Q3 2024 UBS Group AG Earnings Call
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[music].
Speaker Change: Ladies and gentlemen, good morning, welcome to the UBS third quarter 2024 results presentation. The conference must have been recorded for publication or good cost you can register for questions at any time by pressing star one on your telephone should you need to operator assistance. Please.
Speaker Change: Press Star Zero at this time, it's my pleasure to hand over to Sarah Mccabe UBS Investor Relations. Please go ahead.
Sarah Mccabe: 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 included in our annual report together with additional disclosures in our SEC filings.
Speaker Change: On slide two.
Speaker Change: You can see our agenda for today. It is now my pleasure to hand over to Sergio <unk> Group CEO.
Speaker Change: Okay.
Sergio: Thank you Sarah and good morning, everyone.
Sergio: Our strong financial performance in the quarter with a net profit of $1 4 billion in underlying PBT of $2 4 billion together with our year to date results demonstrates the power of our unique client franchises diversified business model and global scale.
Sergio: It also represents continued progress on the integration.
Sergio: This brings us two important benefits.
Sergio: First it increases our confidence level in achieving our short and medium term financial targets.
Sergio: Second it allows us to offer the full range of services of the combined bank and to stay even closer to clients.
Sergio: We are better positioned than ever to help them navigate a market background that wild constructive still exhibits periods of high volatility and dislocation.
Sergio: Our commitment to serving clients is reflected in our 9% year on year increase in underlying revenues with notable strength in the Americas and APAC.
Sergio: Invested assets across the group increased by 15% year on year to six two trillion.
Sergio: This shows that our wealth and asset management clients continue to value the capabilities, we provide across our advice platform and the way in which we consistently innovate to meet their needs.
Sergio: One excellent example is the positive client and general partner reaction to the launch of our unified global authorities.
Sergio: <unk>, which has created a top five player in alternatives.
Sergio: Yes.
Speaker Change: And Switzerland, while we face the expected headwinds on net interest income we continued to deliver on our commitment to acting as a safe and reliable provider of credit to the economy with around 35 billion Swiss francs of loans granted or renewed in the quarter.
Speaker Change: Within the investment bank, our investments in global markets supported the robust performance in equities, notably in the Americas.
Speaker Change: And then global banking, we maintained our momentum in advisory as we outperformed the global M&A fee pools for the third consecutive quarter.
Speaker Change: As importantly, our M&A pipeline continues to build.
Speaker Change: Okay.
Speaker Change: Turning back to the integration.
Speaker Change: Mineralization of our preparation work during the quarter allowed us in the last two weeks of October to successfully achieved another milestone.
Speaker Change: We moved all of the client's account and date that in Luxembourg, and Hong Kong onto UBS platforms.
The next significant milestones for 2024 are the client account migrations in Singapore, and Japan expected by year end.
Speaker Change: We will then kick off the next phase of suites migrations in the second quarter of 2025.
Speaker Change: Five positioning us well to announce the client experience and unlock further cost reductions towards the end of 2025 and into 2026.
Speaker Change: In non core and legacy we continue to simplify our operations through bug closures and the decommissioning of applications.
Speaker Change: These are supported the significant year to date reductions in costs.
Speaker Change: And thanks to our active wind down efforts the natural runoff profile of the remaining positions is already in line with our 2020 risk weighted assets ambition.
Speaker Change: At the same time, we remain focused on identifying opportunities to further improve the round down profile, but we'll continue to do so without compromising economic value creation.
Speaker Change: The overall disciplined progress on the integration, including the completion of the legal entity mergers as significantly mitigated the execution risk of the credit Suisse acquisition.
Speaker Change: This combined with the strong performance of our businesses has allowed us to generate capital well ahead of our plan and guidance.
Speaker Change: As we prudently assess future capital requirements business plans and profitability for the coming years, we feel it is important our current group capital position better reflects excess capital available for growth and returns to shareholders.
Speaker Change: Consequently, we have voluntarily accelerated the phase out of the remaining transitional capital adjustments agreed with our regulator, which we have disclosed upon the closing of the acquisition.
Speaker Change: This brings our CET one capital ratio to 14, 3% more in line with our guidance why do we remaining.
Speaker Change: While maintaining a strong capital position and a balance sheet for all seasons.
Speaker Change: This buffer was never considered for distribution and its removal as no impact on our ability to execute on the ongoing 2024 share buyback nor on our medium term ambitions for dividends and buybacks.
Speaker Change: As already communicated we will provide more details on our 2025 capital return plans, including the continued execution of buybacks.
Speaker Change: Our fourth quarter results.
Speaker Change: Our ambition for 2026 capital returns to exceed pre acquisition level is unchanged subject to our assessment of any proposed requirements from Switzerland ongoing review of its capital regime.
Speaker Change: I want to emphasize that our focus extends beyond meeting the current needs of our clients executing on the integration and delivering on our short term plans.
Speaker Change: We are also preparing for the future by continuing to invest in our people products and capabilities to strengthen our client offerings and position our business for long term growth.
Speaker Change: This includes investing in our industry, leading cloud infrastructure as well as our expertise in artificial intelligence and automation.
Speaker Change: This will accelerate generative AI adoption, increasing efficiency and effectiveness.
Speaker Change: One example of the many ways we are leveraging AI is through Microsoft Copilot.
Speaker Change: With 50000 licenses being rollout between now and the end of the first quarter. We are implementing the largest deployment of copilot within the global financial services industry to date.
Another example is read our proprietary AI assistant that provides 20000 employees in Switzerland, Hong Kong, and Singapore with easy access to UBS product information.
Speaker Change: Investment research.
Speaker Change: And the investment bank, we are piloting a proprietary AI algorithms that researches and comply compiles potential merger and acquisition by site targets.
Speaker Change: In Ts and the many other AI deployments that are underway across the entire firm. We are focused on responsible AI as we provide our people with tools that will help them better manage their businesses.
Speaker Change: Even as new technologies changing.
Speaker Change: The way we work our people will remain the most important driver of our success.
Speaker Change: Okay.
Speaker Change: That is why I'm, particularly pleased with the positive results from recent employee survey, which by the way. It's an important testament to the progress we have made on the integration.
Speaker Change: 84% say that they are proud to work for UBS, and 83% would recommend UBS as an employer, both well above industry benchmarks.
We have achieved a lot over the last 18 months as we are building a stronger and even savr showing of UBS that all of our key stakeholders can be proud of.
Speaker Change: But there is no room for complacency, we are just about half way to restoring pre acquisition levels of profit and returns on capital and the journey won't be a straight line.
Speaker Change: In the short term in addition to seasonality ongoing global macroeconomic developments geopolitical conflicts and the upcoming U S elections create uncertainties that are likely to affect investor behavior.
Speaker Change: We continue to help clients navigate this environment and I remain confident in our ability to deliver on our financial targets as we position UBS for long term sustainable growth and remain a pillar of economic support in the communities, where we live and work.
Speaker Change: With that I hand over to Todd.
Speaker Change: Yes.
Todd: Thank you Sergio and good morning, everyone.
Throughout my remarks, I will refer to underlying results in U S dollars unless stated otherwise.
Todd: Also starting today I compare our performance to the prior year quarter. Since we now have fully comparable year over year information for the first time since the credit Suisse acquisition last year.
Todd: I continue to offer sequential insights on balance sheet net.
Todd: Net interest income developments and our progress towards achieving a gross cost save targets by the end of 2026.
Todd: Starting on slide five profit before tax in the quarter increased over two five times to two 4 billion with strong operating leverage improvement year over year contributing to our return on CET, one capital of nine 4%.
Todd: Total revenues rose by 9% to $11 7 billion driven by momentum in our asset gathering businesses and investment bank.
