Q4 2024 UBS Group AG Earnings Call
Speaker Change: [music].
Ladies and gentlemen, good morning, welcome to the UBS full year 2020 for results presentation.
Conference must not be recorded for publication or broadcast you can register for questions at any time by pressing star one on your telephone.
Should you need operator assistance, Please press star zero.
At this time, it's my pleasure to hand over to Sarah Mackie UBS Investor Relations. Please go ahead Madam.
Speaker Change: Good morning, and welcome everyone before we start I'd like to draw your attention to our cautionary statements 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.
On slide two you can see our agenda for today.
Speaker Change: That you are in total carries through our fourth quarter and full year results as well as our investor update before we move onto Q&A.
Speaker Change: It's now my pleasure to hand over to Sergio MLT Group C E O.
Sergio: Thank you Sarah and good morning, everyone.
Sergio MLT: Before we provide an update on how we are delivering on our priorities to meet our 2026 commitments, let me share some highlights for 2024.
Sergio MLT: <unk> fourth quarter results contributed to an even stronger full year financial performance as we rebuild profitability across our businesses.
Sergio MLT: Our full year net profit of $5 1 billion and underlying return on <unk> capital of eight 7% reflect our unwavering commitment to serving our clients our diversified global franchise and the disciplined progress we have made on our integration plan.
Sergio MLT: Yes.
Sergio MLT: Throughout 2024, we maintained robust momentum as we captured growth across our global asset gathering platform and gain market share in the investment bank.
Sergio MLT: In the areas, where we have made strategic investments.
Sergio MLT: With over 70 billion Swiss francs of loans granted or renewed during the year and outstanding balance of 350 billion. We also maintain our commitment as a reliable partner for the Swiss economy supporting families and businesses to achieve their goals.
Sergio MLT: We delivered on all of our key integration milestones in 2024, including all major legal entity mergers and the successful completion of our client account migrations.
Speaker Change: In Luxembourg, Hong Kong, Singapore, and Japan in the fourth quarter.
Speaker Change: This builds upon the successful integration of our key operating entities the optimization of our balance sheet and the reduction of cost and risk weighted assets in noncore and legacy.
Speaker Change: Combined these milestones have significantly reduced the execution risk of the credit Suisse, Inc acquisition.
Speaker Change: As a result, we remain confident in our ability to substantially complete the integration and deliver on our financial targets by the end of 2026.
Speaker Change: Our capital position remains robust as we ended the year with a CET one capital ratio of 14, 3%.
Speaker Change: For the financial year 2024, we intend to propose a dividend of 90.
Representing a 29% increase year on year.
Speaker Change: This is in line with our intention to calibrate the proportion of cash dividends and share repurchases.
Speaker Change: Okay.
Speaker Change: As we execute on our business and integration plans, we are building additional capacity to invest in our people and to enhance our products and capabilities.
Speaker Change: This will allow us to better serve our clients and position UBS for future success.
Speaker Change: That includes the Americas, a region that remains a core component of both our asset gathering foundation and our capital efficient business model.
Speaker Change: In 2024, we started to make changes across the business to introduce new capabilities that will help increase the operating leverage of our platform improve profitability and drive sustainable growth.
Speaker Change: Across all of our businesses and supporting functions, we continue to invest in technology, leveraging our strong foundation to improve the client experience and enhance how we operate.
Speaker Change: Now I hand over to Todd will cover the fourth quarter results.
Todd: Thank you Sergio.
Todd: And good morning, everyone.
Speaker Change: Throughout my remarks, I'll refer to underlying results in U S dollars and make year over year comparisons unless stated otherwise.
Speaker Change: For the fourth quarter profit before tax tripled to $1 8 billion.
Speaker Change: Revenue momentum in our core franchises and cost synergies across the group drove a 12 point improvement in operating leverage.
Speaker Change: Our EPS for the quarter was 23.
Speaker Change: With a seven 2% underlying return on CET one capital.
Speaker Change: Our underlying cost income ratio was 82%.
Speaker Change: Looking at the drivers of our fourth quarter group performance on slide five.
Speaker Change: Total revenues rose by 6% to 11 billion driven.
Speaker Change: Driven mainly by strong topline growth in global wealth management and the investment bank.
Speaker Change: Howard by our capabilities and advice and supportive market conditions.
Speaker Change: Operating expenses declined by 6% year over year to $9 1 billion and were 1% lower sequentially as progress on synergies and a stronger U S dollar more than offset the expected <unk> tick up in non personnel expenses.
This achievement was supported by a lower overall employee count, which fell sequentially by another 2% to below 129000.
Speaker Change: The total staff count is down 27000, or 17% from our 2020 to baseline.
Speaker Change: Excluding litigation variable compensation and currency effects operating expenses decreased by 9% year over year to.
Speaker Change: The 4% quarter over quarter increase was caused by seasonally higher charges, including the UK Bank Levy and increased marketing expenditures.
Speaker Change: Our reported profit before tax for the quarter included 0.7 billion of revenue adjustments relating to PPA effects, a remeasurement loss of 0.1 billion on an investment in an associate and $1 3 billion of integration related expenses.
Reported net profit was 0.8 billion in the quarter on an effective tax rate of 26%.
Speaker Change: We expect a similar tax rate in the first quarter.
Speaker Change: Turning to our business divisions, and starting with global wealth management on slide six.
Speaker Change: Gws pre tax profit was $1 1 billion, an increase of over 80% as revenues grew by 10%.
Speaker Change: Excluding litigation charges PBT rose to $1 2 billion net.
Speaker Change: Net new assets reached 18 billion and net new fee generating assets with 13 billion fueled by sales of mandates and separately managed accounts for.
Speaker Change: <unk> performance this quarter reflects the maturity of over $50 billion of fixed term deposits associated with our 2023 win back campaign.
Speaker Change: Like in previous quarters, we managed to retain over 85% on our platform, including converting over 20% into more profitable solutions, including mandates for.
