Since my appointment, my focus has been on the financial consolidation of the two firms, progressing the work done on transaction adjustments, optimizing our liquidity and funding position, firming up our cost savings, and enhancing financial reporting controls for the expanded group. Regardless of whether staff come from credit Swiss or UBS, I've been extremely impressed with the dedication of the finance team.
The transitional treatment is subject to linear amortization concluded by June 30, 'twenty 'twenty seven.
Speaker 3: The negative marks of 2.3 billion on fair value assets and liabilities that I mentioned earlier reflect UBS's assessment of the complexity, liquidity, and model risk uncertainties in the book.
The negative marks of $2 3 billion on fair value assets and liabilities that I mentioned earlier reflect ubs's assessment of the complexity liquidity and model risk uncertainties in the book.
Speaker 3: as well as the relevant markets for potential strategic exits.
As well as the relevant markets for potential strategic exits.
Speaker 3: We also made PPA adjustments of negative 4.5 billion to capture UBS's determination of credits with provisions and contingent liabilities related to litigation, regulatory, and similar matters.
We also made PPA adjustments of negative $4 5 billion to capture Ubs's determination of credit suisse's provisions and contingent liabilities related to litigation regulatory and similar matters.
Todd Tuckner: I'm proud of what we as a unit have already been able to accomplish, and we, like the entire firm, continued to execute at pace. We recognize that this is a complex deal, but our aim is to be clear and forthcoming in explaining the financial implications of our actions. Actions during this critical period and beyond.
Speaker 3: This includes 1.5 billion of incremental provisions credits, which took in the second quarter.
This includes $1 5 billion of incremental provisions credit Suisse took in the second quarter.
Other net PPA adjustments totaling to negative $5 5 billion largely relate to GAAP differences associated with pension accounting, but also goodwill and intangibles and fair value marks on nonfinancial assets and liabilities, including software and real estate.
Speaker 3: Other net PPA adjustments, totaling to negative five and a half billion, largely relate to gap differences associated with pension accounting, but also goodwill and intangibles. And fair value marks on non-financial assets and liabilities, including software and real estate.
Todd Tuckner: Today I'll cover our second quarter operating performance, the impact of the merger on our balance sheet and capital as of day one, and finally our integration plan and outlook. Let's start with the quarter on slide 17. I'll refer to UBS Group AG's consolidated results, which this quarter include one month of credit's wishes operating performance. Presented under IFRS and in US dollars. On a reported basis, the second quarter profit was 29 billion, both pre and post tax.
Okay.
Speaker 3: of the total negative 25 billion of PPA adjustments.
Of the total negative <unk> 25 billion of PPA adjustments negative 17 billion is CET, one capital relevant with the balance relating to the 5 billion regulatory waiver I mentioned earlier.
Speaker 3: Negative 17 billion is CET-1 capital relevant. With the balance relating to the 5 billion regulatory waiver I mentioned earlier, and other items that are filtered out of CET-1 capital, such as pension accounting differences, goodwill.
And other items that are filtered out of CET, one capital such as pension accounting differences.
Goodwill and intangibles.
Todd Tuckner: These results were largely driven by the net impact from items related to the acquisition, principally negative goodwill of 28.9 billion and integration related expenses and acquisition costs. Excluding these items, the group pre-tax profit was 1.1 billion, of which 2 billion from the UBS subgroup and negative 0.8 billion from the credit's wish subgroup. Turning to slide 18, the negative goodwill of 28.9 billion is calculated as the difference between the consideration UBS paid and the fair value of the acquired net assets.
Overall, we believe the negative goodwill, including the PPA adjustments there in in.
Speaker 3: Overall, we believe the negative goodwill, including the PPA adjustments therein,
Speaker 3: In addition to underpinning almost 240 billion of acquired RWA
In addition to underpinning almost 240 billion of acquired <unk>.
Speaker 3: provides us with sufficient capacity to absorb the cost to achieve our two key savings subject.
Provides us with sufficient capacity to absorb the cost to achieve our two key savings objectives.
Speaker 3: First, an efficient wind down of the non-core businesses and associated overhead we acquired.
First inefficient wind down of the noncore businesses and associated overhead we acquired.
Speaker 3: Second, positive operating leverage and synergies in our core franchise.
And second positive operating leverage and synergies in our core franchises.
All while remaining capital generative over the integration timeline.
Speaker 3: all while remaining capital-generative over the integration timeline.
Yeah.
Todd Tuckner: After taking into account the various PPA adjustments of negative 25 billion. The roughly 6 billion difference between the negative goodwill reported today and the amount included in the form F4 registration statement, just prior to closing, is principally explained by two factors. First, credits was generated operating losses over the first five months of 2023 that were not captured in the F4, which was prepared as if the transaction occurred on December 31, 2022.
Speaker 3: We are highly confident that we can successfully integrate credits with.
We are highly confident that we can successfully integrate credit suisse enhancing our business model and operating metrics, while continuing to ensure we maintain world class capital ratios and our balance sheet for all seasons.
Speaker 3: enhancing our business model and operating metrics while continuing to ensure we maintain world-class capital ratios and a balance sheet for all seasons.
Speaker 3: On page 19 we illustrate how the transaction strengthens key financial measures from day one, offering us a highly attractive starting point as we commence this journey.
On page 19, we illustrate how the transaction strengthens key financial measures from day, one offering us a highly attractive starting point as we commenced this journey.
Speaker 3: Since the acquisition, our capital position is even stronger, with almost 200 billion total loss absorbing capacity, and a CET-1 capital ratio of 14.4%.
Since the acquisition our capital position is even stronger with almost 200 billion total loss absorbing capacity and a CET one capital ratio of 14, 4%.
Todd Tuckner: Second, we applied additional net negative PPA adjustments to credits with financial assets and liabilities, reflecting a more detailed fair value assessment post closing. The total net PPA adjustments of negative 25 billion consists primarily of marks of negative 14.7 billion in connection with financial assets and liabilities. This includes negative 12.4 billion on mainly fixed rate of cruel assets and liabilities, of which around 8.5 billion relates to our core businesses and around 4 billion to non-core and legacy.
Speaker 3: Additionally, our tangible book value per share is up 49% quarter on quarter. And today, we manage over five and a half trillion dollars of invested assets with a unique and meaningful presence in all the major markets across the globe.
Additionally, our tangible book value per share is up 49% quarter on quarter and today, we manage over five and a half a trillion dollars of invested assets with a unique and meaningful presence in all the major markets across the globe.
Remaining on capital on Slide 20.
The strength of our balance sheet is the foundation of our success and the reason why we were able to restore financial stability and client trust in such a short amount of time.
Speaker 3: The strength of our balance sheet is the foundation of our success, and the reason why we were able to restore financial stability and client trust in such a short amount of time.
Todd Tuckner: In addition, we made negative 2.3 billion of further necessary adjustments to fair value positions, mostly related to non-core and legacy. The negative 8.5 billion of marks on core business, a cruel financial instruments include, for example, PPA adjustments on the Swiss mortgage book, which were almost entirely interest rate driven. The majority of the accrual basis positions are expected to mature within the next three to four years, and if held to maturity, will pull to par, of the total marks on a cruel positions, six billion pre-tax, or five billion net of tax, or CET-1 capital neutral, as Phinma has granted us transitional relief, which mainly applies to Swiss mortgages.
As at the end of June as just mentioned our CET one capital ratio was 14, 4% and our CET one leverage ratio was four 8%.
Speaker 3: As at the end of June , as just mentioned, our CET1 capital ratio was 14.4%, and our CET1 leverage ratio was 4.8%.
Included in our capital ratio this quarter are the impacts from the closing of the credit Suisse acquisition.
Speaker 3: Included in our capital ratio this quarter are the impacts from the closing of the credit Swiss acquisition, including a 10 billion operational risk RWA reduction from diversification benefits and a combined lower forward-looking risk profile.
Including a 10 billion operational risk <unk> reduction from diversification benefits and a combined lower forward looking risk profile.
Speaker 3: Looking through to the end of the year, we expect our CET-1 capital ratio to remain around 14% as the benefit of RWA reduction.
Looking through to the end of the year, we expect our CET one capital ratio to remain around 14% as the benefit of <unk> reductions improvements in our underlying profitability, mainly from cost saves and CET, one capital relevant pull to par effects from.
Speaker 3: improvements in our underlying profitability, mainly from cost sales, and CET-1 capital relevant pulled to par effects from the PPA adjust.
The PPA adjustments.
Speaker 3: are expected to largely but not fully offset integration related expense.
Our expected to largely but not fully offset integration related expenses.
Todd Tuckner: The transitional treatment is subject to linear amortization, concluding by June 30, 2027. The negative marks of 2.3 billion on fair value assets and liabilities that I mentioned earlier reflect UBS's assessment of the complexity, liquidity, and model risk uncertainties in the book, as well as the relevant markets for potential strategic exits. We also made PPA adjustments of negative 4.5 billion to capture UBS's determination of credits with provisions and contingent liabilities related to litigation, regulatory, and similar matters.
We also expect to maintain our CET, one capital ratio of around 14% and a C. E T. One leverage ratio of more than 4% over the medium term.
Speaker 3: We also expect to maintain a CET-1 capital ratio of around 14% and a CET-1 leverage ratio of more than 4% over the medium term.
Speaker 3: You have often heard us referring to our bound sheet for all seasons and our capital generative operating model that allows us to service clients and invest in the business through the cycle.
You have often heard is referring to our balance sheet for all seasons and our capital generative operating model that allows us to service clients and invest in the business through the cycle. It's.
Speaker 3: It's how we've operated over the last decade and it's how we intend to continue to operate going forward.
It's how we've operated over the last decade, and it's how we intend to continue to operate going forward.
Speaker 3: So rest assured, maintaining a balance sheet for all seasons will remain among our very top priority.
So rest assured maintaining a balance sheet for all seasons will remain among our very top priorities.
Speaker 3: On liquidity and funding on slide 21, we close the quarter with an average liquidity coverage ratio of 175% well above our prior quarter level and a net stable funding ratio of 118%.
On liquidity and funding on slide 21, we closed the quarter with an average liquidity coverage ratio of 175% well above our prior quarter level and the net stable funding ratio of 118%.
Todd Tuckner: This includes 1.5 billion of incremental provisions credits with Tuck in the second quarter. Other net PPA adjustments, totaling to negative 5.5 billion, largely relate to gap differences associated with pension accounting, but also goodwill and intangibles, and fair value marks on non-financial assets and liabilities, including software and real estate. Of the total negative 25 billion of PPA adjustments, negative 17 billion is CET-1 capital relevant, with the balance relating to the 5 billion regulatory waiver I mentioned earlier, and other items that are filtered out of CET-1 capital, such as pension accounting differences, goodwill, and intangibles.
The liquidity coverage ratio increase largely reflects the elevated <unk> levels of credit Suisse, including the effect of the usage of the Swiss National Bank facilities.
Speaker 3: The liquidity coverage ratio increase largely reflects the elevated HQLA levels of credit Swiss, including the effect of the usage of the Swiss national bank facility.
Speaker 3: As Sergio highlighted, positive net new deposits in the past few months enabled us to repay L-A-plus and terminate the public liquidity backstop facility as announced earlier this month.
As Sergio highlighted positive net new deposits in the past few months enabled us to repay L plus and terminate the public liquidity backstop facility as announced earlier this month.
We expect to continue attracting net new deposits and as of this week, we've already seen in the third quarter 13 billion of positive net new deposit flows and our combined wealth management and Swiss franchises.
Speaker 3: We expect to continue attracting net new deposits. And as of this week, we've already seen in the third quarter, 13 billion of positive net new deposit flows in our combined wealth management and Swiss franchises. While this will help us narrow-
Todd Tuckner: Overall, we believe the negative goodwill, including the PPA adjustments therein, in addition to underpinning almost 240 billion of acquired RWA, provides us with sufficient capacity to absorb the cost to achieve our two key savings objectives. First, in efficient wind-down of the non-core businesses and associated overhead we acquired, and second, positive operating leverage and synergies in our core franchises, all while remaining capital-generative over the integration timeline. We are highly confident that we can successfully integrate credit twists, enhancing our business model and operating metrics, while continuing to ensure we maintain world-class capital ratios and a balance sheet for all seasons.
While this will help us narrow the inherited funding gap and continue to manage our liquidity coverage ratio at prudent levels.
Speaker 3: continue to manage our liquidity coverage ratio at prudent levels.
Speaker 3: We expect to resume execution of our funding plans shortly.
We expect to resume execution of our funding plans shortly.
Okay.
In addition to maintaining significant liquidity and funding buffers on a consolidated basis.
Speaker 3: In addition to maintaining significant liquidity and funding buffers on a consolidated base.
Speaker 3: We're actively managing the allocation of financial resources among our significant legal legal aid.
We're actively managing the allocation of financial resources, among our significant legal entities, which also have standalone funding requirements and will continue to operate while we progress towards our target legal entity structure.
Speaker 3: which also have standalone funding requirements and will continue to operate while we progress towards our target legal entity structure.
Speaker 3: We're working towards merging CreditSwiss AG into UBS AG in 2024, as this is a critical step to removing resource allocation bottlenecks.
We're working towards emerging credit Suisse AG into U B S. A G in 2024.
This is a critical step to removing resource allocation bottlenecks and enabling the realization of business and operational efficiencies.
Speaker 3: enabling the realization of business and operational efficiencies. Now I want to...
Now onto slide 22.
Todd Tuckner: On page 19, we illustrate how the transaction strengthens key financial measures from day one, offering us a highly attractive starting point as we commence this journey. Since the acquisition, our capital position is even stronger, with almost 200 billion total loss absorbing capacity, and a CET-1 capital ratio of 14.4%. Additionally, our tangible book value per share is up 49% quarter on quarter and today we manage over five and a half trillion dollars of invested assets with a unique and meaningful presence in all the major markets across the globe.
Excluding credit Suisse's performance in June the.
Speaker 3: The effects of the acquisition I mentioned earlier, and a gain on sale of 848 million in asset management last year.
The effects of the acquisition I mentioned earlier and a gain on sale of $848 million in asset management last year.
Speaker 3: UBS's pre-tax profit in the quarter was $2 billion, up 12% year over year.
UBS is pre tax profit in the quarter was 2 billion up 12% year over year.
Yeah.
Speaker 3: Before turning to the UBS subgroup business division starting on page 23, let me first point out that for the second quarter, the negative goodwill, as well as the substantial portion of integration-related expenses, have been retained and reported in group function.
Before turning to the UBS subgroup business Division starting on page 23, Let me first point out that for the second quarter, the negative goodwill as well as a substantial portion of integration related expenses have been retained and reported and group functions.
Speaker 3: Starting with the third quarter, we intend to consolidate the reporting of our business divisions across the UBS and credits with subgroups, and will report integration related expenses in the respective combined segments.
Starting with the third quarter, we intend to consolidate the reporting of our business divisions across the UBS and credit Suisse subgroups, and we'll report integration related expenses in the respective combined segments.
Todd Tuckner: Remaining on capital on slide 20, the strength of our balance sheet is the foundation of our success and the reason why we were able to restore financial stability and client trust in such a short amount of time. As at the end of June, as just mentioned, our CET1 capital ratio was 14.4% and our CET1 leverage ratio was 4.8%. Included in our capital ratio this quarter are the impacts from the closing of the Credit Suisse acquisition, including a 10 billion operational risk RWA reduction from diversification benefits and a combined lower forward looking risk profile.
Speaker 3: All references to figures are in US dollars and comparisons are year over year unless stated otherwise.
All references to figures are in U S dollars and comparisons are year over year unless stated otherwise.
In global wealth management, we delivered net new money of $16 billion, the strongest second quarter in over a decade with inflows across Switzerland, EMEA and APAC and despite 5 billion in seasonal tax payments in the U S.
Speaker 3: In global wealth management, we delivered net new money of 16 billion, the strongest second quarter and over a decade, with inflows across Switzerland, the Maya and APAC, and despite 5 billion in seasonal tax payments in the U.S.
Speaker 3: We also delivered net new feed generating assets of 13 billion or an annualized growth rate of 4% with positive flows across all regions as well as net new deposits of 5 billion.
We also delivered net new fee generating assets of $13 billion or an annualized growth rate of 4% with positive flows across all regions as well as net new deposits of 5 billion.
These strong inflows across net new money fee generating assets and deposits.
Speaker 3: These strong inflows across net new money, fee generating assets, end deposit.
Todd Tuckner: Looking through to the end of the year, we expect our CET1 capital ratio to remain around 14% as the benefit of RWA reductions, improvements in our underlying profitability mainly from cost sales, and CET1 capital relevant pull to par effects from the PPA adjustments are expected to largely but not fully offset integration related expenses. We also expect to maintain a CET1 capital ratio of around 14% and a CET1 leverage ratio of more than 4% over the medium term.
Speaker 3: demonstrate our continuous focus on active client engagement and the trust our clients place in us.
Demonstrate our continuous focus on active client engagement and the trust our clients place in us.
This was especially important during a quarter, where the macro backdrop and developments with credit Suisse placed a premium on our investment advice and the stability of our gws franchise.
Speaker 3: This was especially important during a quarter where the macro backdrop and developments with credits was placed a premium on our investment advice and the stability of our GWM franchise.
Profit before tax was $1 1 billion down 4%, despite strong growth in EMEA, and Switzerland of 15% and 9% respectively.
Speaker 3: Profit before tax was 1.1 billion, down 4% despite strong growth in AMAIA and Switzerland of 15% and 9% respectively.
Speaker 3: Positive top line contributions from all regions outside of America supported a 1% revenue increase, which was more than offset by higher expense.
Positive top line contributions from all regions outside of Americas supported a 1% revenue increase which was more than offset by higher expenses.