Todd: At the same time operating expenses declined by 4% to $9 2 billion as we continued to execute on our integration and efficiency plans.
Todd: These results also contributed to our strong year to date performance with a nine month pre tax profit of $7 1 billion and return on seed tier one capital of nine 2%.
Todd: Turning to slide six which illustrates our progress and improving profitability over the last year.
Todd: The net profit for the quarter was $1 4 billion with an EPS of <unk> 43.
Todd: As illustrated on the slide the increase in underlying pretax profit was driven by higher revenues paired with lower costs and cle.
Todd: On a reported basis PBT was one 9 billion, including 0.7 billion of purchase price allocation adjustments in our core businesses and integration related expenses of $1 1 billion.
Todd: Our tax expense in the third quarter was $502 million, representing an effective rate of 26%.
Todd: For the fourth quarter, we expect additional revenues from purchase price allocation adjustments of 0.5 billion integration related expenses of $1 2 billion and an effective tax rate of around 35%.
Todd: Turning to our quarterly cost update on slide seven.
Todd: Operating expenses increased by 2% quarter on quarter and were flat excluding the effects of U S dollar softness against the Swiss franc in pound Sterling in which we incur substantial personnel costs.
Todd: When also excluding increased variable compensation linked to revenues and lower litigation reserve releases.
Todd: Operating expenses reduced by around 200 million sequentially or 2%.
Todd: This was supported by a lower overall employee count, which fell sequentially by another 1400 or 1% to below 132000.
The total staff count is down 25000, or 16% from our 2020 to baseline.
Todd: Our underlying cost income ratio dropped by two points sequentially to 78, 5% and has improved by over 10 points compared to the same quarter last year.
Todd: This performance highlights the substantial progress to date and outlines a path forward to reach our target ratio of under 70% by the end of 2026.
Todd: As in prior years, we expect in <unk>, a modest sequential uptick in our operating expenses for select non personnel items, including the U K Bank Levy and regional marketing spend.
Todd: Moving on to slide eight.
Todd: In the third quarter, we achieved $750 million in additional annualized gross cost saves putting us past the halfway mark towards our $13 billion goal.
Todd: As expected the pace of saves moderately slowed this quarter as we continued the intensive work necessary to effectively dismantle the infrastructure of a former G. SIB.
Todd: In particular, we completed preparation of the client account and platform migrations and our Asian wealth franchise.
Todd: And continued readiness efforts relating to our Swiss booking center by far our largest that are planned for next year.
Todd: This phase of the integration requires fully staffed teams across regions to minimize client disruption and maintain operational efficiency.
The comparatively smaller saves this quarter are a reflection of these concerted efforts along with higher variable compensation.
Todd: <unk> headwinds and more moderate cost progress in NCL.
Todd: After a year of very strong sequential achievements.
Todd: As we continue our client account and platform migration work across our divisions and regions in the months ahead, we estimate sequential cost saves to be similarly sized.
Todd: We expect the pace to pick up again once this critical integration phase is complete and we can then fully benefit from decommissioning software hardware and data centers and by unlocking further staff capacity.
Todd: By the end of this year, we plan to have delivered around seven 5 billion and annualized gross cost saves versus our 2022 baseline and cumulative integration related expenses of around $9 billion.
Todd: Yeah.
Now to slide nine where I unpack our capital position.
Todd: We ended the third quarter with a CET one capital ratio of 14, 3% slightly above our guidance of around 14%.
Speaker Change: As Sergio highlighted the sequential decrease this quarter results from our decision to accelerate the phase out of the PPA related transitional capital adjustment, which led to a 65 basis point reduction in our CET one capital ratio without this voluntary acceleration the ratio at the end of the quarter would have been.
Speaker Change: 14, 9%.
Speaker Change: As many of you will remember from last year.
Speaker Change: The acquisition accounting standard required us to fair value all of credit suisse's assets and liabilities at closing.
This purchase price allocation process also resulted in fair value discounts applied to select credit Suisse positions, such as fixed rates Swiss mortgages and certain term note liabilities, which were driven solely by interest rate and own credit effects.
Speaker Change: Accordingly, these fair value adjustments totaling to negative 5 billion net of tax effects were expected to fully reverse into income or pull to par over time.
Speaker Change: Given the temporary nature of these adjustments, we agreed with our regulator at closing to amortize, the resulting capital reduction on a linear basis over a four year period.
Speaker Change: Shielded our capital from significant accounting driven volatility at least during the first phase of the integration process.
Speaker Change: Our decision this quarter to accelerate the phase out of the residual balance of $3 4 billion reflects the significant progress we've made to date across our integration agenda, including the successful merger of the two parent banks last quarter.
Speaker Change: This decision also underscores our confidence moving forward.
Speaker Change: Moreover, by accelerating the phase out of the transaction trends transitional capital adjustment on the aforementioned positions the remaining PPA discount like all other pull to par revenues will now fully accrete into our capital in future periods reversing the impact seen in this quarter's results.
Speaker Change: Specifically, we expect to recognize total pull to par revenues of $6 4 billion over the next several years benefiting our net profit equity and CET one capital within this 80% is set to accrete back by the end of 2028 of which $3 five.
Speaker Change: 5 billion by the end of 2026.
Speaker Change: Notably the requirement to fair value of the position subject to the transitional capital adjustment had no bearing on the credit Suisse parent bank or its standalone capital position.
Speaker Change: Hence it is important to emphasize that our decision. This quarter is equally neutral to the regulatory capital position of UBS AG now that the two parent banks have merged.
Speaker Change: We expect UBS AG Standalone fully applied CET, one capital ratio to be a strong 13, 3% when we publish our report next week.
Speaker Change: A brief update on Basel III Finalization as we continue to assess the effects of the Swiss implementation on January one.
Speaker Change: While we will present the final details with our <unk> results in February.
Speaker Change: Our latest estimate is that the <unk> impact will be a low single digit percentage of total group or <unk>.
This is revised down from our prior guidance of around 5% and is now expected to reduce our CET one capital ratio by around 30 basis points upon implementation next year.
Speaker Change: Now moving on to slide 10.
Speaker Change: While our strong capital position is a key pillar of our strategy.
Speaker Change: <unk> this quarter I offer a more comprehensive picture of our balance sheet and the structural drivers that contribute to making it our balance sheet for all seasons.
Speaker Change: As of the end of the third quarter, our balance sheet consisted of $1 six trillion in total assets with around 40% in loan balances, while we continue to optimize the risk profile of exposures inherited with the acquisition of credit Suisse. Our lending book continues to reflect high credit quality and disciplined risk management.
Speaker Change: More than 80% of our loan portfolio consists of mortgages with an average LTV of around 50%.
Speaker Change: And fully collateralized Lombard loans.
Speaker Change: This quarter, our credit impaired exposure as a percentage of our loan book was just 73 basis points and our cost of risk was only eight basis points.
Speaker Change: Assets held at fair value were 494 billion or around 30% of the total balance sheet, notably level three assets were 16 billion and accounted for less than 1% of our total assets.
Speaker Change: Turning to the liability side our operations. This quarter were funded with 776 billion of deposits at almost 370 billion of well diversified wholesale funding spread across currencies and tenors.
Speaker Change: Our loan to deposit ratio at quarter end was 79%.
Speaker Change: Throughout the year, we have diligently executed on our funding plan already having completed our issuances for 2024 and pre funded some of our 2025 81 build.
Speaker Change: Finally tangible equity in the quarter increased by $3 6 billion to 80 billion, mainly driven by quarterly net profits and other comprehensive income of $2 5 billion.
Speaker Change: This was partly offset by a net reduction of zero pipe.