Speaker Change: For the full year 2024, we acquired net new assets at <unk> 97 billion, representing a two 5% growth rate.
Speaker Change: As I've highlighted in the past our net new asset achievement. This year reflects several challenges that we successfully navigated over the course of 2024.
Speaker Change: This includes retaining the vast majority of credit Suisse invested assets. Despite significant levels of relationship manager attrition keeping the bulk of maturing fixed term deposits as just mentioned in the context of <unk> and increasing profitability on sub hurdle lending relationships from a balance sheet optimization efforts.
Speaker Change: <unk>, while these factors weighed down flows by around 30 billion importantly, they've contributed to enhance profitability and returns.
Speaker Change: This is evidenced by the three percentage point year over year increase in revenues over our Ws.
Speaker Change: Recurring net fee income increased by 12% to $3 3 billion as our invested assets grew sequentially to $4 two trillion absorbing roughly $80 billion in FX headwinds.
Speaker Change: Client traction with mandates remains strong with around $5 billion in net new mandates globally, mainly driven by sales of our differentiated discretionary solutions and supported by continued momentum in SMA in the U S.
Speaker Change: Margins held up sequentially and are expected to remain around these levels, especially as recently migrated clients and those remaining on the credit Suisse platform now have access to the full breadth of our CIO value chain led offering.
Speaker Change: This quarter, we once again demonstrated the benefits of combining our leading markets solutions and capabilities with our <unk> investment calls this drove a 12% increase in transaction based revenues and an environment that saw broad re risking after the U S elections.
Speaker Change: Structured products equities and alternatives all recorded double digit transaction revenue increases our investments and capabilities solutions and unified teams support the durability of this revenue line and fuel our ability to capture wallet share in all climates.
Speaker Change: Year on year transaction revenue growth was led by APAC and the Americas up by 30% and 13% respectively.
Speaker Change: Net interest income at $1 7 billion was up 4% sequentially, reflecting improvements in both lending and deposit margins, while fixed term deposit balances decreased in the quarter, we saw inflows into sweeps and current accounts across our platform as our clients increased transactional balances in a constructive trading environment.
Speaker Change: I would note that the planned sweep deposit pricing changes I mentioned previously went into effect for our U S Advisory accounts in early December our 2025 outlook as a result of introducing these rate adjustments remains unchanged.
Speaker Change: Turning to our NII outlook for Gws.
Speaker Change: Since I offered an initial view on 2025 last quarter, we've seen a significant divergence in rates expectations between the U S. Dollar on the one hand, and the Swiss franc and euro on the other.
Speaker Change: This distinction is important for gws, while our U S business is effectively operated entirely in U S dollars in gws businesses outside the U S half of all deposits and the majority of loans and low beta transactional account balances are denominated in currencies other than the U S dollar.
Speaker Change: Looking at the rates outlook. The Federal reserve is now expected to cut U S dollar rates more gradually.
Speaker Change: Meanwhile, both the Swiss and the European Central banks are expected to continue to more actively cut.
Speaker Change: Based on this in the first quarter, we expect to see headwinds from lower rates, particularly in the Swiss franc and euro and lower balances from deployment of sweep and transactional account balances, partially offset by higher margins from balance sheet optimization <unk>.
Speaker Change: Combined with a lower day count effect.
Speaker Change: This is expected to result in a low to mid single digit percent sequential decrease in gws NII.
Speaker Change: Looking further out lower Swiss franc, and euro rates will remain a headwind to deposit margins, partially offset by the benefits of continued balance sheet optimization, particularly on the deposit side net.
Speaker Change: Net new loan growth should also help.
Speaker Change: I should note that if we do see a more hawkish U S. Dollar rates policy, while helpful to deposit margins. This is likely to moderate the extensive re leveraging particularly in Lombard lending.
Speaker Change: For full year 2025, compared to 2024, we expect a low single digit percentage decrease in NII inflicting by <unk> with the second half of the year broadly flat versus two 824.
Speaker Change: Underlying operating expenses were unchanged from last year at $4 8 billion with lower personnel and support costs offset by higher variable compensation tied to revenues and increased litigation provisions.
Speaker Change: To offer a look through comparison.
Speaker Change: Excluding litigation and variable compensation, FX and last year's FDIC special assessment costs were down 5% year over year.
Speaker Change: Turning to personal and corporate banking on slide seven.
Speaker Change: P&C delivered fourth quarter pre tax profit of 572 million Swiss francs down, 18%, primarily from lower interest rates affecting net interest income down, 8% and elevated credit loss expense.
Speaker Change: Recurring net fee income increased by 8% driven by higher volumes of investment products and gross margin expansion transaction based revenues were up 13% also on higher client activity.
Speaker Change: Sequentially NII decreased slightly by 1%, we offset some of the effects of the Smb's third 25 basis point rate cut from late September by moderately decreasing deposit rates and pricing loans to appropriately reflect risk and capital costs.
Speaker Change: After the 50 basis point cut by the SNB in December there was a reasonable likelihood that we will see interest rates dropped to zero by mid 2025.
Speaker Change: The impact of near zero rates will drive down deposit margins, both sequentially and for the full year 2025, additional headwinds and <unk> are expected from the sequential day count effect and lower rates in U S dollar and euro effecting deposit margins on transactional accounts.
Speaker Change: For Pnc's Swiss franc NII, we currently expect a roughly 10% sequential decline in the first quarter.
Speaker Change: For full year 2025, the drop will be somewhat more pronounced versus 2024 with NII expected to trough in the second quarter and plateau thereafter.
Speaker Change: From there any move in interest rates, whether negative or positive should be constructive to our NII and net interest margin in P&C.
Speaker Change: Credit loss expense was 155 million Swiss francs, a 25 basis point cost of risk on an average loan portfolio of 243 billion.
Speaker Change: The quarterly result was driven by stage three charges predominantly from new venture financings and loans to corporates in the metals and automotive industries, which have shown financial vulnerability in a challenging market environment across Europe.