Todd Tuckner: You have often heard us referring to our balance sheet for all seasons and our capital generative operating model that allows us to service clients and invest in the business through the cycle. It's how we've operated over the last decade and it's how we intend to continue to operate going forward. So rest assured, maintaining a balance sheet for all seasons will remain among our very top priorities. On liquidity and funding on slide 21, we close the quarter with an average liquidity coverage ratio of 175%, well above our prior quarter level, and a net stable funding ratio of 118%.
In the Americas revenues were down 4%.
Speaker 3: In the Americas, revenues were down 4%. Mainly as net interest income reflected continued rotation into higher yielding deposits and investments from transactional and sweep deposit accounts.
Mainly as net interest income reflected continued rotation into higher yielding deposits and investments from transactional and sweep deposit accounts.
Speaker 3: Although we expect NII in the Americas to continue to tick down sequentially from ongoing cash sorting and deleveraging in the current rates environment,
Although we expect NII in the Americas to continue to tick down sequentially from ongoing cash sorting and deleveraging in the current rates environment.
We nevertheless continue to see the U S market as a strategic priority for us and hence we continue to invest in the business for future growth.
Speaker 3: As a result, we expect our pre-tax margin in the Americas to be low double digit to mid-teens over the near term.
As a result, we expect our pre tax margin in the Americas to be low double digits to mid teens over the near term.
Todd Tuckner: The liquidity coverage ratio increase largely reflects the elevated HQLA levels of credit Swiss, including the effect of the usage of the Swiss national bank facilities. As Sergio highlighted, positive net new deposits in the past few months enabled us to repay L-a-plus and terminate the public liquidity backstop facility as announced earlier this month. We expect to continue attracting net new deposits, and as of this week, we've already seen in the third quarter 13 billion of positive net new deposit flows in our combined wealth management and Swiss franchises.
Onto total GW AUM revenues net interest income was up 14% year over year and down 3% sequentially, the latter reflecting mix shifts and lower deposit and loan balances, partly offset by higher deposit margins.
Speaker 3: Net interest income was up 14% year over year and down 3% sequentially. The latter reflecting mixed shifts and lower deposit and loan balances, partly offset by higher deposit margin.
Recurring net fee income decreased 3% due to negative market performance, while positive inflows were offset by clients continued repositioning into lower margin solutions.
Speaker 3: Recurring that fee income decreased 3% due to negative market performance while positive inflows were offset by clients continued repositioning into lower margin solutions.
As a reminder, we bill based on daily balances in the Americas and on month end balances everywhere else as such second quarter revenues did not fully reflect june's market rally, which we're seeing benefit the third quarter.
Speaker 3: As a reminder, we bill based on daily balances in the Americas and on month end balances everywhere else. As such, second quarter revenues do not fully reflect June's market rally, which we're seeing benefit the third quarter.
Todd Tuckner: While this will help us narrow the inherited funding gap and continue to manage our liquidity coverage ratio at prudent levels. We expect to resume execution of our funding plans shortly. In addition to maintaining significant liquidity and funding buffers on a consolidated basis, we're actively managing the allocation of financial resources among our significant legal entities, which also have standalone funding requirements and will continue to operate while we progress towards our target legal entity structure.
Speaker 3: Transaction based income decreased 6% impacted by investor uncertain
Transaction based income decreased 6% impacted by investor uncertainty, particularly in Americas, and APAC. However towards the end of the second quarter and into the third we're seeing a pickup in both client sentiment and transactional momentum, especially in APAC.
Speaker 3: Particularly in America's and APAC. However, towards the end of the second quarter and into the third, we're seeing a pickup in both client sentiment and transactional momentum. A speck.
Operating expenses ex litigation integration related expenses, and FX were up 3% driven by increases in technology and personnel expenses.
Speaker 3: Operating expenses, ex litigation, integration related expenses, and FX were up 3% driven by increases in technology and personnel expense.
Todd Tuckner: We're working towards merging Credit Swiss AG into UBS AG in 2024, as this is a critical step to removing resource allocation bottlenecks and enabling the realization of business and operational efficiencies.
Speaker 3: Turning to personal and corporate banking on slide 24.
Turning to personal and corporate banking on slide 24.
Speaker 3: We delivered another record quarter, excluding past one-off game.
We delivered another record quarter, excluding past one off gains.
Speaker 3: Profit before tax was up 54% to 612 million Swiss francs.
Profit before tax was up 54% to 612 million Swiss francs.
Todd Tuckner: Now on to slide 22. Excluding Credit Swiss's performance in June, the effects of the acquisition I mentioned earlier, and a gain on sale of 848 million in asset management last year, UBS's pre-tax profit in the quarter was $2 billion, up 12% year over year. Before turning to the UBS subgroup business division starting on page 23, let me first point out that for the second quarter, the negative goodwill, as well as the substantial portion of integration related expenses, have been retained and reported in group functions.
Speaker 3: Revenues increase 24% with increases across all revenue lines. Highlighting continued momentum in the business.
Revenues increased 24% with increases across all revenue lines highlighting continued momentum in the business.
Net interest income increased by 45% year on year, and 12% quarter on quarter.
Speaker 3: Net interest income increased by 45% year on year and 12% quarter on quarter.
Speaker 3: Equentially we continue to see loan growth while the deposit base remained roughly stable.
Sequentially, we continue to see loan growth, while the deposit base remained roughly stable.
Speaker 3: Costs were up 9% driven by continued tech investments and higher personnel expense.
Costs were up 9% driven by continued tech investments and higher personnel expenses.
Speaker 3: The cost to income ratio was 51%, a seven percentage point improvement year on year demonstrating strong positive operating leverage.
The cost to income ratio was 51% a seven percentage point improvement year on year, demonstrating strong positive operating leverage.
We saw strong momentum with 10% annualized growth in net new investment products and almost 6000 net new clients, reflecting the trust our clients continued to place in us.
Speaker 3: We saw a strong momentum with 10% annualized growth in net new investment products and almost 6,000 net new clients.
Todd Tuckner: Starting with the third quarter, we intend to consolidate the reporting of our business divisions across the UBS and Credit Swiss subgroups and will report integration related expenses in the respective combined segments. All references to figures are in US dollars and comparisons are year over year unless stated otherwise. In global wealth management, we delivered net new money of $16 billion, the strongest second quarter and over a decade, with inflows across Switzerland, Maya, and APAC, and despite $5 billion in seasonal tax payments in the US.
Speaker 3: reflecting the trust our clients continued to place in us.
Speaker 3: Moving to slide 25, in asset management, the profit before tax was 90 million. Excluding last-
Moving to slide 25 in asset management, the profit before tax was $90 million.
Excluding last year's gain on sale total.
Speaker 3: Total revenues decrease 5% with lower net management fees driven by market headwinds, asset mix, as well as lower performance.
Total revenues decreased 5% with lower net management fees, driven by market headwinds asset mix as well as lower performance fees.
Speaker 3: These headwinds were partially offset by 1% lower cost.
These headwinds were partially offset by 1% lower costs.
Todd Tuckner: We also delivered net new feed generating assets of $13 billion, or an annualized growth rate of 4% with positive flows across all regions, as well as net new deposits of $5 billion. These strong inflows across net new money, feed generating assets, and deposits demonstrate our continuous focus on active client engagement and the trust our clients place in us. This was especially important during a quarter where the macro backdrop and developments with Credit Swiss placed a premium on our investment advice and the stability of our GWM franchise.
Net new money in the quarter was strong at 17 billion, a 6% annualized growth rate.
Speaker 3: Net new money in the quarter was strong. At 17 billion, a 6% annualized growth rate.
Speaker 3: Net new money excluding money markets and associates was 19.5 billion with positive momentum in SMAs and alternatives.
Net new money, excluding money markets and associates was $19 5 billion with positive momentum in Sma's and alternatives.
Turning to slide 26 in the investment bank the profit before tax was $139 million.
Speaker 3: Turning to slide 26, in the investment bank, the profit before tax was 139 million.
The operating environment for the investment Bank is trading businesses was defined by significant lower equity volatility levels compared to the prior year period.
Speaker 3: The operating environment for the investment banks trading businesses was defined by significant lower equity volatility levels compared to the prior year period.
Speaker 3: Within global markets, this resulted in a meaningful decline in client activity levels across both equities and FRC, where revenues of 1.5 billion were down 11 percent, broadly consistent with our peer group.
Within global markets. This resulted in a meaningful decline in client activity levels across both equities and FRC were revenues of $1 5 billion were down 11%.
Todd Tuckner: Profit before tax was 1.1 billion, down 4% despite strong growth in Amaya and Switzerland of 15% and 9% respectively. Positive top line contributions from all regions outside of America supported a 1% revenue increase, which was more than offset by higher expenses. In the Americas, revenues were down 4%, mainly as net interest income reflected continued rotation into higher yielding deposits and investments from transactional and sweet deposit accounts. [inaudible] Net New Money, Excluding Money Markets and Associates, was 19.5 billion, with positive momentum in SMAs and alternatives.
Hardly consistent with our peer group.
Speaker 3: Our financing business continued to deliver strong results, reporting its best second quarter and best first half on record.
Our financing business continued to deliver strong results reporting its best second quarter in best first half on record.
Speaker 3: This demonstrates the resilience of our balanced portfolio of risk-efficient businesses as we continue to invest in capabilities that are critical to our clients.
This demonstrates the resilience of our balanced portfolio of risk efficient businesses as we continue to invest in capabilities that are critical to our clients.
Global banking revenues of $371 million were down 2% as the second quarter saw the global fee pool hit its lowest quarterly level since 2012.
Speaker 3: Global banking revenues of 371 million were down 2 percent. As the second quarter saw the global fee pool hit its lowest quarterly level since 2012.
Speaker 3: In the second quarter, we significantly outperformed the feed pool in EMEA and gained share in global M&A.
In the second quarter, we significantly outperformed the fee pool, and EMEA and gained share in global M&A.
Speaker 3: Operating expenses were up 2% predominantly on higher tech investments offsetting lower provisions for litigation regulatory and similar matters
Operating expenses were up 2% predominantly on higher tech investments offsetting lower provisions for litigation regulatory and similar matters.
On Slide 27, I now turn to credit Suisse AG is full second quarter results, which were separately published earlier today.
Speaker 3: On slide 27, I now turn to Credit Suisse AG's full second quarter results, which was separately published earlier today.
Credit Suisse AG as reported pre tax loss for the second quarter was $8 9 billion Swiss francs.
Speaker 3: Credit Swiss AG's reported pre-tax loss for the second quarter was $8.9 billion Swiss
Speaker 3: This result includes several large items, including 2.2 billion in adjustments to fair value marks, 1.8 billion in software write downs, 1.3 billion in additional litigation provisions, and 1 billion for a goodwill impairment.
This result includes several large items, including $2 2 billion and adjustments to fair value marks $1 8 billion in software write downs $1 3 billion in additional litigation provisions and 1 billion for goodwill impairment.
Speaker 3: Stripping out these and other items that are not representative of Credit Swiss AG's underlying performance in the quarter, the adjusted operating loss was 2.1 billion Swiss francs.
Stripping out these and other items that are not representative of credit Suisse Ags underlying performance in the quarter. The adjusted operating loss was $2 1 billion Swiss francs.
Not included in this figure are the results of a few legal entities that fall outside of credit Suisse Ags consolidation scope, including.
Speaker 3: Not included in this figure are the results of a few legal entities that fall outside of credits with AG's consolidation scope.
Speaker 3: including those entities, the Credit Suisse subgroups, pro forma, second quarter adjusted operating loss, was two billion Swiss francs.
Including those entities the credit Suisse subgroups pro forma second quarter adjusted operating loss was 2 billion Swiss francs.
Speaker 3: In discussing the Credit Suisse subgroup performance in the second quarter, I'll focus on this two billion Swiss franc adjusted loss, as it better informs the starting point for the group in combination with UBS's quarterly underlying performance.
In discussing the credit Suisse subgroup performance in the second quarter I'll focus on this 2 billion Swiss franc adjusted loss.
Is it better informs the starting point for the group in combination with Ubs's quarterly underlying performance.
Speaker 3: On slide 28, Credit Twists' quarterly adjusted pre-tax loss was largely driven by operating losses in the Credit Twists investment bank and the capital release unit, as well as elevated funding costs in Credit Twists' corporate center.
On slide 28 credit Suisse's quarterly adjusted pretax loss was largely driven by operating losses in the credit Suisse investment Bank and the capital release unit as well as elevated funding costs and credit Suisse's Corporate center.
Speaker 3: sequentially revenues declined by 38% driven by Credit Suisse's investment bank down 78% where the short drop in revenues was due to little to no new activity in the context of the expected exits following the acquisition.
Sequentially revenues declined by 38% driven by credit Suisse's investment bank down, 78%, where the sharp drop in revenues was due to little to no new activity in the context of expected exits following the acquisition.
Second quarter revenues also reflected elevated funding costs, primarily from the Swiss National Bank facilities.
Speaker 3: Second quarter revenues also reflected elevated funding costs, primarily from the Swiss National Bank Facility.
Going forward, we will focus on two key priorities in relation to credit Suisse's investment bank and capital release unit.
Speaker 3: Going forward, we'll focus on two key priorities in relation to Credit Swiss's investment bank and capital release use.
First rebuild activity and profitability levels of the businesses, we decided to retain as part of our core investment bank.
Speaker 3: First, rebuild activity and profitability levels of the businesses we decided to retain as part of our core investment bank.
Speaker 3: Second, actively manage the wind down of businesses and positions that are not aligned to our strategy.
Second actively manage the wind down of businesses and positions that are not aligned to our strategy.
Speaker 3: These include those already in the Credit Suisse Capital release unit and investment bank not retained as core and will be managed and reported within our non-core and legacy segment, beginning in the third quarter.
These include those already in the credit Suisse capital release unit and investment Bank not retained as core and will be managed and reported within our noncore and legacy segment beginning in the third quarter.
Moreover, as the wind down is executed will decisively take out all cost in relation of resources technology and real estate that are not needed to support either what is retained in our core investment bank or what is strictly required to efficiently wind down businesses and positions managed by our <unk>.
Speaker 3: Moreover, as the wind down is executed, we'll decisively take out all costs in relation to resources, technology, and real estate that are not needed to support either what is retained in our core investment bank, or what is strictly required to efficiently wind down businesses and positions managed by our non-core and legacy team.
Non core and legacy team.
In contrast, the credit Suisse's investment Bank and capital release unit, we saw relative stability across credit Suisse's wealth management Swiss bank and asset management segments.
Speaker 3: In contrast to Credit Suisse's investment bank in capital release unit, we saw relative stability across Credit Suisse's wealth management, Swiss Bank and asset management segments.
Speaker 3: In Creditswist Wealth Management, we've seen a stabilization of net new assets trending from substantial outflows in April to net inflows in June with $14 billion of net new deposits in the quarter.
And credit Suisse wealth management, we've seen a stabilization of net new assets trending from substantial outflows in April to net inflows in June with $14 billion of net new deposits in the quarter.
Todd Tuckner: Turning to slide 26, in the investment bank, the profit before tax was 139 million. The operating environment for the investment bank's trading businesses was defined by significant lower equity volatility levels compared to the prior year period. Within global markets, this resulted in a meaningful decline in client activity levels across both equities and FRC, where revenues of 1.5 billion were down 11%, broadly consistent with our peer group. Our financing business continued to deliver strong results, reporting its best second quarter and best first half on record.
Speaker 3: We remain focused on introducing Credit Suisse's clients to the unrivaled value proposition of the combined firm to counterbalance any headwinds to our flows from lag effects stemming from past or future attrition of Credit Suisse relationship management.
We remain focused on introducing credit suisse's clients to the unrivaled value proposition of the combined firm to counterbalance any headwinds to outflows from lag effects stemming from past or future attrition of credit Suisse relationship managers.
Speaker 3: In addition to clear and decisive actions to retain client assets, we also implemented client advisor incentive programs with the clear objective to win back and sustainably retain client assets.
In addition to clear and decisive actions to retain client assets. We also implemented client advisor incentive programs with the clear objective to win back and sustainably retain client assets.
Todd Tuckner: This demonstrates the resilience of our balanced portfolio of risk-efficient businesses as we continue to invest in capabilities that are critical to our clients. Global banking revenues of 371 million were down 2%, as the second quarter saw the global fee pool hit its lowest quarterly level since 2012. In the second quarter, we significantly outperformed the fee pool in Emea and gained share in global M&A. Operating expenses were up 2%, predominantly on higher tech investments, offsetting lower provisions for litigation, regulatory, and similar matters.
Speaker 3: Quarter to date, these actions have helped us to attract net new deposits of $10 billion and positive net new assets in the Credit Suisse Wealth Management franchise.
Quarter to date. These actions have helped us to attract net new deposits of $10 billion and positive net new assets in the credit Suisse wealth management franchise.
Speaker 3: Credit swisses adjusted operating expenses were down 10% sequentially, reflecting actions initiated before and after the merger announcement, as well as voluntary attrition of employees.
Credit Suisse has adjusted operating expenses were down 10% sequentially, reflecting actions initiated before and after the merger announcement as well as voluntary attrition of employees.
Speaker 3: As of the end of the second quarter, headcount was down by over 8,000 compared to the end of 2022.
As of the end of the second quarter head count was down by over 8000 compared to the end of 2022 split roughly equally between internal and external staff.
Speaker 3: Split roughly equally between internal and external staff.
Yeah.
Todd Tuckner: On slide 27, I now turn to Credit Suisse AG's full second quarter results, which were separately published earlier today. Credit Suisse AG's reported pre-tax loss for the second quarter was 8.9 billion Swiss francs. This result includes several large items, including 2.2 billion in adjustments to fair value marks, 1.8 billion in software write downs, 1.3 billion in additional litigation provisions, and 1 billion for a goodwill impairment. Stripping out these and other items that are not representative of Credit Suisse AG's underlying performance in the quarter, the adjusted operating loss was 2.1 billion Swiss francs.
I now turn to slide 29.
On an illustrative and underlying basis, the sum of the UBS subgroup pre tax profit of 2 billion and the credit Suisse subgroup pre tax loss of $2 2 billion after translation to U S dollars.