Speaker Change: 5 billion Treasury shares repurchased as part of our share buyback program.
Speaker Change: Our tangible book value was $25 10 per share, reflecting a sequential increase of 5%.
Speaker Change: Overall, we continue to operate with a highly fortified and resilient balance sheet with total loss absorbing capacity of 195 billion, our net stable funding ratio of 127% and an LCR of 199%.
Speaker Change: Moving to our business divisions, starting with global wealth management on slide 11.
Speaker Change: Gws pre tax profit was $1 3 billion, an increase of 30% with strong positive jaws as revenue growth outpaced expenses by four percentage points.
Speaker Change: Our performance is showcasing the enduring competitive strengths of our wealth franchise.
Speaker Change: Enhanced by the credit Suisse acquisition, our global scale diversified model and cross divisional capabilities uniquely position us to capture wallet and seize growth opportunities.
Speaker Change: The industry trends, we see accelerating include legacy and longevity based planning needs.
Speaker Change: Geographic wealth migration and active management, among the world's wealthiest investors to diversified portfolios and manage risks.
Speaker Change: These secular growth dynamics play right to our strengths.
Speaker Change: This quarter within an active market environment characterized by higher volatility and continuing concerns around geopolitical developments our clients benefited from our CIO is call to remain invested and to position their portfolios to take advantage of the current market backdrop.
Speaker Change: This further strengthened our clients' trust in our advice and capabilities and contributed to strong revenue growth in every region.
Speaker Change: All regions delivered double digit PBT growth.
Speaker Change: Notably APAC delivered impressive results more than doubling last year's pretax profits on a revenue improvement of 13%.
Speaker Change: Also in the Americas were invested assets surpassed the two trillion Mark our performance showed notable progress PBT grew by 11% year on year and by over 30% sequentially translating into a pretax margin of 12%.
Speaker Change: In the quarter, we delivered 25 billion in net new assets with positive flows across all regions with.
Speaker Change: With net new assets of nearly $80 billion year to date, we remain on track to deliver on our 100 billion M&A ambition for 2024.
Speaker Change: Once again, we attracted strong net new assets, while continuing to absorb integration related headwinds, including the anticipated roll off of a portion of the fixed term deposits associated with last year's win back campaign.
Speaker Change: Our ongoing work to optimize balance sheet usage and enhance revenue margins.
Speaker Change: And the residual tale of client advisers, leaving the credit Suisse platform.
Speaker Change: Of the 60 billion in deposit volumes maturing in the quarter, we retained 85% on our platform, including converting 20% into more profitable mandates structured products and other liquidity solutions.
Speaker Change: Managing this roll off will remain a short term priority for us as we expect elevated maturing deposit volumes over the next two quarters.
Speaker Change: Additionally, by remaining focused on improving the efficiency of our financial resources and increasing profitability on sub hurdle relationships our balance sheet optimization efforts have supported incremental progress in our revenue over our WAM margin, bringing it to over 23% a three percentage point increase.
Speaker Change: From a year ago, when we started this work.
Speaker Change: Net new fee generating assets were 15 billion, reflecting strong discretionary mandate sales in all regions with disciplined pricing supporting stable margins sequentially.
Speaker Change: Now on to Gws financials.
Speaker Change: Total revenues increased by 7% with higher recurring net fee income and double digit growth in transactional revenues more than offsetting NII headwinds.
Speaker Change: As I've highlighted in the past a lower interest rate environment is expected to spur client demand for more advisory solutions, including structured products and alternative investments as clients seek to rebalance their cash exposures and search for yield.
Speaker Change: We also expect clients to reengage and lending activities, helping to offset some of the NII headwinds.
Speaker Change: Recurring net fee income increased by 9% to $3 2 billion as our invested assets grew to $4 three trillion up 16% year on year, and 5% sequentially driven by market growth FX and net new asset inflows.
Speaker Change: Mandate penetration increased to 38% up two points from the same quarter, a year ago, reflecting the value our clients see and our advice and solutions supporting their investment objectives.
Speaker Change: Transaction based revenues were $1 1 billion up 19% with strong momentum across all regions supported by the initial reduction in U S policy rates combined with the announcement of economic stimulus in China. This made for a constructive trading environment for our clients.
Speaker Change: In addition, the successful collaboration between Gws in the I B.
Speaker Change: And our investments in AI led sales support capabilities allowed us to capture transactional volumes across our expanding product shelf.
Speaker Change: We saw impressive growth in structured and cash products and in alternatives.
Speaker Change: This continues to be especially notable in APAC and the Americas were transactional revenues were up 25% and 23% year on year, respectively, and both up sequentially versus a strong <unk>.
Speaker Change: We see this momentum continuing into the fourth quarter, while noting transactional activity typically decreases as we approach year end.
Speaker Change: Net interest income at $1 6 billion was broadly flat sequentially as reinvestment income from longer duration application portfolios offset expected headwinds from mix shifts.
Speaker Change: In the fourth quarter with 50 basis points, a further U S dollar rate cuts priced in we expect a sequential mid single digit percentage drop in NII.
Speaker Change: This is expected to be driven mainly by headwinds deposit revenues from lower rates, while our deposit balances as mentioned reflect conversion of fixed term deposits in part into non deposit solutions.
Speaker Change: Also as mentioned last quarter towards the end of the year, we plan to adjust the sweep deposit rates in our U S advisory accounts.
Speaker Change: The effect of this change on our NII is expected to be minimal in the fourth quarter.
Speaker Change: Moreover, lower U S dollar rate assumptions also reduce the modeled impact of sweep deposit rate changes on net interest income in 2025, and likewise would be expected to improve last quarter's guidance of negative 15 million pvt annually.
Speaker Change: Okay.
Speaker Change: Across Gws as mentioned last quarter. We continue to initially expect net interest income to trough around the middle of next year based on current implied forwards without <unk> results and after completing our planning process, we intend to offer more developed insight into our 2025 expectations.
Speaker Change: For Gws NII.
Speaker Change: Operating expenses increased by 3% compared to last year, and 1% sequentially, excluding compensation related and currency translation effects underlying operating expenses dropped by 4% compared to the second quarter as.
Speaker Change: As highlighted previously the ongoing client account and platform migration work is expected to be a significant driver of cost reductions in gws by the middle of 2025 and into 2026.
Speaker Change: Turning to personal and corporate banking on slide 12.
PNC delivered third quarter pre tax profit of 659 million Swiss francs down 7% revenues.
Speaker Change: Decreased by a similar level, mainly as NII dropped by 11% as the prior year quarter featured substantially higher Swiss franc interest rates.
Speaker Change: Recurring net fee income increased by 5% on higher custody assets, while transaction based revenues were down 5%, mainly from lower corporate activity, including in trade finance, partly offset by higher card fees.
Speaker Change: NII decreased by 2% sequentially, mainly driven by the effect of the S. N. B's second 25 basis point interest rate cut in June and partly offset by the benefits of our balance sheet optimization efforts, which remain key to building back returns to pre acquisition levels.
This work, which continues to contribute to improve revenues on capital deployed and fixing the funding gap inherited from credit Suisse came at the expense of net new lending outflows of $5 6 billion Swiss francs this quarter.
Speaker Change: I would highlight that pnc's contribution to our commitment in Switzerland to maintain a loan book of 350 billion Swiss francs was evidenced by around 25 billion in loans granted or renewed during the quarter.
Speaker Change: In the fourth quarter, we expect NII to tick down sequentially by a low single digit percentage both in Swiss francs in U S dollars as the effects of the S. N. B's third 25 basis point rate cut in September are expected to more than offset improved lending revenues from our repricing efforts and lower funding.