Speaker Change: These exposures by and large are on the credit Suisse platform, reflecting lending practices and underwriting standards from the pre acquisition period.
Speaker Change: We expect <unk> to remain elevated at around 350 million Swiss francs in 2025, as we continue to build allowances for pre acquisition credit Suisse portfolios with many exposure still having more than a year until maturity and.
Speaker Change: In the first quarter, we may see lower cle versus the implied quarterly average due to seasonal factors.
Speaker Change: Operating expenses in P&C were $1 1 billion Swiss francs up 2% and flat sequentially as the business offset increased investments in building up support functions related to its larger footprint through cost reduction initiatives and synergy realization.
Speaker Change: Moving to asset management on slide eight pre.
Speaker Change: Pre tax profit increased by 20% to $224 million as strong cost discipline more than offset lower revenues.
Speaker Change: Overall revenues were down 7% or 6% excluding gains on asset sales.
Speaker Change: Net management fees declined by 5% mainly from continuing shifts out of active equities compressing topline margins.
Speaker Change: Performance fees were $44 million compared to $52 million in the prior year quarter with improvement in hedge fund solutions more than offset by decreases across other products, including fixed income funds.
Speaker Change: Net new money in the quarter was positive 33 billion led by a large institutional inflow in passive equities and net flows into money market funds for the full year 2024, net new money was 45 billion. A strong result in light of flow Dis synergies, we were expecting from integrating credit Suisse asset management.
Operating expenses were 15% lower both year over year and sequentially as the business is demonstrating good progress in transforming its operating model and driving cost saves.
Speaker Change: On to slide nine in the investment bank pretax profit of $452 million was driven by strong revenue performance up 37% year on year.
Speaker Change: Banking revenues increased by 19% to $675 million with advisory up, 36% and LCM, which more than doubled its revenues. The main drivers of growth regionally, we saw particular strength in the Americas up 33%.
Speaker Change: Markets revenues increased by 44% to $1 9 billion with increased client activity and higher cash volumes and supportive volatility across equities and FX.
Speaker Change: This led to our best fourth quarter markets revenue on record with particular strength in financing supported by all time high client balances for markets regional revenues in the Americas, and APAC surged by around 50% and grew by about a third in EMEA driven by broad based increases across both equities and FRC.
Speaker Change: Operating expenses were down 4% on lower personnel costs.
Speaker Change: On slide 10, non core and legacy pretax loss in the quarter with 606 million revenues were negative $58 million, mainly reflecting funding costs that unlike in prior quarters were not offset by gains on exits or the carry and are now much smaller credit book.
Speaker Change: Operating expenses were down by nearly 50% year on year and 5% sequentially as we continue to make good progress in driving out costs.
Speaker Change: NCL risk weighted assets were 41 billion down $3 billion sequentially, mainly from physician exits LR.
Speaker Change: <unk> was down $15 billion or 22% quarter on quarter.
Speaker Change: Turning to our capital and balance sheet position on slide 11 as at the end of the fourth quarter, our balance sheet for all seasons consisted of one six trillion in total assets, including around 600 billion ended period loans and 750 billion at end of period deposits.
Speaker Change: Our loan portfolio reflected credit impaired exposures of 1% up sequentially by four basis points the cost of risk in the quarter increased to 15 basis points as credit loss expense in our Swiss business drove this measure higher.
Speaker Change: We ended the year with a sequentially unchanged CET, one capital ratio of 14, 3% as a decline in CET one capital of $2 8 billion was offset by a proportionate decrease in risk weighted assets of 21 billion.
Speaker Change: CET one capital was mainly affected by the stronger U S dollar as well as by higher cash taxes and dividend accruals more than offsetting quarterly profits are waa, likewise was lower on currency effects as well as asset size reductions mainly in the IV and NCL.
Speaker Change: To summarize our fourth quarter performance caps off a strong 2024, and which are noncore and legacy team successfully ran down balance sheet in costs at our core franchises demonstrated strength and scale and delivering for our clients, even while absorbing substantial costs associated with the integration.
Speaker Change: With that I hand back to Sergio for the Investor update.
Speaker Change: Thank you Todd.
Sergio MLT: For over a decade UBS has been a source of strength and stability for all of our stakeholders. Thanks to the consistent execution of our capital generative strategy and a commitment to maintaining our balance sheets for all seasons.
Sergio MLT: Our global capabilities empower strong collaboration across our businesses to deliver the best of UBS to our clients and our disciplined focus on risk and the efficiency is at the forefront of our culture.
Sergio MLT: This is why our clients continue to extend their trust and confidence in UBS and our employees are proud to work here.
Sergio MLT: It is how we generate significant value for our shareholders, while remaining a consistent and reliable economic partner in the communities, where we operate.
Sergio MLT: And it has also allowed us to be a source of financial stability for Switzerland, and the wider financial system in March 2023.
Sergio MLT: The same principle guide us as we build an even stronger safer and more efficient firm and position UBS for sustainably higher returns and long term growth.
Sergio MLT: Our unique business model with our asset gathering businesses generating around 60% of our revenues provides us with an attractive risk and return profile that continues to stand out among our global peers.
Sergio MLT: We are the largest truly global wealth manager and the leading Universal Bank in Switzerland.
Sergio MLT: These two key pillars of our strategy, how renounced by a portfolio of best in class capabilities across asset management, and our competitive but capital light investment bank.
Sergio MLT: With leading franchises in the world largest and fastest growing markets. Our regional diversification is a strategic advantage and also provides us unique value for both our clients and investors.
Sergio MLT: Okay.
Turning to the integration has I highlighted earlier, we are on track with our plans. Thanks to the successful delivery of our key objectives in 2024, having completed over 4000 milestones during the year.
Sergio MLT: Following the merger of our parent banks, we have now migrated over 90% of client accounts outside of Switzerland onto UBS platforms.