Speaker 3: On an illustrative and underlying basis, the sum of the UBS subgroup pre-tax profit of two billion, and the credits with subgroup pre-tax loss of 2.2 billion after translation to US dollars.
Speaker 3: Equals a combined pro forma group operating loss of around negative 0.3 billion.
Equals a combined pro forma group operating loss of around negative 0.3 billion.
Speaker 3: You can consider this indicative level as a useful starting point to contextualize the trajectory of our underlying profitability going forward and assess the steps we are taking to a
You can consider this indicative level as a useful starting point to contextualize the trajectory of our underlying profitability going forward and assess the steps we are taking to achieve our ambitions.
Speaker 3: First and foremost, we're executing on our cost reduction plans at pace. And we expect positive combined underlying profits in the second half of 2023.
First and foremost we're executing on our cost reduction plans at pace and we expect positive combined underlying profits in the second half of 2023.
Todd Tuckner: Not included in this figure are the results of the few legal entities that fall outside of Credit Suisse AG's consolidation scope. Including those entities, the Credit Suisse subgroups pro forma, second quarter adjusted operating loss was 2 billion Swiss francs. In discussing the Credit Suisse subgroup performance in the second quarter, I'll focus on this 2 billion Swiss franc adjusted loss as it better informs the starting point for the group in combination with UBS's quarterly underlying performance.
We expect to deliver underlying exit rate cost savings of over 3 billion by the end of the year, which will benefit our 2024 results and to incur a broadly similar amount of integration related expenses in two age 23.
Speaker 3: We expected to deliver underlying exit rate cost savings of over $3 billion by the end of the year, which will benefit our 2024 results, and to incur a broadly similar amount of integration-related expenses in 2-H-23.
Speaker 3: While neutral to our underlying performance, I would note that such integration-related expenses will be partly offset by pull-to-par effects of over one and a half billion.
While neutral to our underlying performance I would note that such integration related expenses will be partly offset by pull to par effects of over one 5 billion.
Todd Tuckner: On slide 28, Credit Suisse's quarterly adjusted pre-tax loss was largely driven by operating losses in the Credit Suisse investment bank and the capital release unit, as well as elevated funding costs in Credit Suisse's corporate center. Sequentially, revenues declined by 38 percent, driven by Credit Suisse's investment bank, down 78 percent, where the sharp drop in revenues was due to little to no new activity in the context of expected exits following the acquisition.
Second asset and deposit retention and win back initiatives will continue to support the positive momentum across our wealth management businesses.
Speaker 3: Second, asset and deposit retention and windback initiatives will continue to support the positive momentum across our wealth management business.
In particular, we expect to see positive underlying contribution from the credit Suisse wealth management franchise by the first half of 2024.
Speaker 3: In particular, we expect to see positive underlying contribution from the credits with wealth management franchise by the first half of 2024.
Speaker 3: We will apply the same systematic approach to client and asset retention and wind back across all of our core franchise.
We will apply the same systematic approach to client and asset retention and win back across all of our core franchises.
Speaker 3: especially following today's announcement in connection with the Swiss business.
Specialty following today's announcement in connection with the Swiss businesses.
Todd Tuckner: Second quarter revenues also reflected elevated funding costs, primarily from the Swiss national bank facility. Going forward, we'll focus on two key priorities in relation to Credit Suisse's Investment Bank and Capital Release Unit. First, rebuild activity and profitability levels of the businesses we decided to retain as part of our core Investment Bank. Second, actively manage the line down of businesses and positions that are not aligned to our strategy. These include those already in the Credit Suisse Capital Release Unit, and Investment Bank.
Third our second quarter 2023 pro forma results include $550 million of funding costs related to the Swiss National Bank facilities that credit Suisse reported in its corporate center.
Speaker 3: Third, our second quarter 2023 pro forma results include 550 million of funding costs related to the Swiss national bank facilities that Credit Swiss reported in its corporate center. The repayment of each facilities will lead to materially lower funding costs in the third quarter and further benefits in the fourth quarter for the combined group.
The repayment of these facilities will lead to materially lower funding costs in the third quarter and further benefits in the fourth quarter for the combined group.
Continuing on the NII topic sequentially for <unk> 'twenty, three we expect a low single digit percentage decline in our combined wealth management businesses with positive contribution from the credit Suisse franchise.
Speaker 3: Continuing on the NII topic, sequentially for 3Q23, we expect a low single-digit percentage decline in our combined wealth management businesses with positive contribution from the credit Swiss franchise and a mid-single digit percentage decline in our Swiss business.
Todd Tuckner: And we'll be managed and reported within our non-core and legacy segment, beginning in the third quarter. Moreover, as the line down is executed, we'll decisively take out all costs in relation to resources, technology, and real estate that are not needed to support either what is retained in our core Investment Bank, or what is strictly required to efficiently wind down businesses and positions. In contrast to Credit Suisse's Investment Bank and Capital Release Unit, we saw relative stability across Credit Suisse's wealth management, Swiss Bank, and asset management segments.
In the mid single digit percentage decline in our Swiss businesses.
Speaker 3: This excludes the pull to par effects I mentioned earlier.
This excludes the pull to par effects I mentioned earlier.
These elements in combination with disciplined resource management, and our focused execution mindset across the leadership team give us confidence in our ability to deliver a successful integration starting with approaching breakeven in the third quarter and returning to positive underlying profitability before.
Speaker 3: These elements in combination with discipline resource management and a focused execution mindset across the leadership team.
Speaker 3: Give us confidence in our ability to deliver a successful integration.
Speaker 3: Starting with approaching break even in the third quarter and returning to positive underlying profitability before the end of the year. With that, I'll hand back to Sergio for his closing remarks.
The end of the year.
With that I'll hand back to Sergio for his closing remarks.
Thank you Todd.
Todd Tuckner: In Credit Suisse's wealth management, we've seen a stabilization of net new assets, trending from substantial outflows in April to net inflows in June, with $14 billion of net new deposits. We remain focused on introducing Credit Suisse's clients to the unrivaled value proposition of the combined firm to counterbalance any headwinds to our flows from lag effect stemming from past or future attrition of Credit Suisse relationship managers. In addition to clear and decisive actions to retain client assets, we also implemented client advisor incentive programs with the clear objective to win back and sustainably retain client assets.
Speaker 2: As we speak the geopolitical and macroeconomic outlook remains volatile and difficult to predict, but of course major developments on this front will impact our business in the short term. As always, our first priorities to stay close to clients and help them manage the challenges and opportunities presented by this uncertain environment.
As we speak the geopolitical and macroeconomic outlook remains volatile and difficult to predict but of course major developments on this front will impact our business in the short term as always our first priority is to stay close to clients and help them manage the challenges and opportunities.
Presented by these uncertain environment.
Speaker 2: For us, this is business as usual and we remain focused on this priority.
For us this is business as usual and we remain focused on this priority.
At the same time, we are and we will also execute on our integration plans with determination and base.
Speaker 2: At the same time, we will also execute on our integration plans with determination and pace.
Speaker 2: that will unlock significant economies of scale, allowing us to fund future investments as we continue to pursue growth opportunities.
That will unlock significant economies of scale, allowing us to fund future investments as we continue to pursue growth opportunities.
Todd Tuckner: Quater to date, these actions have helped us to attract net new deposits of $10 billion and positive net new assets in the Credit Suisse wealth management franchise. Credit Suisse's adjusted operating expenses were down 10% sequentially, reflecting actions initiated before and after the merger announcement, as well as voluntary attrition of employees. As of the end of the second quarter, headcount was down by over 8,000 compared to the end of 2022, split roughly equally between internal and external staff.
Speaker 2: We are well aware of the additional trust and responsibility that accompany this transaction. We will not be.
We are well aware of the additional trust and responsibility that accompany these transaction.
We will not be trade that trust remaining faithful to our strong culture and conservative risk management.
Speaker 2: remain faithful to our strong culture and conservative risk management. I'm excited about the...
I'm excited about the opportunities that lie ahead of us.
Speaker 2: I strongly believe UBS will emerge as a stronger global financial institution. One of even greater value to its clients, wide remaining safe and delivering superior returns.
I strongly believe UBS will emerge as a stronger global financial institution, one of even greater value to its clients, while remaining safe and delivering superior returns.
Todd Tuckner: I now turn to slide 29. On an illustrative and underlying basis, the sum of the UBS subgroup pre-tax profit of 2 billion, and the credits with subgroup pre-tax loss of 2.2 billion after translation to US dollars, equals a combined pro forma group operating loss of around negative 0.3 billion. You can consider this indicative level as a useful starting point to contextualize the trajectory of our underlying profitability going forward and assess the steps we are taking to achieve our ambitions.
With that let's get started with questions.
We will now begin the question and answer session for analysts and investors.
Speaker 4: We will now begin the question and answer session for analysts and investors. For these answers are requested to usually hand it to the question. Anyone who has a question, we press start and want at this time.
I have requested to use only had to ask a question.
One who has a question please press star and one at this time.
Speaker 4: Transgression is from Jeremy Sege from BNP Paribah. Please go ahead.
First question is from Jeremy <unk> from BNP Paribas. Please go ahead.
Speaker 5: Morning, thank you very much for all the information there's a lot to get through and a lot of questions. I'll just ask two things. One is, could you talk about the SWIFT integration, which obviously takes time. And I think you said it's going to legally close in 24 and then physically integrate in 25. I just wondered what determines that time frame and how you manage.
Good morning. Thank you very much for all the information there is a lot to get through a lot of questions I'll just ask two things.
One is could you talk about the Swiss integration, which obviously takes time and I think you said, it's gonna legally closing 24, and then physically integrating 25.
Todd Tuckner: First and foremost, we're executing on our cost reduction plans at pace, and we expect positive combined underlying profits in the second half of 2023. We expected to deliver underlying exit rate cost savings of over 3 billion by the end of the year, which will benefit our 2024 results, and to incur a broadly similar amount of integration-related expenses in 2-H-23. While neutral to our underlying performance, I would note that such integration-related expenses will be partly offset by pull-to-par effects of over 1.5 billion.
I just wondered you know what determines that timeframe and how you manage how you intend to keep the business stable, whilst they're in that slight sort of limbo period.
Speaker 5: How you intend to keep the businesses stable whilst they're in that slight sort of limbo period? So that's my first question. And the second question is about sort of capital stack. The 14% C-T-1 target.
So that's my first question and the second question is about sort of capital stack, the 14% CET one targets.
Speaker 5: I imagine it implies that you're going to reissue 81 and rebuild the 81 part of your capital stack. And I saw a headline the other day that you might even do that this autumn. I just wondered if you comment on that aspect, your intentions in terms of issuing 81. Thank you.
I imagine it implies that you're going to reissue a T. One and rebuilds the a T. One parts of your capital stack and that's sort of a headline the other day that you might even do that.
This awesome I was just wondering if you can't comment on that aspect your intentions in terms of issuing a T. One thank you.
Todd Tuckner: In addition, asset and deposit retention and windback initiatives will continue to support the positive momentum across our wealth management businesses. In particular, we expect to see positive underlying contribution from the credits with wealth management franchise by the first half of 2024. We will apply the same systematic approach to client and asset retention and windback across all of our core franchises, especially following today's announcement in connection with the Swiss businesses. Third, our second quarter 2023 pro-former results include 550 million of funding costs related to the Swiss national bank facilities that credit Swiss reported in its corporate center.
Thank you Jeremy so well first of all on the integration of course, you know.
Speaker 2: Thank you Jeremy. So well, first of all, on the integration, of course,
Speaker 2: Now that we go through, as I mentioned, it's very important to understand the sequence of how we going to go through the merger of the different legal entities. As I mentioned before, our intention is to merge the two-parent company, UBS, AG, and Condit-Swiss AG. And as a follow-through, different entities underneath will go through the same process.
Now that we go through as I mentioned, it's very important to understand that the sequence. So far we're going to go through the merger of the different legal entities. We are as I mentioned before our intention is to merge the two parent company UBS and credit Suisse AG and as a follow through different entities underneath will go through the same.
So we need to optimize the timing from a different aspects at and last but not least also the one of the regulatory approvals. So so we are starting now the process to do that in terms of the Swiss business you know the way, we we will manage that.
Speaker 2: So we need to optimize the timing from a different aspect and last but not least also the one of regulatory approval.
Speaker 2: So we are starting now the process to do that in terms of the Swiss business, the way we will manage that.
Todd Tuckner: The repayment of each facilities will lead to materially lower funding costs in the third quarter, and further benefits in the fourth quarter for the combined group. Continuing on the NII topic, sequentially for 3Q-23, we expect a low single-digit percentage decline in our combined wealth management businesses with positive contribution from the credit Swiss franchise and a mid-single-digit percentage decline in our Swiss businesses. This excludes the pull-to-par effects I mentioned earlier. These elements, in combination with discipline resource management and a focused execution mindset across the leadership team, give us confidence in our ability to deliver a successful integration, starting with approaching break even in the third quarter and returning to positive underlying profitability before the end of the year.
He's by as I mentioned first of all assuring that all people employed in the Swiss businesses at UBS and credit Suisse.
Speaker 2: Please, by, as I mentioned, first of all, assuring that all people employ in the Swiss business.
Speaker 2: at UBS and Credit Suisse will not be subject to any redundant.
We will not will not be subject to any redundancies until the end of 2024. So what's the most important message is to clients. So that nothing changes for them and our view is to make it very smooth for clients to go through the transition.
Speaker 2: until the end of 2024. So what's the most important message is to clients that nothing changes for them. And our view is to make it very smooth for clients to go through the transition. And so once we go through this kind of legal process and regulatory process of merging the two entity, at the same time, we are also tackling
And so once we go through this kind of legal process and regulatory process of merging the two entity. We did at the same time, we're also tackling.
Speaker 2: the IT migration, the operational migration. And this is something that will only be completed early on in 2025. So what we...
The migration of the operational that migration and this is something that will only be completed early on in 2025. So.
What with what we.
Sergio Ermotti: With that, I'll hand back to Sergio for his closing remarks. Thank you, Todd. As we speak, the geopolitical and macroeconomic outlook remains volatile and difficult to predict, but of course major developments on this round will impact our business in the short term. As always, our first priorities to stay close to clients and help them manage the challenges and opportunities presented by this uncertain environment. For us, this is business as usual, and we remain focused on this priority.
Speaker 2: The message here is a balance between showing the way forward to our people, to clients, but without rush and in a stable manner so that our clients continue to be served in the way they expect to be served.
The message here is to is a balance between showing the way forwards to our people to clients, but without rush.
And in a stable manner, so that people.
Our clients continue to be served in the way do you expect to be served.
In terms of the CET one target while of course 81 continues to be an important element of our capital stack and strategy.
Speaker 2: Well, of course, 81 continues to be an important element of our capital stack and strategy. I will not comment on speculations of this. We are watching the market carefully. We will assess the timing and the need of tapping the markets when appropriate. But yes, of course, we are looking at the 81 markets and we will make our consideration when appropriate. okay? Just below 10 seconds as you arekus
I will not comment on speculations are outside of this we are watching the market carefully we will assess the timing and the need of a tapping the markets when appropriate but yes of course, we are looking at a 81 markets and we will make the our consideration when appropriate.
Sergio Ermotti: At the same time, we will also execute on our integration plans with determination and pace. That will unlock significant economies of scale, allowing us to fund future investments as we continue to pursue growth opportunities. We are well aware of the additional trust and responsibility that accompany this transaction. We will not betray that trust. First, Remain Faithful to our strong culture and conservative risk management. I'm excited about the opportunities that lie ahead of us. I strongly believe UBS will emerge as a stronger global financial institution, one of even greater value to its clients while remaining safe and delivering superior returns.
Very helpful. Thank you.
Speaker 4: The next question is from Alistair Ryan from Bank of America. Please go ahead.
The next question is from Alastair Ryan from Bank of America. Please go ahead.
Speaker 6: Yes, thank you, it's nice to be here very, Sergio good morning, great to have.
Yes. Thank you guys have asked me if I am Sanjay good morning, and great to have.
Speaker 6: clarity on the strategy and obviously the market.
On the strategy, obviously, the minimum kids to launch it as you are that the flows have come back to just then on operating costs and make it clear.
Speaker 6: delighted as you are that the flows have come back just then on operating costs very clear ambitions and it looks like you're bringing forward a little 27 to 26 when you've landed everything but just given the size of the operating costs in the old Credit Suisse investment bank and a non-core can you give us any sense about how quickly you can go there so that
Claim ambitions and it looks like you're bringing food a little 27 to 26 when you've.
Did everything but just given the size of the operating costs in the old credit Suisse investment Bank and unknown cool can you give us any sense about how quickly you can go with that.
Unknown Executive: With that, let's get started with questions.
Unknown Executive: We will now begin the question and answer session for analysts and investors. Participants are requested to use only hands. It's what asking a question. Anyone who has a question may press star and one at this time.
You know call it a large restructuring charge integration charge in the second half, but does not does not causing them to move out quickly. So that you normalized profitability or is there still quite a long long tail to the costs in that part of the business. It's just.
Speaker 6: you know, quite a large restructure and charge, integration charge in the second half, but does that cost them a move out quickly so that you normalize profitability or is there still quite a long tail to the cost in that part of the business? It's just, you know, IB Classic, the revenues have gone the cost are still lingering how quickly they go. Thank you. Thank you.
Jeremy Sigee: This question is from Jeremy Sigee from BNP Paribal. Please go ahead.
Oh I bet classic the revenues have gone the costs still lingering how quickly they got it. Thank you.
Unknown Executive: Good morning. Thank you very much for all the information there's a lot to get through and a lot of questions. I'll just ask two things. One is, could you talk about the swift integration, which obviously takes time and I think you said it's going to legally close in 24 and then physically integrated in 25. I just wondered what determines that time frame and how you manage, how you intend to keep the businesses stable whilst they're in that slight limbo period. That's my first question.
I'll pass it to Todd.