Speaker Change: Costs.
Speaker Change: Considering competitive dynamics in Switzerland, as well as the measured pace of accommodation in the Swiss central Bank's monetary policy.
Speaker Change: Our objective is to protect client deposit balances.
Speaker Change: Hence our guidance for the fourth quarter reflects only a slight increase in deposit beta.
Speaker Change: As mentioned last quarter with Swiss franc interest rates stabilizing by mid next year based on current implied forwards. We continue to expect net interest income in P&C to trough shortly thereafter.
We will offer additional insights into our 2025 expectations for P&C NII next quarter.
Speaker Change: Credit loss expense was 71 million driven by several positions in our corporate loan book, mainly on the credit Suisse platform.
For the foreseeable future, we expect <unk> to remain at broadly similar levels, given the persistent relative strength of the Swiss franc and some economic softness in the main Swiss export markets contributing to an already muted domestic economic outlook.
Speaker Change: Operating expenses in P&C were broadly flat year on year and down 1% quarter on quarter.
Speaker Change: On slide 13 pretax profit in asset management increased by 46% to 237 million with revenues up 13% our asset management franchise is making visible progress in advancing our strategy of offering differentiated and tailored client solutions at scale.
Speaker Change: <unk>.
Speaker Change: Complementing this is a high level of focus on streamlining the operational backbone of the division as well as exiting non strategic businesses results.
Speaker Change: Results in the quarter include gains of 72 million from disposals largely related to the residual portion of the sale of our Brazilian real estate Fund management business.
Speaker Change: Excluding these gains asset management revenues were up by 3% year on year.
Speaker Change: Net management fees were broadly flat as higher average invested assets and the effect of a reevaluation of our real estate fund offset ongoing margin compression from clients rotating into lower margin products.
Speaker Change: Performance fees were $46 million compared to $18 million in the prior year quarter, driven by higher revenues in our hedge fund businesses and fixed income.
Speaker Change: Net new money in the quarter was positive 2 billion with strong inflows in money markets and positive contribution from our China JV is <unk>.
Speaker Change: More than offsetting outflows in equities.
Speaker Change: Operating expenses were 4% higher as cost reductions from lower head count were more than offset by higher personnel and litigation expenses.
Onto our investment bank's performance on slide 14.
Speaker Change: The I B continued to build revenue momentum leveraging the investments in teams and capabilities acquired with credit Suisse and delivered another strong set of results with pretax profit of $377 million in the quarter.
Speaker Change: <unk> revenues increased by 29% to $2 5 billion with global markets posting its best third quarter on record and supported by solid performance in global banking.
Speaker Change: Banking revenues increased by 21% to $555 million as we leverage the increased breadth of our franchise and solidified growth achieved over the last several quarters.
Speaker Change: Our investments in talent and integrated coverage teams are paying off as we have gained meaningful market share in a number of key sectors.
Speaker Change: Regionally APAC delivered its best third quarter on record and M&A more than doubling total revenues from the prior year quarter, while banking revenues in the U S were up by around 20%.
Speaker Change: In advisory, we delivered topline growth of 13% and further market share gains in M&A.
Speaker Change: Capital markets revenues rose by 28% with increases across all product groups.
Speaker Change: Looking ahead, we remain encouraged by the strength of our pipeline.
Speaker Change: Which should support our performance into 2025, we also maintain a top 10 ranking across the street and announced M&A volume.
Speaker Change: Revenues in markets increased by 31% to $1 9 billion driven by client activity and the strength of our expanded franchise, we saw increases across all regions and notably in the Americas, where revenues were up by around 60%.
Speaker Change: Equities revenues were up by 33% supported by higher constructive volatility.
Speaker Change: Our equity derivatives and cash equities businesses, each delivered their best third quarter on record.
Speaker Change: <unk> was up by 26% with double digit growth in FX and rates as we benefited from increased client activity, albeit against a softer comparative quarter a year ago.
Speaker Change: Operating expenses rose by 2% and were broadly flat excluding currency effects.
Speaker Change: Moving to slide 15, noncore and legacy pretax loss in the quarter was $333 million with $262 million in revenues, primarily from physician exit gains in securitized products, partly offset by net losses in macro.
Speaker Change: Excluding litigation operating expenses were down by over 40% year on year and up 1% sequentially in.
Speaker Change: In the fourth quarter, we expect NCL to generate a pre tax loss broadly in line with the guidance, we provided with our <unk> 24 earnings.
Speaker Change: Yeah.
Speaker Change: Now on to slide 16 in.
Speaker Change: In the quarter, NCL reduced <unk> and LR D by five and 11 billion respectively.
Speaker Change: Since the second quarter last year N C. L has freed up almost $6 billion of capital by reducing its RW way by around half and it's L. R. D. By two thirds. It also halved its cost base in that time.
Speaker Change: This progress to date puts us nearly a year ahead of our derisking schedule, including closing over 50% of the 14000 books, we started with.
Speaker Change: By the end of 2026, we aimed to have less than 5% remaining.
Speaker Change: As the chart illustrates solely by letting the portfolio naturally run off we would already broadly meet our current ambition to reduce mcl to 5% of group <unk> by 2026.
Speaker Change: This impressive result is testament to the skillful work delivered by the NCL team over the past five quarters.
Speaker Change: After completing our planning process, we will provide an update to our NCL ambition through 2026 with our fourth quarter results in February.
Speaker Change: Recapping the quarter, we showcase the strengths and long term strategic advantages of our franchise by building on positive client momentum and delivering strong underlying profitability.
Speaker Change: We continued to make impressive progress in integrating credit Suisse. As we've successfully embarked on the next critical phase of our integration journey.
Speaker Change: With a strong capital and liquidity position and our balance sheet for all seasons, we remain well positioned to continue delivering for our clients and generating attractive shareholder returns while investing for our future.
Speaker Change: With that let's open for questions.
Speaker Change: We will now begin the question and answer session for analysts and investors participants are requested to use only handsets are asking a question anyone who has a question you May press star one at this time.
Speaker Change: The first question is from Kian <unk> from Jpmorgan. Please go ahead.
Speaker Change: Yeah, Thanks for taking my questions.
Speaker Change: The first question is on.
Speaker Change: Buyback in 2025.
Speaker Change: Second quarter stage, you were not commenting yet on buyback.
Clearly that changed at a recent conference and the weak real quick.
Speaker Change: Confirming this say a deal today as well.
Speaker Change: I just wanted to understand what the thinking is in terms of changing the buyback view in 2025, and how that fits into the regulatory regime changes that might come in.
Speaker Change: In the future.
Speaker Change: And in that context, if you could just also indicate if you will make any comments with our full year results and he will give us the buyback for 2025, how is it fits this regulatory changes.
Speaker Change: Especially again, referring to the parent bank capital issue.
Speaker Change: And then the second question is on.
Speaker Change: The U S wealth management.
Speaker Change:
Speaker Change: Are you seeing a peak in yield seeking from deposits. This at this point and.
Speaker Change: We're hearing from the U S. P is that there is some stabilization sweep accounts. So I'm just trying to understand how lower rates will impact suite, but also potentially impact loan growth.
Speaker Change: I can see it's flattish in the quarter.
Okay. Thanks.
Speaker Change: Thanks Kian.
Speaker Change: Well look if I if you go back into our remarks and my remarks in the past I always clearly stated that.
Speaker Change:
Speaker Change: Starting a buyback program in 2024 would be at the start of a journey.
Speaker Change: Would not be a stop and go kind of strategy. So I always and we always flagged. The fact that in 2025, we would have a share buyback now we are reiterating that sat.
The guidance that by saying that we do expect in the early part of 2025 as we presented Q4 results to tell.