Sergio MLT: In addition, the integration of the investment Bank is now complete and in asset management, we made good progress migrating portfolios onto our infrastructure and rationalizing our fund shelf.
Sergio MLT: We also continue to follow our technology decommissioning the roadmap to date, we have removed over 40% of non core and legacy applications.
Sergio MLT: Through 16, Petabytes of data and reduce the number of legacy servers by over 40%.
Sergio MLT: Thanks to our restructuring efforts and the active wind down of NCL, we've captured almost 60% of our targeted 13 billion gross cost savings.
Sergio MLT: We will look to maintain this momentum in 2025 as our focus shifts to migrating the majority of clients accounting, Switzerland, and decommissioning over 12 under credit Suisse models and applications.
Sergio MLT: We have always said that our progress on the integration of <unk> Suisse will not be a straight line.
Sergio MLT: Our performance in 2025, we will continue to reflect significant restructuring work necessary to integrate our businesses and right size our cost base.
Sergio MLT: I can say that our progress to date supports an incremental improvement in our returns this year compared to our previous guidance.
Sergio MLT: We remain confident in our ability to substantially complete the integration and deliver on our targets and ambitions by the end of 2026.
Sergio MLT: At the same time, we will continue to invest to drive sustainable growth and long term value beyond the integration.
Sergio MLT: Investing in technology to benefit our clients and empower our colleagues is one of the key ways. We are preparing for the future.
Sergio MLT: We continue to invest in our best in class cloud infrastructure with over 70% in the public and private cloud.
Sergio MLT: This is a key facilitator.
Sergio MLT: Our integration progress, allowing us to reduce complexity and cost as we remove legacy applications, while maintaining our compliance and security standards.
It is also an important catalyst for innovation as we continue to invest in tools to enhance our client offering and increase efficiency and effectiveness.
Sergio MLT: A good example is our rollout of 50000, Microsoft Copilot licensees to our employees in the largest deployment within the global financial services industry to date.
Sergio MLT: We are also seeing strong benefits from our proprietary generative AI solutions.
Sergio MLT: An example is in the U S, where we our advanced analytics platform supported our financial adviser with over 13 million automated insights and actionable opportunities.
Sergio MLT: Solutions like this improved productivity and our ability to deliver tailored solutions to our clients.
Sergio MLT: We are on track to deliver on our 2020 exit rate ambitions across our core businesses. While we are encouraged by our progress to date. This slide also reflects the significant work that lies ahead to achieve our objectives.
Sergio MLT: GW and we remain focused on leveraging our enhanced capabilities and solutions to maintain client momentum.
Sergio MLT: At the same time, we aim to capture the benefits of integration related synergies and improved advisor productivity.
Sergio MLT: With the client account migration achieved in APAC, we are even better placed to leverage our number one position in the region to drive market leading growth.
Sergio MLT: In the Americas, we are making targeted investments to deepen relationships with our ultra high net worth clients accelerate growth in the high net worth and core affluent segments and expand our loan and deposit offering.
Sergio MLT: These growth initiatives will be supported by actions, we have already taken to enhance our technology offering simplify our organizational structure and improve execution.
Sergio MLT: I am confident in our ability to deliver mid teen PBT margins as we exit 2026.
Sergio MLT: Then the business will be better positioned to further expand profit margin and capture long term growth.
Sergio MLT: Todd will take you through our plans in more detail.
Sergio MLT: In P&C, we are as we have said previously declining Swiss franc rates are expected to continue to affect revenues.
Sergio MLT: We are still the fact operating two separate banks, including branches staff and technology, but we are well positioned to start delivering cost synergies later this year and into 2026 as we unite those platforms.
Sergio MLT: Unfortunately, as we reported previously this will lead to certain drove reductions in Switzerland.
Sergio MLT: We plan to mitigate the impact of Ts as much as possible through natural attrition early retirement and other measures.
Sergio MLT: For those impacted we will provide proactive support in helping to find a new job and a comprehensive social plan that combines the strongest components of the prior UBS and credit Suisse plants.
Sergio MLT: I'm also especially proud off efforts to prioritize the hiring of internal candidates.
Sergio MLT: Over two thirds of open position in Switzerland, where field this week in 2024.
Sergio MLT: In asset management, we remain we remain focused on continuing to capture opportunities, where we have a differentiated and scalable offering.
Sergio MLT: This includes our newly launched unified global alternatives unit, which makes us the fifth largest limited partner in alternatives with promising growth prospects are.
Sergio MLT: At the same time, we will remain focused on realizing cost synergies and structural efficiencies to create capacity for investments and improve profitability.
Sergio MLT: And the investment bank I'm encouraged by the progress of <unk>.
Sergio MLT: By the progress our fully integrated teams are making to deliver for clients as we see market share gains in our areas of strategic importance.
Sergio MLT: As we continue to deploy our products and services across our broader institutional client base and increased connectivity to gws and P&C to deliver on our return ambitions, we will maintain our well established risk and capital discipline.
Sergio MLT: Okay.
Sergio MLT: Turning to capital.
Sergio MLT: We continue to target a CET one capital ratio of around 14%.
Sergio MLT: At this level, we will be able to go through the integration period and beyond with a strong capital buffer relative to minimum requirements.
Sergio MLT: This will allow us to remain a source of stability why we self fund growth and deliver attractive capital returns to our shareholders.
Sergio MLT: For the 2025 financial year, we plan to accrue for an increase in our dividend of around 10%.
Sergio MLT: We also plan to repurchase another $1 billion of shares in the first half of this year and up to an additional 2 billion in the second half.
Sergio MLT: As in the past our share repurchases will be consistent with delivering on our financial plans and maintaining our CET one capital ratio target of around 14% and assuming no material immediate changes to the current capital regime.
Sergio MLT: Our ambition for capital returns to exceed pre acquisition levels in 2020 remains unchanged.