Speaker 3: Yeah, in terms of the speed at which we expect to take out costs, you know, as Surgeon, I said, we've been operating at pace in terms of the cost takeout, which is among our top priorities.
Yeah and in terms of the speed at which we expect to take out cost you know as a surgeon I've said, we've been operating at a pace in terms of the cost takeout, which is among our top priorities.
Speaker 3: in terms of in particular restructuring the parts of credits with that need immediate attention and restructuring. And so you see how we're making very strong progress out of the gate in terms of the cost takeout through the second half of 23 and the cost to achieve those cost takeout as well. We've obviously modeled.
In terms of in particular restructuring the parts of credit Suisse that need immediate attention and restructuring and so you see.
How we're making very strong progress out of the gate in terms of the cost takeout.
Sergio Ermotti: The second question is about capital stack. I imagine it implies that you're going to reissue 81 and rebuild the 81 part of your capital stack and I saw a headline the other day that you might even do that. I just wondered if you comment on that aspect, your intentions in terms of issuing 81. Thank you. Thank you Jeremy. First of all, on the integration, of course, now that we go through, as I mentioned, it's very important to understand the sequence of how we're going to go through the merger of the different legal entities.
Through the second half of 'twenty, three and the cost to achieve those cost takeout as well, we've obviously modeled to get to the.
Speaker 3: to get to the targets that were the landing zones that we described earlier in terms of returns and a cost income ratio at the end of 2026.
<unk> that.
Or the landing zones that are that we described earlier in terms of returns and in a cost income ratio at the end of 2026.
Speaker 3: But as you say, you know, that the costs do have a long tail in some cases. And that's because of the complexity of the operation that we have to unpack. Because you have significant infrastructure and technology. You have a very large array of legal entities over a thousand legal entities that have to be addressed. And just back one proof point on the software components, there are 3,000 applications.
But as you say that the cost do have a long tail in some cases and that's because of the complexity of the operation that we have to unpack cause you have significant infrastructure and technology you have a very large array of legal entities over a thousand legal entities that have to be addressed and.
Sergio Ermotti: As I mentioned before, our intention is to merge the two-parent company, UBS, AG and Credit Suisse AG. As a follow-through, different entities underneath will go through the same process. We need to optimize the timing from a different aspect and last but not least, also the one of regulatory approvals. We are starting now the process to do that in terms of the Swiss business. The way we will manage that is by, as I mentioned, first of all, assuring that all people employed in the Swiss businesses at UBS and Credit Suisse will not be subject to any redundancies until the end of 2024.
Just back one one proof point on on the software components. There are 3000 applications.
Speaker 3: and the work that our team has done suggests that we will only integrate 300 into UBS. That takes time.
The work that our team has done suggest that we will only integrate 300 into a into UBS that takes time and so yes. There is a long tail, but you can count on us to operate a quickly. The last thing I would say is in terms of clarity on a sense of as those things.
Speaker 3: So yes, there is a long tail, but you can count on us to operate quickly. The last thing I would say is in terms of clarity on a sense of as those things hit through because we give...
Through because we give.
Speaker 3: a degree of clarity through the second half of the year and we give sort of our landing zone We will come back with further clarity once we do the business planning process in the second half of the year and that will be with with our fourth quarter earnings in early February
A degree of clarity through the second half of the year and we give sort of a landing zone, we will come back with further clarity once we do the business planning process in the second half of the year and that will be with our with our fourth quarter earnings in early February .
Sergio Ermotti: What's the most important message is to clients that nothing changes for them. Our view is to make it very smooth for clients to go through the transition. Once we go through this kind of legal process and regulatory process of merging the two entities, at the same time we are also tackling the IT migration, the operational migration. This is something that will only be completed early on in 2025. The message here is a balance between showing the way forward to our people, to clients, but without rush and in a stable manner so that our clients continue to be served in the way they expect to be served.
Speaker 7: And I would probably recommend Todd observation, because it's very important that the fact that the vast majority of the assets on non-core and legacy are supported by the Credit Suisse IB platform. So as we progress in winding down, that call it the core day to day operation from the front office standpoint of you, that whatever is left is gonna be legacy.
And I would probably it compliments.
The observation that gets very important debt.
The fact of the vast majority of.
The assets in non core and legacy are supported by the credit Suisse I'd be a platform. So as we progress in winding down the call. It the core day to day operation from the front office standpoint of view.
Whatever is left is gonna be.
Legacy.
Speaker 2: infrastructure, I be infrastructure that is only there for non-core. And so you can see how then this will be a very important element in determining how quickly we get rid of non-core assets because as a consequence of that we accelerate.
Infrastructure I be infrastructure, only therefore, four noncore and so you can see out there and this will be a very important element in determining how quickly we get read off effects of noncore assets because as a consequence of that we accelerate the winding down of this of this operation so.
Speaker 2: the winding down of this operation. So, but I think that's exactly what we are working on and we will give you more detail in early on next year when we present our Q4 results and our three-year plan.
But I think that's exactly what we are working on and then we will give you more detail.
Sergio Ermotti: In terms of the CT1 target, well of course, 81 continues to be an important element of our capital stack and strategy. I will not comment on speculations of this, we are watching the market carefully, we will assess the timing and the need of tapping the markets when appropriate, but yes, of course, we are looking at the 81 markets and we will make our consideration when appropriate.
And early on next year, when we present, our Q4 results in our three year plan.
Thank you.
Yeah.
Speaker 4: Next question is from Chris Holland from Goldman Sachs. Please go ahead. Yeah, good morning everybody. And thanks for taking my questions. Just two from me. First, in wealth management, you've talked about now essentially being at scale in every growth market globally.
The next question is from Craig Hallum from Goldman Sachs. Please go ahead.
Good morning, everybody and thanks for taking my questions. Just two for me Firstly in wealth management, you've talked about now essentially being at scale in every crisis market globally.
Speaker 6: But in tangible terms, what does that enhance scale enable you to do that perhaps you weren't able to do previously? And have you seen any proactive response from competitors in reactions that enhanced scale? That's my first question. And then second, looking at the banking business in Switzerland, now the dust has settled. Does all the volatility we saw earlier in the air change at all? How do you think strategically about running? The combined Swiss bank period in terms of capital, funding, liquidity, et cetera. I guess just simply has your risk appetite changed.
Intangible Thomas what does that enhance scale enabled us to do that perhaps you weren't able to do previously and have you seen any proactive response from competitors in reaction to that enhanced scale. That's my first question.
Unknown Executive: Very helpful, thank you.
Alastair Ryan: The next question is from Alessar Ryan from Bank of America, please go ahead. Yes, thank you. It is nice to have a great clarity on the strategy and obviously the markets delighted as you are that the flows have come back. Just then on operating costs, very clear ambitions and it looks like you are bringing forward a little 27 to 26 when you have landed everything. But just given the size of the operating costs in the old Credit Suisse investment bank and a non-core, can you give us any sense about how quickly you can go there.
Then second looking at the banking business in Switzerland, now the dust has settled the who the volatility we saw earlier in the year changed at all how you think strategically about running the combined Swiss bank compete in terms of capital funding liquidity et cetera.
I guess, just sort of simply has your risk appetite changed in Switzerland.
Speaker 8: Thank you. So, well, I mean, look, in terms of scale, of course, there is an economic economy of scale. So being able to leverage UBS's IT platform as we onboard all the assets, it's a huge advantage because we have, you know,
Thank you so Ah well I mean look at in terms of scale of course, there is an economic economy of scale, so being able to leverage UBS society platform as we onboard all the assets. It's a huge advantage because we have.
Alastair Ryan: So a large restructure and charge, integration charge in the second half, but does that cost number move out quickly so that you normalize profitability or is there still quite a long tail to the cost in that part of the business. It is just, you know, IB Classic, the revenues have gone, the cost is still lingering, how quickly they go. Thank you. Alessar, in terms of the speed at which we expect to take out costs, you know, as Sergin said, we have been operating at pace in terms of the cost take out which is among our top priorities in terms of in particular restructuring the parts of Credit Suisse that need immediate attention and restructuring.
Called at a marginal cost the effects, but also when you look at the geographic footprint of the two operations that they are extremely complementary in some areas by relationships, but also in geographic terms I E. For example, in Brazil, right. So we had a lot of operation.
Speaker 2: called it marginal cost effects, but also when you look at the geographic footprint of the two operations, they are extremely complimentary in some areas by relationships, but also in geographic terms. For example, in Brazil, right? So we had a lot of operation, Chris with is much stronger. We now create a very important player in Asia. We really reinforce our position and both in North Asia and South East Asia. I think that in Switzerland is quite clear and also across Europe where...
<unk> suites is much stronger we now create a very important player in Asia, we really reinforced our position and that are both in the northeast.
Alastair Ryan: And so you see how we are making very strong progress out of the gate in terms of the cost take out through the second half of 23 and the cost to achieve those cost take out as well. We have obviously modeled to get to the targets that were the landing zones that we described earlier in terms of returns and a cost income ratio at the end of 2026. But as you say, you know, that the costs do have a long tail in some cases, and that is because of the complexity of the operation that we have to unpack.
North Asia, North Asia, and Southeast Asia, I think that in Switzerland is quite clear and also across Europe , where there are different markets, where you know you know.
Speaker 2: There are different markets where, you know, ideally, it's a very fragmented market in general, or wealth management in particularly in Europe . So there, we create economy of scales and things that we would have not been able to fund.
Ideally, it's a very fragmented.
Market in general or wealth management, particularly in Europe . So there we create economy of scales and things that we would have not been able to fund.
Speaker 2: from our organic standpoint to view. So it's very important. As I mentioned before, also Credit Suisse, across the board in asset management and wealth management, brings capabilities and excellence, excellent products that can be then leveraged into our, into the UBS client, friend.
From an organic standpoint of view so it's very important as I mentioned before ultra credit Suisse across the board in asset management and wealth management brings capabilities.
And excellent excellent products that can be then leverage into our.
The UBS client.
Franchise.
Speaker 2: Have we seen competitors, yeah, I mean the reaction of competitors, of course they started to take advantage of the fragile situation of pretty Swiss already during 2022, late 22, of course the beginning of the year and it's a pretty normal situation.
And we've seen that competitors are yeah, I mean, the reaction of competitors of course, they started to to take advantage of the fragile situation of credit Suisse already during 2022 late 'twenty to 'twenty two of course.
Alastair Ryan: Because you have significant infrastructure and technology, you have a very large array of legal entities over a thousand legal entities that have to be addressed. And just back one proof point on the software components, there are 3,000 applications and the work that our team has done suggests that we will only integrate 300 into UBS. That takes time. And so yes, there is a long tail, but you can count on us to operate quickly.
At the beginning of the year.
And and it's a pretty normal situation. So.
Speaker 2: So now, I've been saying that, I think that, as you saw from the flows, clients are now comfortable and they understand the value added of the franchise. We are able to retain and actually reattract by clients. So now, it's our turn to be prox.
Now, having say that so I think that says you saw from the flows.
Clients are now comfortable and they understand the value added of the franchise, we are able to retain and actually we got threatened by clients. So now it's our turn to be proactive and we will not spare any effort to regain back any lost assets.
Alastair Ryan: The last thing I would say is in terms of clarity on a sense of as those things hit through because we give. We have a degree of clarity through the second half of the year and we give sort of our landing zone.
Speaker 2: and we will not spare any effort to regain back any lost <expletive>
So in terms of the Swiss as anything is anything changing I mean, it's very important to reiterate that nothing changes in the way we run our Swiss businesses until they are fully integrated.
Speaker 2: So in terms of the Swiss, as anything is anything changing, I mean, it's very important to reiterate that nothing changes in the way we're on our Swiss businesses until they are fully integrated.
Sergio Ermotti: We will come back with further clarity once we do the business planning process in the second half of the year and that will be with with our fourth quarter earnings in early February. And I would probably compliment Todd Observation, because it's very important that the fact of the vast majority of the assets in non-core and legacy are supported by the Credit Suisse IB platform. So as we progress in winding down the core day-to-day operation from the front office standpoint of you, whatever is left is going to be legacy.
Speaker 2: Right, so from a client standpoint of you, and then service, and then risk and capital allocation, nothing changes. And even after we merge it, our commitment, as I said,
Right so from a client standpoint of view.
And then surveys and and and risk and capital allocation nothing changes and even after we margin our commitment.
As I say.
In my remarks is that we will continue to sustain the combined lending book of course.
Speaker 2: that we will continue to sustain the combined landing book.
Speaker 2: There are exceptional risky situations, but our principle is very clear. One and one makes two. We want to keep our market share in Switzerland. Switzerland is strategic. Absolutely strategic for the group.
There are exceptional at.
Risky situations, but our principle is very clear one and one makes too we want to keep our market share in Switzerland, Switzerland is strategic absolutely strategic for the group.
Sergio Ermotti: The legacy infrastructure IB infrastructure is only there for non-core. And so you can see how then this will be a very important element in determining how quickly we get rid of non-core assets, because as a consequence of that, we accelerate the winding down of this operation.
Speaker 2: and we will not want to lose any of the market share we have today.
And we will not want to lose any of the market share we have today.
Great. Thank you very much.
Sergio Ermotti: But I think that's exactly what we are working on and we will give you more detail in early on next year when we present our Q4 results and our three-year plan. Thank you.
Speaker 4: The next question is from Kiana Bowie, saying from JP Morgan. Please go ahead.
The next question is from Ken <unk> from J P. Morgan. Please go ahead.
Yes, good morning, Todd.
Speaker 9: Yeah, good morning, sir. Deon taught things with taking my question. First question on risk-created assets. You have around $557 billion, $145 billion, operational risk-created assets. And I'm just wondering how we should think about the exit run rate in 2026 in terms of total risk.
Thanks for taking my question.
Great.
David you have around 557 billion $1 45 billion operational risk weighted assets and I'm just wondering how we should think about the exit run rate in 2026.
Chris Holland: Next question is from Chris Holland from Goldman Sachs. Please go ahead. Good morning, everybody, and thanks for taking my questions. Just two from me. First, in wealth management, you've talked about now essentially being at scale in every growth market globally. But in tangible terms, what does that enhance scale enable you to do that perhaps you weren't able to do previously? And have you seen any proactive response from competitors and reactions that enhanced scale?
Chris Holland: That's my first question. And then second, looking at the banking business in Switzerland, now the dust has settled. Does all the volatility we saw earlier in the year change at all? How do you think strategically about running the combined Swiss bankbeard in terms of capital funding, liquidity, et cetera? I guess just simply has your risk appetite changed in Switzerland?
In terms of total risk weighted assets.
Speaker 9: as well as in terms of operational risk-created accesses I made.
Operational risk weighted assets, if I may.
Speaker 9: And then second question is related to the non-core. Could you talk a little bit about the P&L effect of the non-core XME 4-active?
And then second question is related to the noncore.
Could you talk a little bit about the P&L effect.
Non core and more active.
Speaker 9: write down or fail to say leading to potential write down. I just try to understand the P&L in terms of the run rate of the non-core legacy bank if I may. Thank you.
Right down.
Leading to potential write downs.
Just trying to understand the P&L.
The run rate.
Our non core legacy bank, if I may.
Sergio Ermotti: Thank you. So, well, I mean, look, in terms of scale, of course, there is an economic economy of scale. So being able to leverage UBS society platform as we onboard all the assets, it's a huge advantage because we have, you know, call it marginal cost effects. But also when you look at the geographic footprint of the two operations, they are extremely complimentary in some areas by relationships, but also in geographic terms, for example, in Brazil.
Yeah.
So I came.
Speaker 3: In terms of the operas guard WA, we will come back next quarter after doing a fair bit of additional modeling in terms of the operas guard WA of
In terms of the op risk out of the way.
We will come back next quarter after doing a fair bit of additional modeling in terms of the offer is going to be way of the combined bank. We've we've started to have.
Speaker 3: the combined bank, we've started to have initial views on that and initial discussions with regulators and that informed the 10 billion reduction that I spoke about in my comments. And then in terms of the trajectory and how we think about the 557 towards 2026.
Initial.
Views on that and an initial discussions with our regulators and that are informed that the 10 billion reduction that I spoke about in my comments and then in terms of the trajectory and how we think about the $5 57.
Sergio Ermotti: So we had a lot of operation. Credit Switzerland is much stronger. We now create a very important player in Asia. We really reinforce our position and both in North Asia and South East Asia. I think that in Switzerland is quite clear and also across Europe where there are different markets where, you know, ideally it's a very fragmented market in general. It's more wealth management, particularly in Europe. So there, we create economy of scales and things that we would have not been able to fund, and from our organic standpoint to view.
Towards.
2026, you'll have more color on that in term after we complete the the business planning process and a three Y S. P and come back early next year as mentioned.
Speaker 3: You'll have more color on that in term after we complete the business planning process and a three YSP and come back early next year as mentioned.
And in terms of the.
Speaker 3: In terms of the, you asked about the P&L and the run rate in non-course. What I would say on that is, so first off,
You asked about the P&L and the run rate in in noncore. So what I would say on that is so first off it's the thing. That's most important is to take costs out into focus.
Speaker 3: The thing that's most important is to take costs out into focus very significantly on the cost takeout because there's a significant level of overhead and costs that aren't associated.
Focus very significantly on the cost takeout, because theres a significant level of overhead and costs that are associated with.
Sergio Ermotti: So it's very important. As I mentioned before, ultra-critic Swiss across the board in asset management and wealth management brings capabilities and excellence, excellent products that can be then leveraged into the UBS client franchise. And we've seen competitors, yeah, I mean, the reaction of competitors, of course they started to take advantage of the fragile situation of pretty Swiss already during 2022, late 2022, of course in the beginning of the year. And it's a pretty normal situation.
Speaker 3: with the wind down of the portfolio. So the way to think about it is
With the wind down of the portfolio. So the way to think about it is that you know we have emphasized so far today that we have to take costs out and effectively.