Like we did this year and the amount of.
Speaker Change: Ambition. So are the size of the ambitions we have for 2025, so in that sense I think that set.
Speaker Change: I just we are just reiterating our commitments set also in respect of our ambitions for 2026 is that of course, they are subject to.
Speaker Change: Our requirements are.
Speaker Change: Potential new requirements in Switzerland, and then we will assess but our ambition is to have similar returns we add before the acquisitions by 2026 now.
Speaker Change: For 2025.
Speaker Change: Early 2025 year question are we going to have a more crowded clarity.
Speaker Change: I I don't know we are not really in control of that.
Speaker Change: Off of the timing.
Speaker Change: Think I suspect that we won't be able to give a lot of.
Speaker Change: <unk> on that in that sense because of that.
Speaker Change: We are still are going through technical discussions the consultation process, probably is going to start late this year or even in the early part of next year and he is going to take curfew few months. So it's very unlikely that in February we will be able to give that much more clarity on this topic.
Speaker Change: And so this is very unlikely to affect 2025.
Speaker Change: That return ambitions.
Speaker Change: And.
Speaker Change: That also implies that said there is no change in terms of the parent bank has used so our parent bank. Our overall capital position is very strong and that.
Speaker Change: And also when you look at our parent bank capital at 13, 3% is a very solid is already on a fully applied basis and with a methodology on how we look at the valuation of our assets and subsidiaries that is quite.
Speaker Change: Conservative.
Speaker Change: Definitely compared to what we saw in the past.
Speaker Change: I can.
Speaker Change: Regarding your second question in terms of lower rates and impact on our U S wealth business. So first on the loan side, absolutely I would expect.
Speaker Change: Across the division that lower rates will that I made this comment earlier in my remarks.
Speaker Change: Could spur additional lending opportunities across the division, including in the U S. On the deposit side in particular on on sweeps. So first I'd say a couple of things.
Speaker Change: That we are seeing sweep deposits continue to taper, but in a in the quarter. We did have a.
Speaker Change: Smaller outflows, so still about $1 billion of of outflows.
Speaker Change: I'd say that.
Speaker Change: Some of the market dynamics that I see.
Speaker Change: In this regard one is that we're not yet pricing.
Speaker Change: Pricing sweeps higher versus maybe some of the peer set doing.
Speaker Change: Lee.
Speaker Change: We have a higher percentage of our assets with a.
Speaker Change: Ultra high net worth and for sure that our asset band tends to have a much lower percentage of AUM and sweeps. So that's going to be a market dynamic for us that we'll always weigh on you.
Speaker Change: You know that that sensitivity just given that with a a.
Speaker Change: More.
Speaker Change: High net worth client base, where there's more sensitivity in terms of deposit pricing you know naturally then there'll be lower balances and sweeps that said you know I.
Speaker Change: Expect as rates come down that we will see we will continue to see us.
Speaker Change: <unk> balanced tape taper, if not starting to grow.
Yeah.
Speaker Change: Thank you.
Speaker Change: The next question is from Craig Hallum from Goldman Sachs. Please go ahead.
Yes. So good morning, everybody just two questions from me 2025 profitability you've got it at a high single digit return on core tier one consensus is at nine nine point too in the nine month stage. This year. So how should we be thinking about the outlook for returns and earnings growth in 'twenty five 'twenty four and also any specific items to be.
Speaker Change: We're off in the fourth quarter that could bring the 24 return on core tier one down meaningfully from what we've seen so far this year.
Speaker Change: Then second and again, it's a bit of a follow up on U S. Wealth, so 12% pre tax margin in the quarter are there any one off in that number and you've highlighted before you decided to bring a broader suite of products and capabilities to clients to drive that margin up towards the mid teens targets. What are the key signposts, we should account for fee to <unk>.
Speaker Change: Be delivering on that strategy and given the comments yesterday from column on M&A, how does how does M&A fit into that strategy as well. Thank you.
Speaker Change: Yeah, Hi, Chris So maybe just address your second question. Initially just in terms of the pre tax profit and in the Americas region.
Speaker Change: No no no one offs just you know I would I would comment that first of all our strongest revenue quarter ever.
Speaker Change: So, they're certainly seeing that as a as a strength.
Speaker Change: We continue to see our revenues.
Speaker Change: Growing nicely up 3% sequentially in the region and 9% year on year.
Speaker Change: And so no no one one offs you see.
Speaker Change: Well I I highlighted in my comments the transaction revenues.
Speaker Change: Continue to be a real a real plus for us as we borrowed a page from.
Speaker Change: Our.
Speaker Change: Our strategy outside the the U S in terms of.
Speaker Change: Working hand in hand, with the IV and working with clients and bringing them out.
Speaker Change: Our product shelf in in transactions, so really generating good oh, good good transactional growth in that respect.
Speaker Change: Look we're going to we know what we need to do.
Speaker Change: And we're going to stay focused on our continuing to chip away at our at our goals, it's not going to happen overnight and will will continue to come back and talk about.
Speaker Change: And in fact in the fourth quarter.
Speaker Change: We'll give more of a perspective on how we see things in the end.
Speaker Change: The signposts you can look to.
Speaker Change: In terms of.
Speaker Change: 2025 and I.
Speaker Change: I'd say first off.
Speaker Change: If we look out into <unk>, you asked I mean other than the.
Speaker Change: The seasonality that we highlighted in the fourth quarter a bit on the.
Speaker Change: The top line that you would normally see despite the momentum we saw coming into <unk> also a little bit on the expense side as I highlighted in my comments a bit of the somewhat seasonal uptick and some one offs like the U K bank Levy, but away from that no I mean, nothing that we're seeing and nothing on the CET one.
Speaker Change: Our capital ratio that I would that I would highlight.
Speaker Change: We look out I don't think we want we don't think it's appropriate to draw a straight line or extrapolate from the strong return on CET. One we've generated this year I think we just have to keep doing the things that we said we're going to do.
Speaker Change: We know we have costs.
Speaker Change: Costs that have to continue to come out at this point that is going to be the biggest driver of getting us to a cost income ratio below 70% and our returns to around <unk>.
Speaker Change: 15% by the end of 2026, we know that's the.
Speaker Change: The ambition for us and we're going to work over the next two years to get there.
Speaker Change: But at.
Speaker Change: At this point I wouldn't extrapolate necessarily from our 24 performance to draw a line into 'twenty five.
Okay.
Speaker Change: Okay. Thanks very much.
Speaker Change: The next question is from Giuliano from Morgan Stanley. Please go ahead.
Yes, hi, good morning.
Giuliano: So two questions from me Todd.
Giuliano: Todd you mentioned that some balance sheet optimization efforts.
Giuliano: And I think you're still going on but basically two percentage points.
Giuliano: I was wondering if you could the ships from nine to.
Giuliano: All these measures Inc.
Giuliano: Much is left to come I think in Q4, you highlighted them.
Giuliano: NII impact and I was wondering how much of that is already.
Speaker Change: Got it.
Speaker Change: And then aside from the quarter and going back to the U S business.
Speaker Change: Business my understanding and once you get to 15% PBT and once you get.
Speaker Change: Integration and you could consider some.
Speaker Change: Inorganic growth opportunity to further improve margins, but even on.
Speaker Change: Too big to fail proposal.
Speaker Change: The way it is we can't the moment, which sort of penalizes grossing pouring subsea journeys and how to use it to them.
Speaker Change: Thank you.
Speaker Change: Hi, Julia.
Speaker Change: Yeah, so on the balance sheet optimization.
Speaker Change: Thanks for recalling that point in my remarks was that is something we're quite proud of that work.
Speaker Change: Is driving up the.