Sergio MLT: Now following the publication of the Parliamentary investigation Commission's report in December we expect further developments in the ongoing review of the capital regime in Switzerland.
Sergio MLT: Based on the on the latest public communication from the state Secretary yet for International Finance the public consultation on the proposal is expected to begin in May.
Sergio MLT: Therefore at this time, we are not in a position to offer any new information.
As we have saved in the past we support the vast majority of proposals from the Swiss Federal Council on how do we announce the regulatory framework in Switzerland.
Sergio MLT: In our discussions with the Swiss authorities, we continue to maintain our view that the Swiss capital regime is one of the strongest when consistently and coherently applied.
Sergio MLT: While it is also crystal clear that the overall quality of our capital is of much higher standard than previous releases, we accept that some adjustments and clarifications to the current regime may be necessary.
Sergio MLT: However, a disproportionate outcome in terms of requirements.
Sergio MLT: The parent bank level boot drive our companies at the group level to overshoot the current requirements.
Sergio MLT: Therefore, we believe that any significant change is unjustified.
Sergio MLT: Offsetting the consequences of ire requirements would make us uncompetitive domestically and abroad hamper our ability to help clients grow and importantly make banking services more expensive for suite families and enterprises in the long run.
Sergio MLT: It will also damaged the nation standing as an attractive global financial center, and ultimately hurts our position as the third largest private employer in Switzerland.
Sergio MLT: Of course this.
Sergio MLT: We would have an impact on our returns on capital.
Sergio MLT: But even more importantly, even it would impede our ability to compete for capital in the global marketplace, particularly in a moment of financial stress.
Sergio MLT: As a reminder, our current ambitions are based on a 14% CET one capital ratio.
Sergio MLT: I've been reading some recent reports so let me be very clear.
Sergio MLT: There are no easy fixes in terms of repatriation of capital from foreign subsidiaries all balance sheet optimization that are not already included in our plans.
Sergio MLT: Therefore, while I'm extremely confident in our capital generation capacity under any outcome.
Sergio MLT: Our shareholders have their arms and return on capital would be affected.
Todd: Todd will provide more detail later.
Sergio MLT: We want to.
Speaker Change: Continue to be a source of strength for our clients employees shareholders and Switzerland.
Speaker Change: For that reason it is very important that a comprehensive cost benefit analyses on the consequences of Fannie material changes of capital requirement is carried out.
Speaker Change: We remain hopeful that any potential changes will be proportionate targeted and internationally aligned and coherent with the strategic objectives set out by the suites Federal Council.
Speaker Change: As I mentioned before we have substantially derisked the integration across many dimensions. This is reflected in our return profile, which as a significantly improved compared to a year ago.
Speaker Change: Our goal is to continue to rebuild profitability in 2025 as we further progress our integration plan and capture the benefits of our enhanced scale and capabilities across our businesses.
Speaker Change: We remained well positioned to deliver on our 15% return on <unk> capital target by the end of 2026.
We will then look to achieve UBS is pre acquisition levels of profitability and deliver on our 2028 ambitions.
Speaker Change: We have achieved so much over the last two years and I am proud of the immense effort.
Speaker Change: Of all of my colleagues.
Speaker Change: But there is no room for complacency and we remain focused on serving our clients delivering on the next phase of the integration and fulfilling our growth initiatives as we position UBS for a successful future.
Speaker Change: With that I hand back to Todd for more details on our plans.
Todd: Thanks again, Jeff.
Speaker Change: I will now offer a more detailed perspective on our financial outlook for 2025, and the trajectory towards our exit 2026 targets and ambitions starting on slide 21.
Speaker Change: With each of our core business is well positioned to drive sustainable growth in 2025, we expect to generate an underlying return on CET, one capital of around 10% versus eight 7% in 2024. This.
Speaker Change: This year on year increase reflects our expectation that noncore and legacy will weigh on our financial performance more significantly than last year.
Speaker Change: Importantly, this also means that our core businesses are expected to be the main drivers of year on year growth in returns despite continuing to absorb together with NCL the costs associated with restructuring and integrating the businesses legal entities infrastructure and teams inherited with the.
Speaker Change: <unk>.
Speaker Change: For full year 2025, we expect an effective tax rate of around 20% as we aim to implement tax planning later in the year, mainly related to the combination of legal entities in the U S.
Speaker Change: The acceleration we expect in 2026, when our in year return on CET, one should be low teens, and our exit rate around 15% will be driven predominantly by the benefits from more than three years of extensive integration restructuring and transformation effort.
Speaker Change: As I've highlighted in the past, we continue to expect more significant cost reductions across the core businesses as we retire legacy infrastructure and create further staff capacity.
Speaker Change: Revenue should also receive an uplift as we complete the integration and play more on our front foot with no distractions generating alpha across our core franchises. Moreover, most of the headwinds to returns we see in 2025 are expected to dissipate by the end of 2026. These include NII and Craig.
Speaker Change: Loss expenses in Switzerland, with the ladder, starting next year expected to reflect the substantial conversion towards Pnc's historical average cost of risk as a result of increased allowances and legacy credit Suisse loan maturities.
Speaker Change: Additionally, as we exit 2026, we expect to see better profitability in our U S wealth business and further reductions to our noncore and legacy portfolio decreasing its drag on resources and profits.
Speaker Change: As I've mentioned before the plan's underpinning our ambitions are largely determined by factors within our control while we expect to continue to invest for growth, we retained the necessary optionality and operating flexibility to support our profitability and returns ambitions regardless of market conditions.
Speaker Change: Turning to costs on slide 22.
Speaker Change: As of year end, we delivered $7 5 billion of cumulative gross run rate cost saves of which $3 4 billion in 2020 for putting us well on track towards achieving our goal of around $13 billion by the end of 2026.
Speaker Change: The cumulative gross saves achieved to date 4 billion contributed to net cost reductions with much of this progress driven by NCL.