Speaker 3: you know, we have emphasized so far today that we have to take costs out and effectively the costs that sit in parts of credit twists that don't work. And so those, those,
Costs that sit in parts of our credit Suisse that don't work and so those those.
Those costs are whether they'd be personnel costs or whether they'd be technology cost of real estate costs. They move into non core and legacy if they don't support the core businesses and they have to be run down.
Speaker 3: whether they be personnel costs or whether they be technology costs or real estate costs, they move into non-core and legacy if they don't support the core businesses and they have to be run down extremely quickly. And so I would say first and foremost it's a cost.
Extremely quickly and so I would say first and foremost it's it's.
Sergio Ermotti: So now, having said that, I think that, as you saw from the flows, clients are now comfortable and they understand the value added for the franchise, we are able to retain and actually we are tracking back clients. So now it's our turn to be proactive and we will not spare any effort to regain back any lost assets. So in terms of the Swiss as anything is anything changing, I mean, it's very important to reiterate that nothing changes in the way we run our Swiss businesses until they are fully integrated.
Cost.
Speaker 3: The way to think about it is the cost rundown over the integration timeline. Then there's the asset rundown and we talked about the trajectory from a natural rundown perspective and of course as Sergio mentioned that there will be strategically and actively looking at that. And of course...
The way to think about it is the cost run down over the integration timeline then there's the asset.
<unk> run down and we talked about the the trajectory from a natural rundown perspective and of course as Sergio mentioned that there will be strategically and actively looking at that and of course you know.
Speaker 3: you know, we, you know, from that perspective, we have taken some PPA adjustments and excess of $5 billion relating to non-coron legacy. I think that's a useful way to think about too, the fact that some of that pulls to par and some of that will be fair value position.
We are you know from from that perspective, we have taken some PPA adjustments in excess of 5 billion relating to non core and legacy I think that's a useful way to think about to the fact that some of that post to par and in some of that'll be fair value positions.
Speaker 3: And we will manage that book on the most capital-efficient way that we can and dispose of positions as appropriate.
And we will manage that book.
Sergio Ermotti: Right, so from a client standpoint of you and then service and then risk and capital allocation, nothing changes. And even after we merge it, our commitment, as I said, in my remarks, is that we will continue to sustain the combined lending book. Of course, there are exceptional risk situations, but our principle is very clear. One and one makes two. We want to keep our market share in Switzerland. Switzerland is strategic, absolutely strategic for the group. And we will not want to lose any of the market share we have today.
On the most capital efficient way that we can and and dispose of positions as appropriate.
And also keeping.
Unknown Executive: Great, thank you very much.
Speaker 3: and also keeping you, and yeah, just considering funding costs and the costs of operations, technology, people, etc.
And yeah, just just considering funding costs and the cost of of of operations technology people et cetera.
Okay. Thank you if I may just very briefly on the risk weighted assets.
Speaker 9: Okay, thank you. If I made this very greasy on the risk-created asset, if I could take a very simplistic view, and I just assume, I know the runoff, I can make some assumptions about bars before. And then upwards clearly very difficult to predict if I want to be conservative, one should assume that ultimately the risk-created asset.
It's a very simplistic view and I just assume yeah, I know the Reno market.
They've become with Samsung about Bob before.
And then upwards.
Clearly very difficult to predict if I wanted to be conservative one could assume that ultimately the risk weighted assets.
Speaker 9: conservatively should not grow if that also naturally decline.
Conservatively not grow.
If at all.
The decline.
Yeah.
Kian Abouhossein: The next question is from Kiana Bowson from JP Morgan, please go ahead. Yeah, good morning, sir, Dylan Todd, thanks for taking my question. First question on risk-created assets, you have around 557 billion, 145 billion operational risk-created assets. And I'm just wondering how we should think about the exit run rate in 2026 in terms of total risk-created assets, as well as in terms of operational risk-created assets as I may.
Ken it's at.
Speaker 7: Kim, it's, you know, we can't really comment right now. We are modeling. We are really going through the details of the plan. We need to really...
We can't really comment right now we are modeling, we arent really going through the details of south of the plan we need to really.
Speaker 2: Also, through the exercise, I'm sure you appreciate when we put together legal entities, the optimization of all that. It's a fairly complex operation. So it's I wouldn't go into a territory of projecting or resquared assets going forward. Because one, there are two elements, well, three elements. The starting point is a good starting point. You know that we can make some adjustments in the next three to four months. One of the subject, but then you need to go through first of all.
Also go through the exercise I'm sure you appreciate when we put together legal entities the optimization of all that it's a fairly complex operation. So it's I wouldn't go into a territory of projecting our risk weighted assets going forward because one there are two elements while three elements. The starting point is a good <unk>.
Starting point of view, we know that.
That we can make some adjustments in the next three to four months op risk was one of the substrate. But then you need to go through first of all what are the efficiencies, we think out as we get round down assets, yes, what are the efficiency on optimizing our legal entity operations and then what is the growth because remember.
Unknown Executive: And then the second question is related to the non-core. Could you talk a little bit about the P&L effect of the non-core XME core active write down or fail, so to say, leading to potential write down. I just trying to understand the P&L in terms of the run rate of the non-core legacy bank if I may.
Speaker 2: What are the efficiencies we take out as we run down assets? Yes. What are the efficiency on optimizing legal entity operations? And then what is the growth? Because remember, we...
We are going to grow as well and we have to attach also that prospect into the equation I wouldn't go into too much of a risk weighted assets projection until you see what we tell you in Q3 and Q4.
Speaker 2: and we have to attach also that prospect into the equation.
Speaker 2: I wouldn't go into too much of a risk-quated asset projector until you see what we tell you into a three and two for the two for results.
Unknown Executive: Hi, Kim. In terms of the operas guard WA, we will come back next quarter after doing a fair bit of additional modeling in terms of the operas guard WA of the combined bank. We've started to have initial views on that and initial discussions with our regulators and that informed the 10 billion reduction that I spoke about in my comments. And then in terms of the trajectory and how we think about the 557 towards 2026, you'll have more color on that in terms after we complete the the business planning process and a three YSP and come back early next year as mentioned.
Uh huh.
Q4 results.
Very helpful. Thank you.
The next question is from Flora <unk> from Jefferies. Please go ahead.
Speaker 4: The next question is from Flora Bocahote from Jeffries. Please go ahead.
Speaker 10: Yes, good morning. Thank you for taking my questions. I'd like to go back actually to some of the elements you have discussed on this call already, especially the NCL. Maybe you know, trying to help us understand how much of the ROC-T1 improvement to AB 26 is going to be driven by this unit, considering only the natural runoff here, you know, trying to help us assess already at this stage.
Yes. Good morning, Thank you for taking my questions and I'd like to go back actually to some of the elements that you'll have to squeeze that on this call Oh.
Especially at the end here.
Maybe you know trying to help us understand how much of the Q1 improvement was when he is going to be driven by this unique considering.
The natural run off here, you know training to help us assess already at this stage.
Unknown Executive: And in terms of the you asked about the PNL and the run rate in in non course, what I would say on on that is so first off, it's the thing that's most important is to take costs out into focus very significantly on the cost takeout because there's a significant level of overhead and costs that aren't associated with the wind down of the portfolio. So the way to think about it is that, you know, we have emphasized so far today that we have to take costs out and effectively the cost that that's it in parts of credits with that don't work.
Speaker 10: what how lost making it is today, and how lost making it would end up being in 26th, if you only consider the natural runoff.
What how loss, making today and how lossmaking eat what ended up being in 'twenty.
When we consider the natural run off now and.
Speaker 10: And then the other question I wanted to raise is on the cost says
And then the other question I wanted to raise is on the cost saves.
Speaker 10: just to make sure I understand correctly. So you basically have already a target of three billion cost sales on an annualized run rate at the end of this year, but this is compared to the end of 22, I think. So how much of the annualized three billion do you kind of already have in the Q2 accounts, please?
Just to make sure I understand correctly and so you basically have already.
Again, the 3 billion coffee and on an annualized run rate at the end of this year, but this is compared to the end of 'twenty. Two I think so how much of the annualized 3 billion do you kind of already have you know into Q2 accounts.
Thank you.
Speaker 3: Thanks for it. So in terms of, take just as maybe address the second point first, in terms of the cost sales in...
Thanks for.
So in terms of take just maybe address the second.
Unknown Executive: And so those those those costs, whether they be personnel costs or whether they be technology costs or real estate costs, they move into non core and legacy if they don't support the core businesses and they have to be run down extremely quickly. And so I would say first and foremost, it's it's a cost the way to think about it is the cost rundown over the integration timeline. But then there's the asset rundown and we talked about the the trajectory from a natural rundown perspective and of course, as Sergio mentioned that will be strategically and actively looking at that.
Point of first in terms of the cost saves in.
In the in terms of what we're projecting by the end of the year at $3 billion in terms of what we see already and are in.
Speaker 3: in terms of what we're projecting by the end of the year, 3 billion terms of what we see already. And.
Speaker 3: In the second quarter, we're having disclosed that specific number, but I think from just a head count reductions that I mentioned in my remarks, you could probably consider that there's somewhere more than around half has already started to hit through and what we're already seeing in our underlying results.
In the second quarter.
We havent disclosed that specific number but I think from just a head count reductions.
Reductions that I mentioned in my remarks, you can probably consider that there's somewhere.
You know more than.
Around around half has already started to hit through and what we're already seeing in our.
In our underlying results in terms of the RSC T. One and how to think about a N C L.
Speaker 3: In terms of the RACT-1 and how to think about NCL, as we go through the process, I mean for sure, NCL is...
Unknown Executive: And of course, you know, we, you know, from from that perspective, we have taken some PPA adjustments in excess of five billion relating to non core and legacy. I think that's a useful way to think about to the fact that some of that pulls to par and some of that will be fair value positions. And we will manage that book on on the most capital efficient way that we can and and dispose of positions as appropriate. And also keeping you and yeah, just just considering funding costs and the cost of of operations, technology, people, et cetera.
We are.
As we as we go through.
The process I mean for sure.
C L is.
Speaker 3: you know, it's going to be something that waits down on our RCT-1. Naturally, just given the fact that, you know, we have significant, at least over the 24 to 26 period, if you just look at the natural profile.
Unknown Executive: Okay, thank you.
Is gonna be something that our weights down on our C. T. One naturally just given the fact that we have significant at least over the 'twenty 'twenty four to 'twenty 'twenty six period.
If you just look at the natural.
Profile.
Speaker 3: rundown, which is effectively a basis for how we started thinking about the ROCT one not not the only way we started to model it but for sure One of the ways that we were thinking about it. There's a drag
Rundown of which is effectively a basis for how we started thinking about the proceeds you want not not the only way we started to model it but for sure one of the ways that we're thinking about it theres a drag.
Unknown Executive: If I made this very briefly on the risk-created asset, if I could take a very simplistic view and I just assume, yeah, I know the runoff, I can make some assumptions about bars before. And then upwards clearly very difficult to predict if I want to be conservative, one should assume that ultimately the risk-created asset. Converterly should not grow if that also materially decline. Kian, we can't really comment right now, we are modeling, we are really going through the details of the plan, we need to really also go through the exercise, I'm sure you appreciate when we put together legal entities, the optimization of all that, it's a fairly complex operation, so it's I wouldn't go into a territory.
Speaker 3: by definition in the sense that by the end of 26, you could see in the slide, the natural profile has roughly half going away. Now, we can model different scenarios as can you, but we're not gonna discuss how we're thinking about it, and obviously some of that is still very much unknown. In terms of the cost takeout, we would expect to be taking out.
By definition in the sense that by the end of 'twenty six you could see in the slide the natural profile has roughly half going away now we can model different scenarios can you, but where we're not going to discuss.
How we're thinking about it and obviously some of that is still very much unknown in terms of the cost take out we would expect to be taking out.
Speaker 3: The lion's share of the costs in non-core and legacy by the time the integration is materially complete, by definition, we would do that. We expect some residual carry that we'll have to take on or continue to run down beyond 2026. So there is some, if you will, negative burn that is associated with NCL in our modeling.
The lion's share of the costs in non core and legacy by the time. The integration is materially complete by definition, we would do that there'll be we expect some residual.
Kerry that we'll have to we'll have to take on or or or.
Continue to run down beyond 2026. So there is a if you will negative burn that is associated with N N C. L. A in our modeling.
Unknown Executive: Of a project, you know, we squatted assets going forward because one, there are two elements, well, three elements, the starting point is a good starting point, you, we know that we can make some adjustments in the next three to four months, operas was one of the subject, but then you need to go through, first of all, what are the efficiencies with the count as we around down assets, yes, what are the efficiency on optimizing legal entity operations, and then what is the growth? Because remember, we are going to grow as well, and we have to attach also that prospect into the equation, I wouldn't go into too much of a risk-graded asset projection until you see what we tell you into a three and Q for, for the two for results.
Okay. This is helpful.
Thank you.
Next question is from Stefan <unk> from Autonomous Research. Please go ahead.
Speaker 4: Next question is from Stephens Talman from Autonomous Research. Please go ahead.
Speaker 2: Good morning and thank you very much for the presentation. I have two numbers questions please. So the first one is on capitalized software. You have taken these roughly 1.8 billion of software impoundments in the PTA.
Yes, good morning, and thank you very much for the presentation.
Two numbers questions. Please.
So the first one is on the capitalized software you have taken these will see $1 8 billion of software impairments.
Unknown Executive: Very helpful, thank you.
In the P. P a.
Speaker 2: Can you give us a rough sense of how the whole much of the remaining amount of capitalized?
Can you give us a rough sense of how do we how much of the remaining amount of capitalized software remaining in your group of Cowen as it relates to CMS.
Speaker 2: software remains in your group accounts that relates to CS. And if there are a risk of further impairments given that you want to retain only about 10% of these systems.
Yeah. He risk of further impairments given that you want to retain only about 10% of the systems and the <unk>.
Speaker 2: And the second question relates to your capital requirements. So you're sure it's still at 10.6% C21 over risk-quared assets.
My question relates to your capital requirements.
So you saw it still at 10, 6% tier one who risk weighted assets.
Speaker 2: If we were to apply the current capital metric set as outlined in Swiss banking law, what would be the capital requirement if there was no TINMA transitional for Garenz, please? Thank you very much.
Flora Bocahut: Next question is from Flora Bocahote from Jeffries, please go ahead. Yes, good morning, thank you for taking my questions. I'd like to go back actually to some of the elements you have discussed on this call already, especially the NCL.
If we were to apply the current capital metrics that is outlined in Swiss banking law.
What would be the capital requirement. If there was no FINMA traditionally for parents. Please.
Thank you very much.
Okay.
Unknown Executive: Maybe, you know, trying to help us understand how much of the ROC T1 improvement towards 26 is going to be driven by this unit, considering only the natural runoff here, you know, trying to help us assess already at this stage, what, how lots making it is today, and how lots making it would end up being in 26 if you only consider the natural runoff. And then the other question I wanted to raise is on the cost phase, just to make sure I understand correctly.
Speaker 3: in terms of the capitalized software
And in terms of the capitalized software as you say $1 8 billion was the the amount that was in.
Speaker 3: As you say, 1.8 billion was the amount that was in...
Speaker 3: The Credit Suisse AG reported number today. I think in the PPA number overall In total there was slightly more about two billion you can look at the CS you know balance sheet
The credit Suisse AG reported number today I think in the PPA number overall in total there was a slightly more about $2 billion you can look at the sea us back.
Balance sheet.
Speaker 3: from year end or Q1, Q2, or Q1 or year end and see there was a capitalized software and neighborhood of 3 billion. So effectively what we have done is taken 2-thirds down and have one-third left.
From yearend or a Q1 Q2.
Q, sorry, Q1 or year end and see there was a capitalized software in the neighborhood of $3 billion. So effectively what we have done is taken two thirds down and have one third left.
Unknown Executive: So you basically have already a target of three billion cost phase on an annualized run rate at the end of this year, but this is compared to the end of 22, I think. So how much of the annualized three billion do you kind of already have, you know, in the Q2 accounts, please? Thank you. Thanks for it. So in terms of, just as maybe addressed the second point first, in terms of the cost phase, in terms of what we're projecting by the end of the year, three billion, in terms of what we see already in the second quarter.
Speaker 3: on a shorter economic useful life that aligns with how we think about A, the time it's going to take just to
On a shorter economic useful life that.
Aligns with how we think about.
A the time, it's going to take just two.
Speaker 3: to fully decommission everything and be leaving what we think we still get value from at the end. So all that has been sort of factored into the PPA. So I don't see necessarily further impairment.
To fully decommissioned everything and be leaving what we think we still get value from at the end. So all of that has been sort of factored into the into the PPA. So.
So I don't see necessarily further impairments, but because we now have just what's left about 1 billion that will have a shorter economic useful life that aligns to how we're thinking about the the restructuring.
Speaker 3: But because we now have just what's left about a billion that will have a shorter economic useful life that aligns to how we're thinking about the restructuring.
Yeah.
Speaker 7: Yes, different on city one. I think when you look at the fully implemented regime in Switzerland, which is not applicable to us until 2027, it would be around 12.5%, 12.5%.
Yes.
Unknown Executive: You know, we're having to disclose that specific number, but I think from just a head count reductions that I mentioned in my remarks, you could probably consider that there's somewhere, you know, more than around, around half has already started to hit through and what we're already seeing in our, in our underlying results. In terms of the RACT-1 and how to think about NCL, as we go through the process, I mean, for sure, NCL is, you know, is going to be something that waits down on our RACT-1, naturally, just given the fact that, you know, we have significant, at least over the 2024 to 2026 period.
On <unk>, one I think when you look at the fully.
<unk> implemented.
Regime in Switzerland, which is not applicable to us until 2027, it would be around 12.5% one point plus.
Speaker 7: plus, and that's, you know, the reason why we raised our CT1 ratio was both to reflect, you know, a buffer there to accommodate for the restructuring, but also is a clear, call it a small front running of what we expect to come as a consequence of that. And
Plus and Thats you know.