Speaker Change: The you know the efficiency on the capital deployed in our in the businesses that we inherited and so this has been a big.
Speaker Change: Piece of work that's been driven by the business.
Speaker Change: Really across our across the entire business and so the impact is appreciable as as you saw so just some insight into it so and I've talked about this a bit before but effectively when we look at the.
Speaker Change: The capital deployed typically around lending relationships that have been.
Speaker Change: Largely inherited albeit we can look at still the you know the ones that are more heritage UBS as.
As well.
Speaker Change: To the extent that there are sub hurdle, we've been taking the steps to.
Speaker Change: <unk> additional revenues.
Speaker Change: Through repricing efforts, but importantly to expand the product shelf and offering available to those clients who might be mono line clients and so that's been a big a big effort and you can see that in the uptick in the revenue over our WMA as we expand effectively the offering.
Speaker Change: <unk> to those clients, who may have just been clients who were at.
Speaker Change: That alone with with with US with credit Suisse, and now have a much broader array and so it's a win win as we bring a lot of value I mentioned the impact on net new assets because naturally as you attempt to optimize the balance sheet. While we've been successful there will be times when you tried to reprice that.
Speaker Change: B clients and in particular securities, leaving the platform and so that's where the NAA headwind is that I talked about that we're capturing in our otherwise impressive.
Speaker Change: Net new asset.
Speaker Change: Performance in the quarter.
Speaker Change: Yeah.
Yeah Julio on the second question I think that's at first of all I think it would be premature to draw conclusion around what set the new regulation will be having to say that you have to balance that.
Speaker Change: One aspect that has been clearly outlined by the Swiss federal counterproposal used out there.
Speaker Change: Intention or their desire to keep that.
Speaker Change: Switzerland, and broadly speaking also UBS as a competitive global player. So I can't really see how it is possible the way that you know with us.
Speaker Change: Ah regime Deadwood panelized.
Speaker Change: Expansion in a globally. So in that sense I think it's that we as I as we mentioned before we do believe that whatever the new regime will be it will be something that fits into their strategic direction outlined by the federal Council and a desire to.
Speaker Change: Correct.
Speaker Change: Some aspect of the current regulation, which broadly speaking, there's a very strong regulation one of the most demanding one when fully applied and consistently applied that was not the case in the credit Suisse situation UBS is a completely different situation. We believe we have a very strong capital position.
Speaker Change: Our balance sheet for one season, and we are able to sustain both our global business model, but also staying very close to our own markets and sustain the economy.
Speaker Change: So you know.
Speaker Change: When we have all the facts, we will draw strategic conclusions on what to do.
Speaker Change: As now premature to do that.
Speaker Change: Thank you.
Speaker Change: The next question is from Stefan Steinman from Autonomous Research. Please go ahead.
Stefan Steinman: Yes. Good morning, Thank you very much for taking my questions.
Stefan Steinman: The first one I wanted to ask is I noticed that your sensitivity to a downward shift of the yield curve is XT compounded lot high in the second quarter you guided for minus one 5 billion now it's only 300 million.
Stefan Steinman: And that is despite the fact that to the rate environment Hasnt changed dramatically during the third quarter.
Speaker Change: Could you maybe explain what has changed.
Speaker Change: And another question not directly related to the results but.
Speaker Change: There were stories that you might be interested in some kind of joint venture in India and potentially with a player called 361.
Speaker Change: You may not be able to comment on the specifics but.
Speaker Change: Hypothetically would this be indicative of any strategic desire to shift more onshore in more into potentially lower wealth brackets.
Speaker Change: If you contemplate such a move thank.
Speaker Change: Thank you very much.
Hey, Stephen how are you.
On the on the first.
Speaker Change: Yeah. Good spot so the that asymmetry is a function of now in the lower interest rate environment and in Swiss franc terms, it's just the.
Speaker Change: The loan flooring dynamics that come into play.
Speaker Change: From negative interest rates, so you see that the down one.
Speaker Change: 100 basis point scenario will have a much more limited impact or an asymmetrical impact to the up 100 basis point.
Speaker Change: Impact in particular in Swissie.
Speaker Change: Yes.
Speaker Change: The second question you are right, we are not on a comment or on any speculation or rumors.
Speaker Change: We we we do we do believe that Asia Pac is a growth business that we have now.
Speaker Change: A stronger presence in India. Thanks to the combination of UBS and credit Suisse capabilities, we always look at ways to enhance our businesses and in each key locations, where we operate.
Speaker Change: But I.
Speaker Change: I wouldn't draw a conclusion that we are thinking about major strategic.
Speaker Change: Moves in terms of our segments our focus at this stage.
Speaker Change: Okay. Thank you very much thank you.
The next question is from Jeremy <unk> from BNP Paribas. Please go ahead.
Speaker Change: Good morning. Thank you just a couple of follow ups on wealth management.
Speaker Change: Things that you've touched on but I, just want to get into a bit more detail.
Speaker Change: The first one was on adviser numbers, which are coming down a little bit more sort of as expected.
Speaker Change: In this quarter, but I was just wondering where you are in that process and what the outlook is for how much more reduction in adviser numbers do you expect and is there a point at which that.
Speaker Change: Returns to growth mode or does it stay in optimization mode for for a continued period of time.
Speaker Change: So adviser numbers.
Speaker Change: And then the second question was just to talk a bit more about Asia and wealth management.
Speaker Change: You referred to the stimulus you referred to the pickup in transaction activity. So I just wondered where you think we are in that process and for example, whether youre seeing signs of re leveraging.
Speaker Change: And just how much improvement you see ahead of us in that Asia.
Speaker Change: Process.
Speaker Change: Hi, Jeremy.
Speaker Change: So first on Asia, Yeah, we're really pleased with the performance in Gws <unk> APAC and you know thanks for recognizing that as well.
Speaker Change: You see the.
Speaker Change: Sequential progress. This this having a transaction based income up in <unk> versus <unk> really proud of that result, and then you see the year on year.
Speaker Change: Quite strong.
Speaker Change: In terms of where we are I think.
Speaker Change: We have I would I would argue we have a long road ahead in the sense of good upside.
Speaker Change: Just given that you know the business is first coming together now on the same platform I mean, we shouldn't underestimate the importance of that.
Speaker Change: With the.
Speaker Change: The Hong Kong client account migration, just having been completed this past weekend and we're looking forward to Singapore and Japan in.
In the fourth quarter I mean these these are.
Speaker Change: These are things that are really going to just further bring the business together and I think from here lower rates you know, let's see.
Speaker Change: Re leveraging opportunities you mentioned the business is very focused I think the businesses.
Speaker Change: Is positioning itself to fire on all cylinders in APAC.
Speaker Change: And I am very very bullish about that so in terms of where we are in the process I think.
Speaker Change: Obviously, it's been a good backdrop in this last quarter, but I think there are really good things ahead in terms of the adviser numbers I would sort of look at that in two ways first.
Speaker Change: On the non U S or what we call the Swiss and international part of Gws I would say from an advisor perspective. It is still optimization is probably the word is come together I think it's it's it's a lion's share of that's been complete you know I've talked about the <unk>.
Speaker Change: Swiss client advisers, leaving for some period of time and that that's been.
Speaker Change: An old story and it's just really the tail of it that we talk about maybe as a headwind a bit on on net new assets, but in terms of the advisor head count.
Speaker Change: You know I I, just see the teams as they come together and as well once all the platform work is complete.
Speaker Change: No I think when we get to a point and that of stability and from there the business can make targeted investments in specific regions to grow.
Speaker Change: For sure, but it's already leverage at scale I think the U S. We need to a bit take a wait and see and see what.
Speaker Change: The leadership.