Speaker Change: Importantly, while the overall cost base decreased by 10% from its 2022 baseline if we exclude litigation and variable compensation linked to revenues, we delivered a 17% net reduction in underlying expenses on this look through basis.
Looking out over the next two years, we expect around $5 5 billion of additional gross cost saves across technology third party spend real estate and from unlocking additional staff capacity.
Speaker Change: As we've highlighted previously while we remain continuously focused on driving cost savings by reducing duplication and streamlining wherever possible. We do not expect our sequential cost reduction to be linear.
Speaker Change: The impact on our cost base varies each quarter, depending on the timing of large scale integration initiatives that drive efficiencies across infrastructure real estate and workforce optimization.
Speaker Change: Over the next two years, the most meaningful driver of cost reductions will be the decommissioning of legacy infrastructure with the most prominent example, the retirement of the Swiss platform, which will only happen. After the client account migration is finalized next year.
Speaker Change: At that point, we'll decommission the associated hardware data centers and software applications, including systems in the middle and back office that are linked to client client facing platforms.
Speaker Change: The continued rundown of NCL and further rationalization of our real estate footprint and legal entity structure will also support our realizing cost synergies over the next two years as we work towards our exit 2026 cost income ratio target of less than 70%.
Speaker Change: Moreover.
With almost 60% of our gross cost save ambition achieved through the end of 2024, we now have a clearer line of sight as to the cost to achieve the successful completion of our integration plans. We now expect cumulative integration related expenses to total around $14 billion.
Speaker Change: The $1 billion in incremental spend largely compensated for lower than anticipated staff attrition levels and accelerated real estate exits. It also accounts for investments in new opportunities to unlock long term value creation and connection with select credit Suisse businesses.
Speaker Change: Turning to our business divisions, and starting with global wealth management on slide 23.
Speaker Change: With over four trillion in invested assets, our scale global connectivity innovation and CIO led advice and solutions uniquely position us to capture wallet and seize growth opportunities across our global footprint.
Speaker Change: GW I'm Americas, which comprises our U S, Canada, and Latin America wealth businesses is a leading wealth management provider with $2. One trillion of assets served by nearly 6000 financial advisors.
Speaker Change: In Switzerland, and EMEA were the number one player <unk>.
Speaker Change: Combining our global offering with regional adaptations and client proximity.
Speaker Change: And then APAC with a broad and well diversified footprint. We're the number one wealth manager twice as large as our next closest competitor.
Speaker Change: Moving to slide 24 in 2024, GW AUM recorded an underlying pretax profit of almost 5 billion and an underlying cost to income ratio of 80%, while restoring its capital efficiency to levels similar to those before the acquisition.
Speaker Change: In 2025 returns are expected to grow year over year as we continue to capitalize on our enduring competitive advantages underpinned by secular tailwind.
Speaker Change: The industry trends, we see accelerating across our global family Ultra and high net worth clients segments, including legacy and longevity based planning needs geographic wealth migration and multi disciplinary client solutions play right to our strengths.
Speaker Change: We expect these dynamics to drive revenue growth in 2025.
Speaker Change: Moreover, our teams of advisors investment managers and solution specialists are leveraging our client account migration efforts as a unique opportunity to review and rebalanced client portfolios, while supporting our clients during their transition to the UBS platform.
Speaker Change: This work supports our outlook of continued increasing mandate penetration and gross margin stability.
Speaker Change: Also gws costs are expected to decrease over the course of 2025, principally as we decommission platforms. Following the first wave of client account migration work completed last year.
Speaker Change: As in 2020 for Gws net new asset ambition will continue to reflect the actions and other dynamics I've highlighted that support higher pretax margins and returns on attributed equity, but at times come at the expense of flows.
Speaker Change: While in Switzerland, and EMEA and APAC the impact on flows is expected to soften over the course of the year in the U S. Our efforts to align financial adviser incentives with our strategic priorities May result in a short term increase in attrition.
Speaker Change: <unk>, an additional headwind for net new assets in the coming months.
Speaker Change: We therefore maintain our net new asset ambition of around 100 billion for 2025.
Speaker Change: Yet in 2026 with the integration behind us and flow headwinds fully addressed we expect gws net new assets to begin to accelerate towards our ambition of 200 billion per annum and over $5 trillion in invested assets by 2028.
Speaker Change: Moreover, the improvement in ECM activity, we're starting to observe across the globe should ultimately play to our asset gathering strengths. This coincides with increasing levels of monetization among wealth management clients, which is expected to translate into greater opportunities to intensify engagement capture share of <unk>.
Speaker Change: Wallet and deliver advice and solutions.
Speaker Change: Moving to the Americas on slide 25.
Speaker Change: Our Americas wealth business, our foothold into the world's largest wealth pool is a key pillar of our long term growth strategy and value proposition to clients.
Speaker Change: In addition to accounting for around 50% of our total asset base. It also contributes a similar proportion to gws global revenues.
Speaker Change: Given the strategic importance of the Americas business, we recognize that improving its financial performance is both a necessity and a priority.
Speaker Change: Since 2019, we've grown the region's invested assets and revenues at a CAGR of 8% and 4%, respectively and delivered profit margins averaging mid teens.
Speaker Change: After reaching a record pretax margin of 19% in 2021, we've seen profitability retreat to its current level of around 10%.
Speaker Change: While our revenues have grown expenses have grown faster.
Speaker Change: With a business model, mostly geared towards the most financially sophisticated ultra and family clients.
Speaker Change: Post pandemic market dynamics of rising equity prices and soaring interest rates caused a shift in our revenue mix that drove up variable compensation levels and compressed profit margins at the same time technology costs were increasing as part of our efforts to improve and modernize the digital experience for.
Speaker Change: And our clients and advisors, but also to address past investments in large programs where delivery had been suboptimal.
Speaker Change: On top of this the cost of recruiting advisors back office spend and litigation charges all grew.
Speaker Change: To address these challenges, we're changing how we operate to improve profitability and position the business for more efficient and sustainable growth since.