The reason why we raised our CET one ratio was a boat.
To reflect.
Buffer there to accommodate for the restructuring, but also is a clear.
Call. It a small upfront running off what we expect to come as a consequence of that and our hour hour and the Finalization of Basel III, which is partially already in our books. So you can count on this number to be calibrated with a pretty.
Speaker 11: our, our, our, and the finalization of Basel III, which is partially already in our books. So you can count on this number to be calibrated with a pretty medium term, medium to long term expectation of the current interpretation of full regulatory regimes worldwide, including Switzerland.
Unknown Executive: And if you just look at the natural profile rundown, which is effectively a basis for how we started thinking about the RACT-1, not not the only way we started to model it, but for sure, one of the ways that we were thinking about it. There's a drag by definition, in the sense that by the end of 26, you could see in the slide, the natural profile has roughly half going away.
Medium term mean.
To long term expectation of the current interpretation of full regulatory regimes worldwide, including Switzerland.
Great. Thank you. Thank you very much.
Speaker 4: And next question is from Conquette Rangan from Kharbi C. Please go ahead.
The next question is from content Rangan from RBC. Please go ahead.
Speaker 4: Thank you very much for taking my questions. The first is on Revenue List in Adjeet. I will then be hanging through your comments and...
Yeah. Thank you very much for taking my questions.
Unknown Executive: Now, we can model different scenarios as can you, but we're not going to discuss how we're thinking about it and obviously some of that is still very much unknown. In terms of the cost takeout, we would expect to be taking out the lion's share of the costs in non-core and legacy by the time the integration is materially complete by definition. We would do that. There'll be, we expect some residual carry that we'll have to take on or continue to run down beyond 2026. So there is some, you know, if you will, negative burn that is associated with NCL in our modeling.
Oh, yes.
Thank you.
Speaker 4: especially that you think you can keep this with market share unchanged. Is this something you really think maybe to get overly concerned and you don't see quite that risk of a revenue dissonagy even if you potentially have to your contact some of us with more attractive rates or intensifying your your advisors. And then secondly on slide to clean where you show us the hours, the return path and there's this blog about the funding cost efficiencies.
Thank you you can keep the Swiss market.
Changed.
Something we really think maybe people.
Unknown Executive: Okay, this is helpful, thank you.
So I don't see.
Quite bad risks, although revenue dis synergies.
We have to yet.
More attractive maybe Boston.
Yeah, Yeah adviser and then suddenly.
In March of last year.
Let me turn path.
Now about the funding cost efficiency.
Speaker 4: And there's something I guess apart from the dropout of the higher expenses, finding a credit source.
Thank you.
I guess apart from the.
Got it.
Funding from credit Suisse.
Speaker 4: Is there other areas where you see the material benefits from lowering funding costs and over old group benefits because it gets blocked as the same size as the cost-wise, while you can maybe elaborate with more about that area. Thank you.
Are there areas, where you see the market benefits.
Hello, Wang funding costs, and all of our group benefits.
Right right.
Stefan Stalman: The next question is from Stefan Stalman from Autonomous Research. Please go ahead. Good morning and thank you very much for the presentation. I have two numbers questions please. So the first one is on the capitalized software. You have taken these roughly 1.8 billion off software impoundments in the PTA. Can you give us a rough sense of how the whole how much of a remaining amount of capitalized software remains in your group accounts that relates to CS and just there a risk of further impoundments given that you want to retain only about 10% of these systems.
Maybe.
In house.
Yes.
Yeah.
Speaker 7: Okay, let me take the first question. First of all, I haven't said that we will keep our market share.
Okay. Let me take the first question first of all I have and say that we will keep our market share I think that our ambition is to keep the market share now having say that it's a it's credit Suisse lost market share.
Stefan Stalman: And the second question relates to your capital requirement. So you're sure it's still at 10.6% each one over a risk rate as it's if we were to apply the current capital matrix that is outlined in Swiss banking law. What would be the capital requirement if there was no in my transition for guarantees. Thank you very much. Okay. Hey, Stefan. In terms of the capitalized software, as you say 1.8 billion was the the amount that was in the Credit Suisse AG reported number today.
Speaker 7: I say that our ambition is to keep the market share. Now, having said that, it's Christmas last market share and business in the last 12 months or so. So what we count on is the fact that, you know, that we will be able to recapture and regain some of the market share and what you saw lately in the last couple of months is a good sign of that. But of course,
In the last 12 months or so so what do we count on is the fact that you know.
And we will be able to recapture and regain some of the market share and what you so lately.
In the last cut.
A couple of months is that he is a good sign of that but of course, we are not we are a realistic and we are also factoring in that we may lose some market shares because some clients may or may not feel you know that they want a certain concentration of the room. So no. There is no danger of us at.
Speaker 7: We are not, we are realistic and we are also factoring in that we may lose some market shares because some clients may or may not feel that they want a certain concentrationary. So, no, there is no danger of us.
Speaker 7: budgeting or planning blue sky scenarios on that one. We are realistic, but that should not be confused with our desire.
Budgeting or planning Blue-sky scenarios on that one we are realistic about that.
Should not be confused with our desire.
To keep as much as we can.
Okay.
Speaker 3: And Ancon, the second question, in terms of material benefits we see, you obviously highlighted the most significant one, which will be just the takeout of the significant cost that we were wearing in connection with the PLB and the L-A-plus facilities.
And Eric on the second actually the second question in terms of material benefits. We see you obviously highlighted the most significant one which will be just to take out of the significant cost that we were wearing in connection with the.
Stefan Stalman: I think in the PPA number overall in total, there was slightly more about 2 billion. You can look at the CS balance sheet. From year end or Q1, Q2 or Q1 or year end and see there was capitalized software and neighborhood of 3 billion.
P L b in the yellow plus facilities, but I would say and you know as I remarked earlier that we expect a positive contribution from the credit Suisse wealth management franchise in our NII and <unk>.
Speaker 3: But I would say, and as I remarked earlier, that we expect the positive contribution from the Credit Suisse Wealth Management franchise in our NII in 3Q, and that comes principally from having stabilized the business and net new deposits that are also helping on NII. So I would say that's another factor that is helping on the underlying profitability. So, I would say that's another factor that is helping on the underlying profitability.
And that comes principally from having stabilized the business in a net new deposits.
Unknown Executive: So effectively what we have done is taken 2 thirds down and have 1 third left on a shorter economic useful life that aligns with how we think about a the time it's going to take just to fully decommission everything and be leaving what we think we still get value from at the end. So all that has been sort of factored into the into the PPA. So I don't see necessarily further impairments, but because we now have just what's left about a billion that will have a shorter economic useful life that aligns to how we're thinking about the the restructuring.
Or also helping on NII, So I would say that's another factor.
That does help.
Helping on the underlying profitability.
Okay. Thank you.
The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.
Speaker 12: The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.
Yes, hi, good morning, two questions from my side, the first to play Devil's Advocate I am more outflows to come with that what are you kind of already had outflows from clients, but maybe some longer term structures partnerships or anything like that take time to see the outflows and then secondly.
Speaker 2: This is a good morning, two questions from my side. The first two play devil's advocate, I'd have more outflows to come, where you kind of already had outflows from clients, but maybe some longer term structures, partnerships or anything like that, take time to see the outflows. And then secondly,
Unknown Executive: Yes, Stefan on on CT1, I think when you look at the fully implemented regime in Switzerland, which is not applicable to us until 2027, it would be around 12.5% 12.2%. And that's, you know, the reason why we raised our CT1 ratio was both to reflect, you know, a buffer there to accommodate for the restructuring, but also is a clear call it a small front running of what we expect to come as a consequence of that.
Speaker 2: For the first time in a while, your CT1 capital is higher than your 10th book value or almost the same. So is the now the 15% return on CT1? Should it also be broadly similar to 2-row T going forward? Or should we expect more moving parts towards, yeah, 2026? Thank you very much.
For the first time in a while youll see tier one capital is higher than your tangible book value almost the same so it's been out a 15% return on CET. One they'll also be broadly similar to pool roti going forward or should we.
Expect more moving parts until what's yeah 2026, thank you so much.
Yeah. Thank you let me take the first questions I guess.
Speaker 7: Thank you. Let me take the first questions. I guess, as I mentioned before, now we are on the wealth management broader perimeter. I think that what, of course, we may still have a client advisor that resigned over the last three, four months or that as they move into a new organization.
I guess as I mentioned before now we are.
On the wealth management and broader perimeter I think that what of course, we missed we may still have a client adviser.
Unknown Executive: And our our our and the finalization of battle three, which is partially already in our boats. So you can count on this number to be calibrated with a pretty medium term medium to long term expectation of the current interpretation of full regulatory regimes worldwide, including Switzerland. Excellent. Great.
Resigned over the last three or four months or or debts as they move into a new organization.
They they they may be able to bring some assets with them what we see right now it's clear that the ability of the people that left a while ago to really move assets. It's fairly limited and this is nothing new compared to what a UBS went through.
Speaker 7: they may be able to bring some assets with them. What we see right now is clear that the ability of the people that left a while ago to really move assets is fairly low.
Speaker 7: And this is nothing new compared to what UBS went through 10 years ago or more than 10 years ago in recognizing that there is a lot of institutional loyalty of the client base.
Anke Reingen: Thank you very much. Next question is from Conqueror Reingen from RBC. Please go ahead.
10 years ago or more than 10 years ago, and recognizing that there is a lot of institutional loyalty of our client based and and now that we have stabilized the franchises of course, we are even stronger.
Unknown Executive: Thank you very much for taking my question. The first is on revenue-clist synergies. I mean, we're going to your comments and especially that you think you can keep this with market share unchanged. Is this something you really think maybe people get overly concerned and you don't see quite that risk of a revenue-differenties, even if you potentially have to your contact some of us make more attractive rates or intensifying your advisors. And then secondly on slide to clean where you show us the hours, the return path, and there's this block about the funding cost efficiencies.
Speaker 7: And now that we have stabilized the franchises, of course, we are even stronger in retaining assets. And as I mentioned before, how are desires to re-bring back assets? So look, the growth movements are going to be very difficult to predict, but the net outcome, we feel pretty comfortable, will be positive.
Retaining assets and as I mentioned before Howard desires to re bring back out so look the movements. The gross movements are going to be very difficult to predict but the net outcome, we feel pretty comfortable will be positive.
And Benjamin and in terms of the.
Speaker 3: and Benjamin in terms of the return on CT1 versus ROTA impact that say there are two factors.
Return on CET, one versus Rota impact I'd say there are two factors.
Speaker 3: that do argue in favor of moving in that direction, just not yet, but for sure, on the first one, the denominator effect were bigger.
That that do.
Unknown Executive: And it's something you, I guess, a part from the dropout of the higher expensive funding aqueducts. Is there other areas where you see the material benefits from lowering funding cost and overall group benefits because it gets blocked as the same size as the cost-size while advertising others, you can maybe elaborate a bit more on that area.
Argue in favor of moving in that direction, just not not yet but for sure on the first one the denominator effect were bigger and so that's obviously going to.
Speaker 3: So that's obviously going to make the difference between the historic rota versus ROCT1 smaller by definition. So that denominator effect is now in play, and it is helpful as you suggest, probably, as well contributing to what you observed. The other one, though, which has been our historic...
Make the difference between the historic Rota versus Oh, CET, one smaller by definition.
So and that so that denominator effect is now in play and it is helpful. As you suggest probably as well contributing to what you observe the other one though which has been our historic.
Sergio Ermotti: Thank you. Okay, let me take the first question. First of all, I haven't said that we will keep our market share. I think that our ambition is to keep the market share. Now, having said that, it's Christmas last market share and business in the last 12 months or so. So what we count on is the fact that we will be able to recapture and regain some of the market share. And what you saw lately in the last couple of months is a good sign of that.
Speaker 3: Delta that really has
Delta that that really has.
Speaker 3: has given us pause to move off what we think is a more meaningful return measure for our DTAs.
It has given us pause to move off what we think is a more meaningful return measure R. A D T A's, but there of course, you know as they amortize down.
Speaker 3: But there, of course, as they amortize down, because these generally, although not exclusively, but generally relate to very old losses that we're now continuing to just chip away at, as that balance comes down, then that's yet another factor that would argue in favor of moving to the other measure.
Because these generally although not exclusively but generally relate to I'm very old losses that were you know now you know continuing to just chip away at.
Sergio Ermotti: But of course we are a realistic and we are also factoring in that we may lose some market shares because some clients may or may not feel that they want a certain concentrationary. So there is no danger of us at budgeting or planning blue sky scenarios on that one. We are realistic, but that should not be confused with our desire to keep as much as we can.
Is that a balance comes down then that she had another factor that would argue in favor of moving to to your to the other measure.
Speaker 13: Well, but, you know, for the foreseeable future and from the other angle of measuring our capital return, flexibility, the C-T-1 ratio is a better proxy because this is the true binding constraint.
Well.
By the way for the foreseeable future and from a the other angle of measuring our capital return flexibility. The CET one ratio is that better.
Roxy.
Because this is the through binding constraint.
Todd Tuckner: Okay, thank you. An echo in the second question, in terms of material benefits, we see you obviously highlighted the most significant one, which will be just the takeout of the significant cost that we were wearing in connection with the PLB and the Ella Plus facilities. But I would say, as I remarked earlier, that we expect the positive contribution from the Credit Suisse wealth management franchise in our NII in 3Q. And that comes principally from having stabilized the business and net new deposits that are also helping on NII. So I would say that's another factor that is helping on the underlying profitability.
Unknown Executive: Okay, thank you.
Well enough.
Thank you.
Speaker 12: The next question is from Pannit Goals from Barclays. Please go ahead.
The next question is from Amit <unk> from Barclays. Please go ahead.
Alright, thank you.
Speaker 14: Hi, thank you. And thanks for a lot of good information.
Thanks Seth.
They get information.
Speaker 14: The first question was, I appreciate there's a lot of moving parts. We're going to spend a bit of time trying to update estimates and all that kind of stuff. But in terms of the past for the ROCT1, to get to that 15% 2026.
The first question was and I appreciate there's a lot of making policy.
And at that time, China, China, China comp.
That kind of stuff that.
The path for the RAC T. One.
To get to that kind of 15% 2026.
Speaker 14: exit rates. Are you able to give any color in terms of expectation for 2024, 2025 or how you like it to trend? And then secondly,
Right and are you able to give any color in terms of expectation for 2024.
2025 four.
It to trend.
And then secondly.
Speaker 14: Just on the costs, it'll be great to get a bit more color on the savings. So I'm just kind of curious things like, 10 billion of gross, but how much net saving or how much reinvestment of that do you expect to do where you found the incremental two billion versus the eight. And also how you're spending the 12 billion restructuring because it does seem like quite a big number. So just wondering if there could be benefits there as well. Thank you.
Just on the costs and it'll be great forget a bit more color.
Benjamin Goy: The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.
And on the savings say I'm, just kind of curious if I can can I attended and of course that how much net saving or how much reinvestment of that do you expect today.
Unknown Executive: This is a good morning and two questions from my side. The first to play devil's advocate are there more outflows to come where you kind of already had outflows from clients, but maybe some longer term structures, partnerships or anything like that. Take time to see the outflows. And then secondly, for the first time in a while, your CT1 capital is higher than your tender book where you're almost the same. So is the now the 15% return on CT1? Should it also be broadly similar to 2 roti going forward? Or should we expect more moving parts towards, yeah, 2026? Thank you very much.
Where you found the incremental tape it in.
The eight.
And also how you're spending.
And in restructuring because it does seem like quite a big number say just wondering if that could be benefits there as well. Thank you.
Speaker 3: Yeah, and so as mentioned in terms of color, further color on the trajectory as to we get end of 23 to end of 26, we'll come back on that. Provide update in 3Q as to where we are, but then, you know, much more fulsome perspective after our business planning processes is complete by the end of the year and early next year. In terms of
So as mentioned in terms of color further color on the trajectory is till we get end of 'twenty three to enter twenty-six will come back on that.
Provide update and <unk> as to where we are but then you know a much more fulsome perspective after our business planning processes is complete by the end of the year into early next year.
Sergio Ermotti: Thank you. Let me take the first questions. I guess, as I mentioned before, now we are on the wealth management broader perimeter. I think that what of course we may still have a client advisor that resigned over the last three or four months or that as they move into a new organization. They may be able to bring some assets with them. What we see right now is clear that the ability of the people that left a while ago to really move assets is fairly limited.
In terms of the cost savings.
Speaker 3: You know, Sergio also made remarked in his in his comments.
Serge you also made a remarked in his in his comments.
Speaker 3: You know, the gross number is greater than 10 billion as you highlight, but we will be making investments. We're gonna grow our business, we're gonna invest in technology, we're gonna also deal with inflationary factors if need be. So, you know, that's all in the thinking around it, around half of the gross cost.
<unk> the gross number is greater than 10 billion as you as you highlight.
But we will be making investments we're going to grow our business, we're going to invest in technology. We're going to you know also deal with the inflationary factors if need be so we that's all that's all in the thinking around it around half of the gross.
Sergio Ermotti: And this is nothing new compared to what UBS went through 10 years ago or more than 10 years ago in recognizing that there is a lot of institutional loyalty of the client based. And now that we have stabilized the franchises, of course, we are even stronger in retaining assets. And as I mentioned before, our desire is to re-bring back assets. So look, the growth movements are going to be very difficult to predict, but the net outcome we feel pretty comfortable will be positive.
Cost saves.
Speaker 3: relate to effectively restructuring the credits with IB and CRU units and the other half gross relates to the synergies we expect to realize, but then that will be there'll be investments back into the technology and the people to grow the core franchise.
Late to effectively restructuring the credit Suisse I B and C are you units and the other half gross relates to.
The synergies, we expect to realize but then that will be there'll be investments back into the technology.
And the people to grow the core franchises.
Speaker 12: The next question is from Andrew Lim from Societation Rural. Please go ahead.