Speaker Change: Comes back with a bid and they as they do their they're strategic reviews, and we'll talk surge and I'll come out and talk a bit in the fourth quarter.
Speaker Change: About that I think.
Speaker Change: It has been a story of somewhat trying to get more productive with a smaller advisor workforce over a number of years and we'll have to see if that's the.
Speaker Change: The direction of travel that the current leadership wants to go.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: The next question is from Amit <unk> from Mediobanca. Please go ahead.
Speaker Change: Hi, Thank you and yes, so two questions for me and.
Speaker Change: One on the U S as well.
Speaker Change: I found it really interesting the comment you made out and potentially looking at acquisitions.
Speaker Change: And I guess, what I'm. Just wondering is then from a strategy standpoint, and it's part of the issue in terms of operating margin is the scale.
Speaker Change: And the cost base relative to the revenues.
Speaker Change: And is it now than a case and it's cheaper to acquire than to simply just higher because either you know as you say, it's the focus has been on productivity, reducing ethane holidays.
Speaker Change: Hey, I'm just trying to think is that because you know these 400% recruitment deal as of now just too expensive and to make it last fall, but it's actually just cheap it's buying and organization.
Speaker Change: And and then secondly, just coming back on the deposits and the roll off of the fixed term deposits within well.
Speaker Change: And I'm, just curious where that is kind of within 12 months.
Speaker Change: Done it kind of quite high right.
Speaker Change: And so just curious if it looks like that.
Speaker Change: Attention now.
Speaker Change: Thanks.
Speaker Change: Q4 and start to next year. Thank you.
Yes.
Yes, so on the on the deposit question.
Speaker Change: These were written.
Speaker Change: Basically there they have a year maturity. So you start to see we saw it in <unk> already are ones that were written just in the wake of the acquisition.
Speaker Change: You know all the way through.
Speaker Change: I would say at the end of the year.
Speaker Change: <unk> 2023.
Speaker Change: To the very beginning of this year and they had they were competitive in terms of pricing for sure as.
Speaker Change: As part of stabilizing the the franchise and engaging with clients so for sure and so now as they mature.
Speaker Change: The question and that's that's what I've been highlighting in the last couple of quarters. The question becomes what.
What we call landing will referred to them as landing those deposits in the sense of converting them into other parts of the platform as we've been doing successfully retaining.
Speaker Change: Retaining as the key is the key objective.
Speaker Change: And retaining them in a more profitable manner, and we're doing that quite successfully but it's a headwind on M&A that we've absorbed.
Speaker Change: And these are in these M&A.
Speaker Change: Metrics that I've been highlighting in so far as you know there is still some that are leaving the platform in terms of the outlook. We still see elevated I think <unk> is the peak, but we still see elevated maturing F. T DS in the fourth quarter and into the front part of the first quarter before.
Speaker Change: Or we could get get this issue a bit in the rearview.
Speaker Change: Yes.
Speaker Change: Well in respect again I.
Speaker Change: Yes on this asset.
Speaker Change: Potential.
Speaker Change: Inorganic things you know I have to say that it's a column that made it very clear that is not a tomorrow morning kind of issue. So I think it's totally premature to speculate how if and how we would do any such that our priority right now is too.
Speaker Change: <unk> is to improve our.
Why do we do in the U S, bringing the margins to a narrowing the margins to our peers and doing better what we have today and then what.
Speaker Change: I actually by doing that.
Speaker Change: We got to create that.
Speaker Change: Also the Optionality and to really choose watch is fits best is on organic growth or inorganic and what fits the best in our in our business model, which is asset gathering centric.
Speaker Change: The scale issue in the U S is pretty much driven by the fact that we have a banking platform a GC that platform that factor.
Speaker Change: So the intermediate holding company to add can accommodate different banking businesses, which we don't have so.
Speaker Change: Again, I think that's at.
Speaker Change: Once we finish this.
Speaker Change: Chapter of restoring the profitability at the levels, we want to be and we fully extract the value of our investments in.
Speaker Change: In the investment banker and a collaboration.
Speaker Change: Between the investment banking and wealth management.
Speaker Change: In asset management, we will determine the next phase now, it's really way too early.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: The next question is from <unk> <unk> from RBC. Please go ahead.
Speaker Change: Yeah. Thank you very much for taking my question I'm just too small.
Speaker Change: Oh geez.
Speaker Change: This last one is on the core tier one ratio.
Speaker Change: I mean ex the excellent.
Speaker Change: Churn stayed in a quarter on quarter.
And that's in spite of a maintenance choice like profit.
Generation.
Speaker Change: I like that number things going on including FX spot.
Speaker Change: This does something else wish with Keybanc.
Speaker Change: That means the capital Asia, that's flat.
Speaker Change: Question Mark habitat, so organic growth.
Speaker Change: I guess given the strong earnings.
Speaker Change: The expectation would be capital generation drives destination, Ohio.
Speaker Change: And then secondly, just on the Bartlett for impact just to confirm would that be at the UBS.
Speaker Change: UBS AG, what the impact would be around kind of basis point that Tom. Thank you.
Speaker Change: So on the on the first on your first question in terms of.
Speaker Change: The capital accretion ex the acceleration of the transitional adjustment I think there are a few factors to consider one is the FX NC I mean, you you mentioned that but.
But we disclosed that there is an FX N C of 18 basis points on our capital.
Speaker Change: With respect to a 10% depreciation in.
Speaker Change: In the dollar versus our major currencies. If you look at the if you look at currencies and.
Speaker Change: In <unk> in particular, the Swissie dollar was down around 6% from the beginning of the quarter until the end.
Speaker Change: And.
Speaker Change: The pound versus the dollar a similar dynamic so that accounts for.
Speaker Change: Close to one.
Speaker Change: 1%.
Speaker Change: On the capital ratio that are the.
Speaker Change: The currency effects this quarter as you mentioned, so that's one piece and other pieces.
Speaker Change: Just a temporary difference deferred tax assets you know given the reduction in the CET one.
Speaker Change: Level of capital from the acceleration we are at the 10% threshold. So we lose a bit it goes over the 10% and therefore lose the benefit of the of the temp difference DTA.
Speaker Change: Which has a modest impact and then third just slight.
Speaker Change: Slightly increasing.
Speaker Change: The.
Speaker Change: Cruel for future.
Speaker Change: Future Award hedging future share award hedges.
Speaker Change: That's in our capital so that that also has as an impact of those all contribute.
Speaker Change: To probably why you would have expected maybe on that net profit all other things equal to be.
Speaker Change: Potentially slightly above the 15.
Handel.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Hey, Matt.
Speaker Change: Sorry and on the.
Speaker Change: On the Basel III.
Speaker Change: F. The Basel III final impact on the parent bank be it won't be the entire thing.
Speaker Change: 30 basis.
Speaker Change: Basis points affecting the the parent bank, but it should be most of that most of it there there might be some that falls outside but again, if you're talking also the parent bank standalone.
Speaker Change: Won't be all of it because still a fair bit of activity that subject to.
Speaker Change: The Basel III changes are happening in subsidiaries not in the parent bank itself. So I would expect that there'll be some but not all of the 30 basis point impact in the parent bank itself.
Speaker Change: Thank you very much.
Speaker Change: The next question is from Andrew Coombs from Citi. Please go ahead.
Andrew Coombs: Hi, Good morning, Thanks for taking my questions a couple basis related to revenue and Bethany coming back suite.
Andrew Coombs: Brian.
Speaker Change: Thank you Betsy additional color around that.
Andrew Coombs: Yes.
Andrew Coombs: Accurate.
Andrew Coombs: Can I ask if you could possibly break out revenue Greg.