Speaker Change: Since the end of last year, we've already taken actions to streamline our organizational structure improve cost discipline and align the incentives of our financial advisers to our strategic objectives.
Speaker Change: As these changes take hold and given our intention to fund incremental strategic investments, we expect our pre tax margin in 2025 to remain at broadly current levels.
Speaker Change: Then expect to make more material progress and steadily improve towards mid teens by 2027.
Speaker Change: At that point, the business will be better positioned to further expand its profitability and help the global wealth franchise deliver beyond its end 2026 target of greater than 30% underlying pretax margin.
Speaker Change: Let me highlight the key changes we're implementing on slide 26.
Speaker Change: First on service models.
Speaker Change: Our strong track record in serving sophisticated clients demonstrates the effectiveness of close collaboration across the organization.
Speaker Change: This is clearly reflected in the 21% year over year increase in Americas transactional revenues. After we introduced joint coverage of gws clients with IV markets specialists.
Speaker Change: Moreover, our experience tells us that the use of one or more of our specialized capabilities has a meaningful multiplier effect on revenue generation.
Speaker Change: We're building a regionally aligned multi disciplinary team approach and extending this offering to a broader population of our existing ultra high net worth clients to accelerate revenue growth, we're rolling out to set up immediately and scaling it over the course of 2025.
Speaker Change: Second on client mix going forward, we intend to better balance our client base across wealth bands by increasing investment and penetration in the high net worth and core affluent segments to drive scale and profitability to that end, we're streamlining and automating.
Speaker Change: <unk> and content distribution and developing more tailored segment specific solutions, leveraging our CIO and national sales capabilities. In addition, we're investing in are digitally led advice model and the wealth advice center to make it a more meaningful contributor to organic growth and to lower our cost to serve.
Speaker Change: But more than doubling our advice center staff, we aim to create further capacity to acquire and serve more clients and increase wallet with existing ones. In addition, the wealth advice center becomes an effective pipeline for future phase in a more cost efficient way to scale our business.
Speaker Change: Another key aspect of our rebalancing efforts relates to enhancing our feeder channels we.
Speaker Change: We intend to expand sources of asset acquisition by revising our referral and incentive structures, while centralizing and investing in digital marketing.
Speaker Change: We're also developing a comprehensive integrated workplace wealth solution across equity and retirement plans and financial planning and wellness.
Speaker Change: We believe a signature workplace wealth offering with state of the art digital capabilities will serve as a highly effective client lead generator aligning with our priority to improve penetration across wealth bands.
Speaker Change: Third on the capability side, we're taking critical steps to build out a full suite of banking capabilities to enhance our ability to serve our clients and their business interests.
Speaker Change: This will help us expand our access to deposits better balance our revenue mix deepen client relationships and importantly, foster enduring engagement and connectivity between our clients and UBS.
Speaker Change: Expanding and enhancing our banking product offering requires that we obtain a national charter a multi year process that is presently in full swing.
Speaker Change: Now moving to slide 27, underpinning these initiatives and their success is a necessary operational realignment of the structure performance culture and tech strategy in our Americas wealth franchise.
Speaker Change: So fourth effective January <unk>, we simplified the organizational structure to drive greater collaboration reduce duplication and create synergies, thereby contributing to improve productivity and efficiency.
Speaker Change: This includes regionally aligning our client facing teams, reducing management layers and fostering clear accountability and faster decision, making.
Speaker Change: Recently, we also announced changes to our financial adviser compensation model, we aim to better align incentives with our strategic goals of the firm.
Speaker Change: Rewarding net new money, new client acquisition, and the broadening of existing client relationships with a specific incentive for NII growth.
Speaker Change: Well, we design these changes to incentivize greater production and ultimately higher compensation levels for advisors in full sync with our strategy. We may see a short term horizon FA attrition, which is reflected in our pre tax margin expectation for 2025.
Speaker Change: And finally, we're implementing a strategic reset in terms of how we invest and modernize our technology infrastructure, we're now delivering new and advanced digital capabilities in a dynamic modular fashion that make it easier for our clients and advisors to do business with and on behalf of UBS.
This approach will enable more efficient execution of our technology technology roadmap with improved payback, which together with it with an expanded tech budget will create additional capacity to fund innovative solutions to improve advisor productivity and drive growth.
Speaker Change: We believe these actions, which are being decisively executed by our new leadership team will drive margins to a mid teens level by 2027, while positioning the Americas wealth business for long term growth.
Speaker Change: A final word on providing more visibility to track our performance going forward, while the ultimate measure of our progress in the Americas as improvement in our regional pretax margin beginning in <unk> will enhance our regional disclosure by breaking out revenue across the various categories and including prior period Comparatives.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: Turning to slide 26 and onto our Swiss business.
Speaker Change: As the leading bank for corporate and private clients in the country, our Swiss Universal Bank with P&C at its core showcases the power of close collaboration creating value for clients.
Speaker Change: Even while absorbing NII and CLA headwinds optimizing its balance sheet and preparing for the client account migration P&C alone contributed over one third of the group's 2024 underlying pretax profits.
Speaker Change: As we expect the headwinds I highlighted earlier to weigh on Pnc's returns in 2025, we aim to partially mitigate the effects of these challenges by growing non NII revenues, while also striving to minimize client and asset outflows during the migration process.
Speaker Change: Moreover, the completion of the client account migration work will allow us to realize cost synergies and further invest in digital capabilities, improving the client experience and efficiency of our platform.
Speaker Change: By 2026, we intend to fully capitalize on growth opportunities with no distractions, our Swiss business will be uniquely positioned to offer exceptional value throughout the client lifecycle by delivering a comprehensive suite of services spanning wealth management asset management and investment banking.
Speaker Change: Our primary focus will be on reinforcing our standing as the go to bank for large corporates entrepreneurs and emerging affluent clients with leading financing asset servicing and wealth advice capabilities.