The next question is from Andrew Lim from Societe Generale. Please go ahead.
Speaker 15: Good morning, thanks for taking my questions and thanks for the detail.
Hi, good morning, Thanks for taking my questions and thanks for all the detail.
Sergio Ermotti: And Benjamin, in terms of the return on CT1 versus ROTA impact, I'd say there are two factors that do argue in favor of moving in that direction, just not yet, but for sure, on the first one, the denominator effect were bigger. And so that's obviously going to make the difference between the historic ROTA versus ROTA one smaller by definition. So that denominator effect is now in play and it is helpful as you suggest, probably, as well contributing to what you observed.
So firstly on.
Speaker 15: So firstly, on the survey value markdowns that you've taken there, related to that, could you give an idea of the maturity remaining on those financial assets and how we should think about the reversal of those markdowns? So you've highlighted...
On the dissatisfied the Mark Downs, you you've taken there related to that could you give us an idea of the maturity remaining on this financial assets and then how we should think about mm three vessel.
As Mark down so your thoughts it highlighted more than one and a half bidding for the second half of this year is that the kind of run rate that we should be expecting.
Speaker 15: more than one and a half billion for the second half of this year. Is that the kind of run rate that we should be expecting going forward?
Going forward.
Speaker 15: And then secondly, on the NCL perhaps I can ask it a different way. Do you have a better idea now of what the ultimate cumulative losses might be from the NCL?
And then secondly.
On the N C L. Perhaps I can ask in a different way do you have a better idea now of what the ultimate cumulative losses might be from the NCL.
Sergio Ermotti: The other one though, which has been our historic delta that really has given us pause to move off what we think is a more meaningful return measure for our DTAs. But there, of course, as they advertise down because these generally, not exclusively, but generally relate to very old losses that we're now continuing to just chip away at. As that balance comes down, then that's yet another factor that would argue in favor of moving to to the other measure. Well, but, you know, by the way, for the foreseeable future and from a the other angle of measuring our capital return flexibility, the CT1 ratio is a better proxy because this is the true binding constraint.
Speaker 15: Would they be less than the five billion maybe that you might have been exposed to under the LPA agreement?
Would they be less than the 5 billion, maybe that you might have been exposed to under the LTA agreements.
Unknown Executive: Thank you.
Speaker 15: That's my question there and then thirdly my life quickly ask
That's my question.
And then thirdly mine I quickly ask him on the on the domestic side suffering for some businesses.
Speaker 15: on the on the domestic side, um, certain for some businesses.
Speaker 15: You will have a significant market share and I wonder if there's any Maybe regulatory risk that market share Might be looked at and you'd be forced to to bring it down to to a level Which is more palatable to the regulators. Thank you
You will have a significant market share and Ah I wonder.
If there's any maybe regulatory risk that that market share might be looked at and you'd be forced to bring it down to two a level, which is more palatable to the regulators.
Speaker 7: Yeah, because you asked three questions, instead of two, I'll take the last one. On the market share one, as you know, we got regulatory approval.
Yeah, because you asked three questions instead of two I'll take the last one.
On the market share one as you know we got the regulatory approvals to basically not be subject to any competitive there are constraints in that was that Don that just to secure and be able to communicate and to be able to place. Although it was a really crystal clear as it is today that there is no <unk>.
Speaker 7: to basically not be subject to any competitive constraints. And that was done just to secure and be able to communicate and to be able to place. Although it was already crystal clear as it is today that there is no market share topics for the combined unity in Switzerland. I mean, if you go across the board, Canton al-Banks are larger on any dimension.
Unknown Executive: Next question is from commit goals from Barclays, please go ahead. Hi, thank you. And thanks for a lot of good information.
Unknown Executive: The first question was, I appreciate there's a lot of moving parts, we're going to spend a bit of time trying to, trying to kind of update estimates and all that kind of stuff, but in terms of the past for the ROCT1 to get to that kind of 15% 2026 exit rates, are you able to give any color in terms of expectation for 2024 2025 or how you'd like it to trend? And then secondly, just on the costs, it'll be great to get a bit more color on the savings, so I'm just kind of curious things like, you know, 10 billion of growth, but how much net saving or how much reinvestment of that do you expect to do, where you found the incremental 2 billion versus the 8, and also how you're spending, you know, the 12 billion restructuring because it does seem like quite a big number. So, you know, just wondering if they could be benefits there as well. Thank you.
Sure topics for the combined <unk>.
Our unit in Switzerland, I mean, if you go across the board cantonal banks are large larger on any day mentions of.
Speaker 7: of relevant personal and commercial banking business in Switzerland.
Outside of 11 personal and commercial banking business in Switzerland.
Speaker 7: And when you measure in terms of branches, we are combined the third largest player. So now, this is very relevant, but because some people may argue, well, these are the cantal banks are combined versus being one unit. Well, the fact that the true of the matters that we compete in those cantons with the local cantal banks is extremely relevant to make that difference.
And when you measure in terms of some of our branches. We are combined the third largest player. So now this is very 11 bats, because some people may argue well. These the cantonal banks are combined versus you are being one unit well. The fact of the matters that we compete in those candles weight.
Todd Tuckner: Yeah, and so, as mentioned in terms of color, further color on the trajectory, as do we get end of 23 to end of 26, we'll come back on that provide update in 3Q as to where we are, but then, you know, much more fulsome perspective after our business planning processes. So, this is complete by the end of the year and to early next year. In terms of the cost savings, you know, Sergio also made remarked in his comments, you know, the gross number is greater than 10 billion as you highlight, but we will be making investments.
The local cantonal banks.
Extremely irrelevant to make that difference. Therefore, we will of course contribute watch what's the competitive.
Speaker 8: Therefore, we will of course contribute, watch what the competitive authorities have to say about it and put our views into this. But I don't really expect that on a fact-based discussions, we will be subject to any limitation or meaningful limitations in respect of our activities going forward.
Outdoor it is I have to say about it and put our views intuition, but I I I I don't really expect that on a fact based discussions we will be subject to any limitation or meaningful limitations in respect of our activities going forward.
Andrew Let me just unpack your first and second I think there you know related so on the first you know us as a as we highlighted earlier, we took around $15 billion of fair value marks on our financial assets and liabilities 12 5 billion where.
Speaker 3: Angela, let me just unpack your first and second. I think they're related. So on the first, as we highlighted earlier, we took around 15 billion of fair value marks on financial assets and liabilities, 12 and a half billion where we indicated would pull to par because they relate to a cruel account of position.
We indicated would pull to par because they relate to accrual accounting positions. Another roughly $2 5 billion relate to fair value positions, where we had marks for the marked down in light of sort of liquidity model risk other other type issues on the on the piece that pulls to par.
Speaker 3: Another roughly two and a half billion relate to fair value positions where we had Marks further mark down in light of sort of liquidity model risk other other type issues
Speaker 3: On the piece that pulls to par, just keep in mind that 4 billion of that 12 and a half relates to non-court and legacy. So that's important to know in about 8 and a half billion more in our core businesses. On the core business piece.
Just keep in mind that a $4 billion of that 12, and a half relates to non core and legacy.
Todd Tuckner: We're going to grow our business, we're going to invest in technology, we're going to, you know, also deal with inflationary factors if need be. So, you know, that's all in the thinking around it, around half of the gross cost saves relate to effectively restructuring the credits with IB and CRU units and the other half gross relates to the synergies we expect to realize. But then that will be, there'll be investments back into the technology and the people to grow the core franchises.
So that's important to know and about a $8 5 billion more in our core businesses.
On the core business piece generally speaking, we see three to four years that we should unwind between 70, and 80% there'll be a longer tail, especially on some fixed rate loans that'll go longer than that so we will see pull to par effects that extend beyond.
Speaker 3: Generally speaking, we see three to four years that we should unwind between 70 and 80 percent. They'll be a longer tail, especially on some fixed rate loans that'll go longer than that. So we'll see pull to par effects that extend beyond the three to four year time frame. But most of it will.
The three to four year time frame, but most of it will most of it will accrete to income over the shorter timeframe as I mentioned to the NCL point, though.
Speaker 3: Most of it will accrete income over the shorter timeframe as I mentioned.
Speaker 3: to the NCL point though, since we have roughly four billion of the Poltapar and NCL and roughly two billion in the fair value mark.
We have roughly $4 billion of the pull to par in NCL and roughly 2 billion are in the fair value marks. So you have $5 billion to $6 billion of fair value adjustments in NCL and I think to go to your second question that's important.
Andrew Lim: The next question is from Andrew Lim from Societation Rall, please go ahead. Hi, good morning. Thanks for taking my questions and thanks for all the detail.
Speaker 3: So you have five to six billion of fair value adjustments in NCL. And I think to go to your second question, that's important.
Unknown Executive: So, firstly, on the survey value markdowns that you've taken there, related to that, could you give an idea of the maturity remaining on those financial assets and how we should think about the reversal of those markdowns. So, you've highlighted more than one and a half, meaning for the second half of this year, is that the kind of run rate that we should be expecting going forward. And then, secondly, on the NCL, perhaps I can ask it a different way, do you have a better idea now of what the ultimate cumulative losses might be from the NCL?
Speaker 3: to understand just given that we think that the positions are appropriately marked. And from here, we will continue to consider all of our optionality in terms of running down the portfolio as Sergio mentioned earlier in a most capital and cost-efficient way. But we think the positions are being carried at appropriate levels presently.
To understand just given that are we think that the positions are appropriately marked and from here we will continue to consider.
All of our Optionality in terms of running down the portfolio as Sergio mentioned earlier and the most capital and cost efficient way.
But we think the positions are being carried at are at appropriate levels presently.
Yeah.
That's great that's really helpful things.
Your next question is from Adam <unk> from Mediobanca. Please go ahead.
Speaker 12: The next question is some other interlux from Edu Wanka. Please go ahead.
Good morning. Thank you for the questions I wanted to get under the Hood, a little bit more in wealth management. Firstly on the CF business acquired clearly there was some business exits to worry about and from that you see non core and kind of the wealth management unit can you give us a sense of what the revenue attach that might look like but also.
Speaker 16: Morning, thank you for the questions. I want you to get under the hood a little bit more in wealth management. Firstly, on the CS business acquired, clearly there was some business exits to worry about from that you've seen on core in kind of the wealth management unit. Can you give us a sense of what the revenue attached that might look like, but also any detail on 81 cost savings that have come through the NII and that division as well? And then secondly, the competitors
Unknown Executive: Would they be less than the 5 billion, maybe that you might have been exposed to under the LPA agreement? That's my question there. And then, thirdly, might I quickly ask, on the domestic side, certainly for some businesses, you will have a significant market share. And I wonder if there's any regulatory risk that that market share might be looked at, and you'd be forced to bring it down to a level which is more palatable to the regulators, thank you.
Any detail on 81 cost savings that come through the NII in that division as well.
Sergio Ermotti: Yeah, because you asked three questions, instead of two, I'll take the last one. On the market share one, as you know, we got regulatory approvals to basically not be subject to any competitive constraints. And that was done just to secure and be able to communicate and to be able to place. Although it was already crystal clear as it is today, that there is no market share topic. [inaudible] Therefore, we will of course contribute, watch what the competitive authorities have to say about it and put our views into this, but I don't really expect that on a fact-based discussions, we will be subject to any limitation or meaningful limitations in respect of our activities going forward.
And then secondly, the competitive environment.
Speaker 16: I notice in your GWM business, UBS standalone cost a rep on lower revenues.
I noticed in your Gws business UBS Standalone costs are up on lower revenues.
Speaker 16: I just want to know kind of what the cost is to retain managers at this point, whether you're seeing competitive landscape on the RM side or the advisor side, but also in your deposit side, what sort of campaigns have you been running to reattract deposits and how easy or difficult has that been in the current rate and deposits environment? Thank you.
Just wondering how you kind of what the cost is to retain managed at this point, whether you're seeing them.
Competitive landscape on the RM side or the advisor side, but also in Europe .
Alright Watson campaigns have you been running can be attract deposits and how easy or difficult is that being in the current rates and deposits environment. Thank you.
Oh, Thanks, Adam on the on the second one would just say in terms of gws cost. So there's a very significant positive operating leverage outside of the U S.
Speaker 3: Thanks Adam. On the second one, we would just say in terms of GWM costs. So there's a very significant positive operating leverage outside of the US.
Speaker 3: So that's important to note this is in the GWM, sorry, in the UBS subgroup GWM, very significant positive operating leverage. We were investing for growth in that business, but that business as well has been, you know, saw a strong NII.
So that's important to note. This is in the the gws sorry in the U B S subgroup gws.
A very significant positive operating leverage we were investing for growth in that business, but that business as well has been.
<unk> saw a strong NII performance.
Speaker 3: and had strong PBT growth as I highlighted in my comments earlier. As I also highlighted, it's more on the GWM overall side, just the fact that we've seen a lot of cash sorting and rotation on NII in the Americas, and that sort of pulled the Americas revenue down, recently significantly, say, quarter on quarter, a year on year, and as a result.
And and had.
Our strong PBT growth as I highlighted in my comments earlier as I also highlighted.
More on the on the Gws overall side, just the fact that.
We've seen a lot of cash sorting and rotation on NII in the Americas and that sort of pulled.
The Americas revenue down.
Reasonably significantly say quarter on quarter year on year.
And as a result.
Speaker 3: you know, we see that negative operating leverage, but we're continuing to invest in that business.
We see that the negative operating leverage, but we're continuing to invest in that business.
Speaker 3: across the board and and so some of that as well contributes to the to the higher cost. On your deposit campaign question, I would say that you know like any bank we hear value value deposits we value deposits in the wind back context in wealth management we also just value deposits to fund.
Across the board and so some of that as well contributes to the to the higher costs on your deposit campaign question, but I would say that you know like any bank.
We are a valued valued deposits we value deposits in the wind back context in wealth management. We also just value deposits to fund our business loan growth et cetera. So there's.
Todd Tuckner: Angela, let me just unpack your first and second. I think they're related. It's on the first, you know, as we highlighted earlier, we took around 15 billion of fair value marks on financial assets and liabilities, 12.5 billion where we indicated would pull to par because they relate to a cruel account of positions, another roughly 2.5 billion relate to fair value positions where we had marks. Marked further marked down in light of sort of liquidity, model risk, other type issues.
Todd Tuckner: On the piece that pulls to par, just keep in mind that 4 billion of that 12.5 relates to non-coron legacy, so that's important to know in about 8.5 billion more in our core businesses. On the core business piece, generally speaking, we see three to four years that we should unwind between 70% and 80%, they'll be a longer tail, especially on some fixed-rate loans that will go longer than that, so we'll see pull to par effects that extend beyond the three to four-year timeframe, but most of it will accrete income over the shorter timeframe, as I mentioned.
Speaker 3: our business, loan growth, etc. So there's nothing I've seen that I would call out there in terms of deposit betas that have moved in a direction I would consider to be anything other than what we see across peers.
There's nothing I've seen it's a I would I would call out there in terms of deposit beta is that have moved in a direction I would consider to be anything other than what we see across peers.
Speaker 3: in terms of the required.
In terms of the acquired.
Speaker 3: you were asking business exits and the revenue attached. At this point, we have...
You were asking the business exits in the revenue attached at this point we have.
Speaker 3: In terms of what's being expected to move into non-coron legacy that was highlighted on one of the earlier slides the revenue attached With that business is less than a hundred million
In terms of what's being expected to move into non core and legacy that was highlighted on one of the earlier slides the revenue attached with that business is less than 100 million one.
Speaker 3: 100 million on an annualized basis in terms of net revenues in terms of what's moving across and that's of course, not risk adjusted for, and so that needs to be considered. In terms of AT1 cost savings that hit through the business from what had been, I would say anything there has really just been captured.
100 million on an annualized basis in terms of net revenues in terms of what's moving across and that's of course not risk adjusted.
For and so that needs to be considered in terms of the 81 cost savings that a hit to the business from what had been.
Say anything there has really just been captured in the credit Suisse Corporate center as it offset potentially to the inflated cost. So I would expect that that will normalize now as.
Speaker 3: in the Credit Twist Corporate Center, as an offset potentially to the inflated costs. So I would expect that that'll normalize now as the businesses come together.
Todd Tuckner: To the NCL point, though, since we have roughly 4 billion of the pull to par in NCL and roughly 2 billion in the fair value marks, so you have 5 to 6 billion of fair value adjustments in NCL, and I think to go to your second question, that's important to understand just given that we think that the positions are appropriately marked. And from here, we will continue to consider all of our optionality in terms of running down the portfolio as Sergio mentioned earlier in a most capital and cost-efficient way, but we think the positions are being carried at appropriate levels. Absolutely.
As the businesses come together.
Speaker 16: They're all so funding issues that in the corporate centre not in the
So we're funding it seems that in the corporate center in London.
Yeah.
Speaker 7: you repeat, it wasn't clear, sorry. So any funding noise 81 versus liquidity facilities is all fact in the corporate center, I don't know.
Can you repeat it wasn't clear sorry.
Any funding noise 81 buses liquidity.
He was also down in the corporate center.
That was our understanding from credit Suisse's practice pre acquisition, yes.
Speaker 3: That was our understanding from Credit Suisse's practice pre-acquisition, yes. Okay, thank you.
Okay.
The next question is from Robert Kwan from Citi. Please go ahead.
Unknown Executive: That's great, that's really helpful, thanks.
Good morning, Andrew Coombs from Citi.
Speaker 17: So, good morning, I'm Andrew Keane from City. And thanks for taking my questions to it, by May. And firstly, I want to come back to follow up on the PPA Port-Parfait, but in relationship to the restructuring charges, you may just comment the outspoken at the end of 2026. I think restructuring charges will be largely but not wholly obsessed by the PPA Port-Parfait. And then in your later comments, you talked about 12-1-1-1.
Taking my question two if I may I want to come.