Speaker Change: Thank you all set on that and it will say Judy.
Speaker Change: Action.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Having implications on pricing.
Speaker Change: Dynamic in your mind in the industry.
Speaker Change: Again Owen.
Speaker Change: And then the second question actually on the line.
Speaker Change: If you adjust for FX, you can't 10 billion decline Q on Q you reiterated today.
Speaker Change: Point about making.
Thanks Frank.
Speaker Change: Named back across in Gws.
Speaker Change: You are now running a bit delayed.
Okay.
Speaker Change: It clearly is the three <unk>.
Speaker Change: A commitment.
Speaker Change: The only thing I'd give you expect to trend down in the back.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Andrew So on the on the on the second one and look it's a it's a commitment to maintain around that that level. So.
Speaker Change: We we've been doing the balance sheet work that I've been highlighting in my remarks.
Speaker Change: Both in P&C and Gws.
Speaker Change: And in P&C, we actually saw a net new loan outflows as I highlighted of about 6 billion Swissie. This this.
Speaker Change: This quarter. This is a commitment that.
Speaker Change: We've made to the market and you can look at that as a.
Speaker Change: Ambition that will that will continue to focus on and commit to but of course, we're also running the business. So there might be volatility quarter on quarter on that in terms of.
Speaker Change: In terms of the sweep you were looking for some more information.
Speaker Change: <unk>.
Speaker Change: I had mentioned in the past that I'm looking at the gross would be a low single digit percentage of our of the divisional net interest income so with.
Speaker Change: That was even based on where rates were.
Speaker Change: When we when we gave the guidance last quarter. So as rates now are coming in.
Speaker Change: And that will have a lower impact on the gross as well as a lower impact on the on the net that should give you, though a general sense of.
Speaker Change: Of the impact.
Speaker Change: Okay.
Speaker Change: The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.
Benjamin Goy: Yes. Good morning, two questions people might think especially investment bank life outperformance across equities and fixed income would just be interested to get more color on what you attribute that to is it's a lower base clean sweep now fully.
Benjamin Goy: Fully AD revenue run rate or anything.
Benjamin Goy: Anything else you would flag and then secondly, GW and also P&C net interest income outperformed your own guidance.
Benjamin Goy: Just wondering why that was in your view and why.
Speaker Change: The Q4 guidance could be conservative or not.
Speaker Change: So what could be worse this time.
Speaker Change: Okay.
Speaker Change: Benjamin so on the on the second in terms of our you know our guidance last quarter. We are we extended duration of our equity and we saw higher investment income as I highlighted in my comments and that had.
Speaker Change: A positive effect on Gws NII.
Speaker Change: And therefore, we came in flattish versus sort of a low a low to mid guidance.
Speaker Change: So that debt.
Speaker Change: Would would explain would explain that on the.
Speaker Change: On the P&C side I think we saw.
Speaker Change: Some positive effects of the balance sheet.
Speaker Change: Optimization work that had.
Speaker Change: A strong impact.
In the.
Speaker Change: In the third quarter as an offset to the rate impact as I highlighted so those where there were some offsets that which we're always working obviously to drive in this lower rate.
Speaker Change: Environment, there were some offsets that had us outperform in the quarter. So I mean, the guidance I gave for <unk> is how we see it at the moment largely driven by our by the impact of rates.
Speaker Change: But of course, we're going to always look to.
Speaker Change: To drive offsets where we can.
Speaker Change: And.
Speaker Change: In terms of the I B, you know I'd say.
Speaker Change: <unk>.
Speaker Change: And in the on the market side I mean, it's a effectively either.
Swiss team has been embedded for some time.
Speaker Change:
Speaker Change: The positions have been all largely transitioned over so it's a you know it's all steam and full steam ahead in terms of that credit Suisse supporting markets on the research side.
Speaker Change:
Speaker Change: But yeah, it's the performance I would say, it's not about it being a lower base I think are in markets. It's been about a team. That's got a strong team that has gotten stronger and you've seen a supportive markets. How the team is performing.
Speaker Change: Okay.
Yeah.
Speaker Change: The next question is from piers Brown from HSBC. Please go ahead.
Speaker Change: Good morning.
Two questions one is a follow up on me.
Speaker Change: That's one thing.
Speaker Change: But in terms of the global banking business from a year.
Speaker Change: Still obviously showing good year.
Speaker Change: Year over year momentum much weaker quarter on quarter.
In <unk>, but could you just spoke about how youre thinking about execution of the pipeline.
Speaker Change: Given market conditions in the fourth quarter and across sectors.
Speaker Change: For the volatility and then the second question is on Ngls.
Speaker Change: Again, as you've guided the slowing of the peso.
Just under 5 million this quarter from.
Speaker Change: 8 billion last quarter and $60 billion.
In the first quarter sorry.
Speaker Change: Would it be fair to draw from that that the opportunity to actively run off the portfolio are fairly limited at this stage my really onto a natural.
Speaker Change: Hum.
Speaker Change: Yeah. It appears so on the on the second look a surge and I've said consistently that in and NCL, we're going to prioritize cost take out and the way we think about.
Speaker Change: Derisking the book that still is a is the team's focus.
Speaker Change: You know, it's had a great run and continue.
Speaker Change: Continue to continue to do so in <unk> with risking another $5 billion.
Speaker Change: <unk> of R. W. A.
Speaker Change: <unk>.
Speaker Change: So I mean, I wouldn't necessarily draw conclusions other than to say that the pace. They were running at a pace that would be very hard to sustain.
Speaker Change: Given that we had you know we we articulated.
Speaker Change: Ambitions for the end of 2026 that they've been making quick workout, but and we'll come back in and re guide as I mentioned in my comments in <unk>, but how we see the next two years, but certainly you can draw a straight line from the performance that.
Speaker Change: They've had a life to date.
Speaker Change:
Speaker Change: And in terms of the banking the banking performance in the quarter look I still think it was a good performance. It outperformed the fee pool, we had a very strong first half of the year <unk> was exceptionally strong we had a bit of bring forward as well.
Speaker Change: Of some deals that we were able to get done in <unk> and.
Speaker Change: And and probably had the inverse dynamic happening in <unk>, where we had some deals pushed into <unk> and into the fourth quarter and end in those deals on the margin can make a difference on the performance in the comparative but we remain very very.
Speaker Change: Very bullish on the pipeline you know naturally of course, the the uncertainties that we highlighted in our comments about <unk>, you know or you know.
Speaker Change: Clearly a potential issues to navigate I E. The U S elections other geopolitical.
Speaker Change: Concerns and intentions that may impact on on banking overall, but I think.
We're going to continue to gain market share and.
Speaker Change: We're bullish on our banking <unk> ability to execute on its pipeline.
Speaker Change: I thought I would only maybe add to that it's at.
Speaker Change: From a comparison standpoint of view, it's worthwhile to note that strategically we are underweight in debt capital markets. So.
Speaker Change: In a sense when you look at peer performance.
Speaker Change: If you look at the third quarter was a pretty strong.
Speaker Change: Quarter for debt capital markets, though so I think that's.
Speaker Change: We are very happy with the developments that we've seen in the banking and the ability to to wean. The mandates now of course, we need to see.
Speaker Change: If we can execute it in the market, we feel that the market will be there, but it's very very confident that he is a good moment.
Speaker Change: So that was the last question so thanks for dialing in and and.
Speaker Change: Your questions and we'll catch up in February for the Q4 results and we're Gonna give me you also an update on our 2025 and 2026 journey. Thank.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, the webcast and Q&A session for analysts and investors is over you may disconnect your lines.
We'll now take a short break and continue with media Q&A session at 10 45 CP.
Speaker Change: [music].