Adam Terelak: The next question is some Adam Terelak from Edivanka, please go ahead. Morning, thank you for the questions. I want to get under the hood a little bit more in wealth management. Firstly, on the CS business acquired, clearly there are some business exits to worry about, from, that you see non-core in kind of the wealth management unit. Can you give us a sense of what the revenue attached that might look like, but also any detail on 81 cost savings that come through the NII and that division as well?
Come back to.
A follow up on me at PPA pop back a bit.
Adam Terelak: And then secondly, the competitive environment. I notice in your GWM business, UBS standalone cost the rep on lower revenues, I just want to know kind of what the cost is to retain managers at this point, whether you're seeing competitive landscape on the RM side or the advisor side, but also in your deposit side, what sort of campaigns have you been running to reattract deposits and how easy or difficult has that been in the current rate and deposits environment? Thank you. Thanks, Adam.
In relationship to the restructuring charges.
The comment that.
At the end of 'twenty two.
In Calgary.
They're not wholly offset by the PPA pooled power back and then you like to comment to cope without probably a half billion of pull to par back.
Speaker 17: of which four and a half would be non-core. And that most of that would be recognizing three to four-year timeframe. So, can we assume restructuring charges?
Of which four and a half would be known call on that and I think that would be recognized in the three four year timeframe.
Can we assume restructuring charges.
Speaker 17: of the magnitude of 12 and a half, and can give us a sense of the timing of those relatives for TPA pull to par.
Of the magnitude of 12, and a half and can you give us the scale for the time.
Timing of values.
The PPA pull to par.
And then the second question is.
Speaker 17: And then the second question is on slide 29. You provide a useful quarterly trajectory down to minus point three into two and you talk about break even into three.
Slide 29.
You provide useful quarterly trajectory a gang minus three in Q2 can you talk about breakeven in Q3.
But you worked with like $750 million savings $550 million funding cost savings.
Speaker 17: but use the flag 750 million savings, 550 million of funding cost savings.
Todd Tuckner: On the second one, we would just say in terms of GWM costs, so there's a very significant positive operating leverage outside of the U.S. So that's important to note, this is in the GWM, sorry, in the UBS subgroup GWM, a very significant positive operating leverage. We were investing for growth in that business, but that business as well has been strong NII performance and had strong PBT growth as I highlighted in my comments earlier.
Speaker 17: There's a 650 million arguably one off ECL charge on the credit and credit in PEDCS portfolio is quarter. So just trying to understand, they're going from minus 0.3 to zero, even with all of those additional benefits, Q&Q, what's the offset? I guess there'd be some season atrium revenue is a bit of a decline in an eye eye, but any more color there.
That's a 650 million arguably one of ECL charge on net credit non credit impaired portfolio. This quarter, but just trying to understand that going from minus 40 Creek was very even though they will benefit Q on Q, what's the offset I guess that'd be some season asking them badly needed a bit of a decline in NII.
Any more color that.
Yeah.
So Andrew.
Speaker 3: So I do in terms of the
Andrew in terms of the yes.
Todd Tuckner: As I also highlighted, it's more on the GWM overall side, just the fact that we've seen a lot of cash sorting and rotation on NII in America's and that sort of pulled the America's revenue down, reasonably significantly, say quarter on quarter, a year on year, and as a result, we see that negative operating leverage, but we're continuing to invest in that business across the board and so some of that as well contributes to the higher costs. On your deposit campaign question, I would say that like any bank, we hear value deposits, we value deposits, in the wind back context, in wealth management, we also just value deposits to fund our business, long growth, etc. So there's nothing I've seen that I would call out there in terms of deposit beaters that have moved in a direction I would consider to be anything other than what we see across peers.
Speaker 3: Yeah, in terms of they'll take the second point first, in terms of the story on the underlying profitability. Yeah, I mean...
Yeah in terms of they'll take the second 0.1st in terms of the story on the underlying profitability.
Just be very clear that the cost saves that we expect to.
Speaker 3: be very clear that the cost saves that we expect to...
Speaker 3: by the end of 2023, a three billion, which we think you can price into 2024. Some of that has been...
To see by the end of 2023 3 billion, which we think you can price into 'twenty 'twenty four some of that has been realized.
Speaker 3: I realized but as I would the way I would think about it is there is work that ongoing and we expect that
Our realized but as I I would the way I would think about it is there is work that's ongoing and we expect that.
Speaker 3: The greater than three billion number is something that we'll see at the end of the year hitting through. I would continue to reemphasize the you know the funding cost point that was in 2Q that will benefit 3Q and fully in 4Q that that helps.
The greater than 3 billion number is something that we'll see at the at the end of the year.
Hitting through.
I would I would continue to reemphasize. The you know the funding cost point that was in <unk> that will benefit <unk> in fully and <unk> that that helps and then the stabilization of our as flows and all of that will sort of hit through as we go.
Speaker 3: and then the stabilization of as flows and all that will sort of hit through as we go on an underlying basis. And as I said, we expect to break even in the third quarter coming out of so roughly a 300 million plus improvement and then to be positive in 4Q for the reasons that I mentioned.
On an underlying basis and as I said, we expect to break even in the in the third quarter coming out of so three roughly a 300 million plus improvement.
And then to be positive in <unk> and <unk>.
Todd Tuckner: In terms of the acquired, you were asking business exits and the revenue attached. At this point, we have in terms of what's being expected to move into non-core and legacy that was highlighted on one of the earlier slides, the revenue attached with that business is less than 100 million on an annualized basis in terms of net revenues in terms of what's moving across and that's of course not risk adjusted and so that needs to be considered.
For the reasons that I mentioned.
Speaker 3: In terms of the restructuring you asked about we'll come back in further details in terms of how much restructuring Specifically, they'll be we're giving a perspective that we expect the number to be broadly offset by the Poltapar effects
In terms of the.
The restructuring are you you asked about will come back in further details in terms of how much restructuring specifically there'll be we were giving a perspective that we expect the number to be broadly offset by the pull to par effects.
Speaker 3: But at this point in time, we're going to need to detail that out to the business planning process and come back as we have said in with our fourth quarter earnings.
But at this point in time, we're going to need to detail that out through the business planning process and come back as we have said.
In with our fourth quarter earnings.
Thank you.
Todd Tuckner: In terms of AT1 cost savings that hit through the business from anything there has really just been captured in the credit twists corporate center as an offset potentially to the inflated costs so I would expect that that will normalize now as the businesses come together. All funding issues are set in the corporate centre in London. And you repeat, it wasn't clear, sorry. Is there any funding noise, 81 versus liquidity facilities is also set in the corporate centre rather than else? That was our understanding from Credit Suisse's practice pre-acquisition, yes.
The last question is from Vishal Shah from Morgan Stanley . Please go ahead.
Speaker 12: Last question is from Bichal Shah for more constantly. Please go ahead.
Speaker 18: All right, thank you so much for your questions. My first one is on wealth management. Just wanted to get a sense on you know, how
Alright. Thank you so much for your questions. My first one is on wealth management just wanted to get a sense on how are you.
Speaker 18: you are assessing the business overlaps in that segment or you have had for the chance to sort of...
You are assessing the business overlaps and in that segment and that segment or you have had you know for the chance to sort of.
Speaker 18: you know, look at, you know, different regions and how to respond to all the ongoing competitive pressures in terms of, you know, relationship managers and then sort of bankers in that segment. So if you could give a bit of an update on that side and then the second one is on.
Look at.
Different regions and how to respond to all the ongoing competitive pressures in terms of our relationship managers and then sort of bankers in that segment. So if you could give a bit of an update.
On on that side and then the second one is on <unk>.
Speaker 18: the investment bank, the CS non-core perimeter of 55 billion. I know in one of your slides you've provided a natural runoff rate, but we're just trying to get a sense if you could provide any sort of color in terms of what is your sort of ambition on actively winding down this perimeter in terms of timeline. I.e. could we expect, you know, the next two years, basically by 25?
The investment bank, the CFS noncore parameter of a 55 billion.
I know in one of your slides you provided a natural run off rate.
Andrew Kuhn: Okay, Mickey. The next question is from Andrew Kuhn from CT, please go ahead. Good morning, I'm Andrew Kuhn from City. And thanks for taking my questions to it by May. And firstly, I want to come back to follow up on the PTA point of part-effect, but in relationship to the restructuring charges. You made this common, the outspeperity at the end of 2026, I think restructuring charges will be largely, but not wholly obsessed by the PPA point of part-effect.
But it was just trying to get a sense. If you could provide any sort of color in terms of what is your sort of ambition on actively winding down this parameter in terms of timeline I E could we expect.
Andrew Kuhn: And then in your later comments, you talked about 12 and a half billion of poor to part-effect, of which four and a half would be non-core. And that most of that would be recognising three to four-year time frame. So can we assume the restructuring charges of the magnitude of 12 and a half and can give us a feel for the timing of those related to the PPA point of part. And then the second question is on slide 29.
The next two years.
Basically by 'twenty five.
Speaker 18: you know, broadly most of this rundown to be done is that a fair assumption or are you, you know, looking at it in a bit of a different way? Thank you so much. Yeah, I hate the shell. I mean, I think on that second question, we've addressed that in the sense that, you know, we offer the natural rundown just given, you know, of course.
You know broadly most of this run down to be done is that is that a fair assumption or or are you looking at it and I'm, Ben if a different way.
Thank you so much.
Hey, Vishal I mean, I think on this on that second question. We've addressed that are in the sense that.
We offer the natural rundown just given you know of course, we have to take care and and ensure that we're protecting our counterparties are and we're doing things in the best interests of the firm and so on these positions that we are we will look we will.
Speaker 3: We have to take care and ensure that we're protecting our counterparties and we're doing things in the best interests of the firm. And so on these positions that we...
Speaker 3: We will look strategically to exit them as quickly as possible, but at this point, I would say we'll come back and give you progress as we've done already in 2Q in terms of...
Look strategically to exit them as quickly as possible, but at this point I would say, we'll come back and give you progress as we've done already in <unk> in terms of the actual <unk> reduction relative to the natural runoff profile will continue to do that.
Andrew Kuhn: You provide a useful quarterly trajectory down to minus point three into two and you talk about rate even in Q3. But you also flag 750 million of savings, 550 million of funding cost savings. There's a 650 million arguably one off ECL charge on the credit non-credit and had CES portfolio this quarter. So just trying to understand the going from minus point three to zero, even with all the additional benefits, Q&Q, what's the offset? I guess there'd be some season at young revenue is a bit of a decline in the eye, but any more color there.
Speaker 3: the actual RWA reduction relative to the natural runoff profile. We'll continue to do that.
Speaker 3: And to the extent we can give more color through any of the, through our planning process we will. But again, these are positions where we think, you know, naturally there will be strategic exits and opportunities that arise and not something will be discussed.
And to the extent, we can give more color through any of them through our planning process. We will but again. These are these are positions, where we think you know naturally there'll be strategic exits and opportunities that arise in an and and not something we'll we'll be disclosing in terms of your first question on wealth management in assessing business overlap I mean in gen.
Speaker 3: In terms of your first question on wealth management and assessing business overlast, I mean in general the way we approach integration.
The way we approached our integration is to look at a credit Suisse is adding value.
Speaker 3: is to look at credit Swiss as adding value in a lot of the areas in which we already operate, but also as Sergio mentioned, areas where we have less of a presence. Brazil was mentioned, there are important parts of the Middle East, where that's the case, important parts of Southeast Asia, also much bigger in Europe overall. So in terms of...
In a lot of the areas in which we already operate but also as Sergio mentioned are areas, where we have less of a presence in Brazil. As mentioned there are important parts of the middle East where that's the case important parts of Southeast Asia also much bigger in Europe overall, so in terms.
Todd Tuckner: So in terms of the, yeah, in terms of, they'll take the second point first, in terms of the story on the underlying profitability. Yeah, I mean, just be very clear that the cost saves that we expect to to see by the end of 2023 if three billion, which we think you can price into 2024. Some of that has been realized, but as I would, the way I would think about it is there is work that's ongoing and we expect that the three the greater than three billion number is something that we'll see at the at the end of the year, hitting through.
Speaker 3: assessing the overlaps. I mean, in the end of the day, relationship managers have their client relationships and we want to retain them all. And of course, we're looking at how to manage the business in the most efficient and effective way. I would make one additional comment, which is very important, which is that
Assessing the overlaps I mean in the end of the day relationship managers have their client relationships and we want to retain them them all and of course, we're looking at how to manage the business in the most efficient and effective way I would make one additional comment which is very important which is that.
You know if Paul it announced.
Speaker 3: You know, if all it announced are the area market heads on a, on a combined basis, now is a very important just in the last several weeks and it was in common surge made as well.
The area market heads on a on a combined basis and that was a very important just in the last several weeks than it was in a.
Todd Tuckner: I would, I would continue to reemphasize the, you know, the funding cost point that was in 2Q that will benefit 3Q and fully in 4Q that helps and then the stabilization of as flows and all that will sort of hit through as we go on an underlying basis. And as I said, we expect to break even in the in the third quarter coming out of so three roughly a 300 million plus improvement and then to be positive in in 4Q for the reasons that I mentioned in terms of the, the restructuring you asked about, we'll come back in further details in terms of how much restructuring specifically they'll be.
Common Sergio made as well because you know.
Speaker 3: you know, when we start integrating how we approach the market. And so we're in the market on an integrated basis, which of course just took time, just even though we move quickly in a two and a half months since we've closed.
When we start integrating how we approach the market and so we're in the market on an integrated basis, which.
Which of course, just took time just in.
Even though we've moved quickly and are two and a half months since we've we've closed to be in the market on an integrated basis, having market heads that have now been decided across wealth management on a combined and integrated basis is quite is quite a step that helps us to manage some of the business overlaps and <unk>.
Speaker 3: to be in the market on an integrated basis, having market heads that have now been decided across wealth management on a combined and integrated basis is quite a step that helps us to manage some of the business overlaps and competitive pressures that you were asking about.
<unk> pressures that you are that you were asking about.
Speaker 7: Okay. Thank you so much. This was the last answer in questions. And we, you know, I'm sure we're going to have a chance to stay in touch between now and November 7th when we announce the Q3 results for the time being. Thank you for dialing in. Thanks for your questions. And.
Okay. Thank you so much the last answer <unk> questions and we are you know I.
Todd Tuckner: We're giving a perspective that we expect the number to be broadly offset by the pull to par effects, but at this point in time we're going to need to detail that out to the business planning process and come back as we have said in with our fourth quarter earnings.
I'm sure we're going to have a chance to stay in touch between now and November 7th events. When we announce the Q3 our results for the time being thank you for dialing in thanks for your questions and.
Speaker 7: Well, as I say, looking forward to staying in touch. Thank you.
Well as I say, if looking forward to staying in touch thank you.
Ladies and gentlemen, the webcast and Q&A session for analysts and investors is over you may disconnect. Your lines. We will now take a short break and continue with the media Q&A session at 10 45 CET. Thank you.
Speaker 12: Ladies and gentlemen, the WorkCalth and Q&A session for analyst and investors is over. You may disconnect your lines. We will now take a short break and continue with a media Q&A session at 10.45 CET. Thank you.
Vishal Shah: The last question is from Vishal Shah from Morgan Stanley, please go ahead. Alright, thank you so much for your questions. My first one is on wealth management. I just wanted to get a sense on how you are assessing the business overlaps in that segment or you've had for the chance to sort of look at different regions and how to respond to all the ongoing competitive pressures in terms of relationship managers and then sort of bankers in that segment.
Speaker 19: The we.
[music].
Vishal Shah: So if you could give a bit of an update on that side, and then the second one is on the investment bank of CS, non-core perimeter of 55 billion, what could we expect the next two years, basically by 25, broadly most of this run down to be done, is that a fair assumption or are you looking at it in a bit of a different way? Thank you so much. I mean, I think on that second question we've addressed that in the sense that we offer the natural run down just given, of course, we have to take care and ensure that we're protecting our counterparties and we're doing things in the best interests of the firm.
Okay.
[music].
Speaker 19: The a.
Vishal Shah: And so on these positions that we will look strategically to exit them as quickly as possible, but at this point, I would say we'll come back and give you progress as we've done already in two two in terms of the actual RWA reduction relative to the natural runoff profile. We'll continue to do that and to the extent we can give more color through any through our planning process, we will, but again, these are these are positions where we think, you know, naturally, there'll be strategic exits and opportunities that arise and not something will will be disclosing in terms of your first question on wealth management and assessing business over less.
Vishal Shah: I mean, in general, the way we approached integration is to look at credit Swiss is adding value in a lot of the areas in which we already operate, but also as Sergio mentioned areas where we have less of a presence, Brazil was mentioned, there are important parts of the Middle East, where that's the case, important parts of Southeast Asia, also much bigger in Europe overall. So in terms of assessing the overlaps, I mean, in the end of the day, relationship managers have their client relationships and we want to retain them all.
Vishal Shah: And of course, you know, we're looking at how to manage the business in the most efficient and effective way. I would make one additional comment, which is very important, which is that, you know, if all it announced are the area market heads on a, on a combined basis. Now, it's a very important, just in the last several weeks, and it was in common, Sergio made as well, because, you know, when we start integrating how we approach the market.
Vishal Shah: And so we're in the market on an integrated basis, which of course, this took time, just in even though we move quickly in a two and a half months since we've, we've closed to be in the market on an integrated basis, having market heads that have now been decided across. So we've got a lot of wealth management on a combined and integrated basis is quite, it's quite a step that helps us to manage some of the business overlaps and competitive pressures that you were asking about.
Vishal Shah: Okay, thank you so much. The last answer and questions and we, you know, I'm sure we're going to have a chance to stay in touch between now and November 7th when we announce the Q3 results for the time being. Thank you for dialing in. Thanks for your questions and well as I say, looking forward to staying in touch. Thank you.
Unknown Executive: Ladies and gentlemen, the work of the Q&A session for analyst and investors is over. You may disconnect your lines.
Unknown Executive: We will now take a short break and continue with the media Q&A session at 1045 CET.
Unknown Executive: Thank you.