Speaker Change: This positioning coupled with a more streamlined cost base give us confidence in our ability to grow the P&C business at least as fast as Swiss GDP, while delivering a cost income ratio of less than 50% and a pre tax return on equity of near 20% by the end of 2026.
Speaker Change: I'll now turn to asset management on slide 29.
Speaker Change: Our strategic positioning expanded product offering and enhanced regional scale in select markets are already supporting healthy momentum in asset management. Despite the impact of the integration we saw a $45 billion in net new money at through our platform in 2024, while we remain focused on continuing to capture opportunities, where we have a <unk>.
Speaker Change: Differentiated and scalable offering. This includes our recently launched unified global alternatives unit, which with nearly $300 billion in invested assets makes us a leading global player in top five limited partner by.
Speaker Change: By combining our leading manager selection franchises across G Wm in asset management.
Speaker Change: We can now offer our wealth management and institutional clients access to exclusive investment opportunities, while providing GPS with a single point of access to the full distribution power of UBS.
Speaker Change: Overall with a focus on alternatives improved traditional investment performance and customized client solutions at scale.
Speaker Change: We continue to expect positive net new money growth in 2025, while completing our fund shelf transition and platform consolidation.
Speaker Change: At the same time, we're investing in our existing platform to build our key capabilities create cost efficiencies and support our AI strategy.
Speaker Change: We will also remain focused on realizing cost synergies from the integration and driving structural operational efficiencies from our strategic cost program together.
Together with further exits of non strategic businesses. These efforts are expected to improve our profit margin in asset management to above 30% by the end of 2026.
Speaker Change: Moving to the investment bank on slide 30.
Speaker Change: Over the last 12 months, we've generated more than half a billion dollars of incremental underlying revenue in global banking and delivered record performance in global markets, including reaching record market share in cash equities looking forward with favorable market conditions. The completion of the credit Suisse integration and earlier investments starting to pay off.
Speaker Change: We aim to enhance our ib's returns in 2025.
Speaker Change: In banking, we remain encouraged by our pipeline and M&A and LCM and our improved position in the Americas, which together are expected to support year on year revenue growth in 2025.
Speaker Change: I should note that while there continues to be broad based positive sentiment around the market backdrop.
Speaker Change: Global fee pools in January were off by more than 20% year on year.
Speaker Change: Additionally, despite greater market activity in equity capital markets productivity improvement visible in our own ECM business is more likely to yield meaningful revenue growth later in 2025 and into 2026, considering the timeline of our pipeline build.
Speaker Change: This said with market share in the Americas over two times pre acquisition levels, we remain confident in our ability to double banking revenues in 2026 compared to our 2020 to baseline.
Speaker Change: It's also worth highlighting that our investment bank will be the only major player in the U S and Europe implementing final Basel III regulations and in particular Fr TB.
Speaker Change: Holding our capital light business model. Despite this additional cost of capital. The IV remains committed to achieve its pre tax return on equity ambition of 15% through the cycle, while continuing to consume no more than 25% of the group's risk weighted assets.
Speaker Change: Turning to non core and legacy on slide 31.
Speaker Change: The performance delivered by the noncore and legacy team in 2024 contributed to a significant acceleration in our de risking cost savings and capital release plans in particular, what we achieved during the last six quarters has fundamentally altered NCL balance sheet and risk position entering 2025 with <unk>.
Speaker Change: From its credit securitized products equities and macro books reduced by over 70%.
Speaker Change: In addition to now being a much smaller and yielding less net carry these books are broadly hedged against market moves, thereby effectively mitigating risks, but also limiting revenue upside.
Speaker Change: Additionally, a significant portion of the funding costs associated with the overall portfolio relates to long dated Holdco opco debt that credit Suisse issued during its crisis. These instruments are prohibitively expensive to redeem prior to maturity, making them as sticky component event sales costs irrespective of fun.
Speaker Change: <unk> needs.
Speaker Change: As a result for full year 2025, we estimate Ngls topline at around negative $500 million, mainly from funding costs with revenues from remaining fair value positions and continued exits expected around zero.
Speaker Change: Excluded from this estimate is a gain of around $100 million expected in the first quarter from closing the sale of credit Suisse's U S mortgage servicing company that we announced last year.
Speaker Change: We also anticipate Ncl's underlying operating expenses ex litigation to continue to reduce over the course of 2025, averaging around $450 million per quarter.
Speaker Change: Accordingly in 2025, Ngls underlying pretax loss excluding litigation is.
Speaker Change: <unk> is expected to be around $2 2 billion, albeit with sequential improvements as expenses and consumption based funding costs decrease.
Speaker Change: This compares to an underlying pre tax loss in 2024 of around $800 million inclusive of litigation releases.
Speaker Change: 2020 fours performance benefited from net carry income and are exiting positions at prices above book value neither of which is expected to repeat at similar levels cons.
Speaker Change: Consequently in 2025, NCL is expected to substantially weigh on returns year over year.
Speaker Change: Looking further out we expect NCL to exit 2026 with less than 5% of group, our WMA consisting of less than $10 billion of market and credit risk.
Speaker Change: We also expect to exit 2026 with pre tax loss of under $1 billion as the business continues its strong cost reduction trajectory.
Speaker Change: This is anticipated to consist of annualized operating expenses of around $750 million in annualized net funding cost of around $200 million.
Speaker Change: We then intend to rundown ncl's legacy operating expenses to a level below $250 million by the end of 2028 with funding cost tapering over an extended timeframe as legacy credit Suisse funding matures by the end of 2028, we forecast around $100 million of legacy funding cost per annum fully running down.
Speaker Change: And by 2033.
Speaker Change: Our outlook for the run off of Ncl's operational risk <unk> for now remains in line with the trajectory, we modeled under our internal method and disclosed previously.
Speaker Change: This reflects the fact that unlike what is expected to eventually apply in the U S U K and across Europe. The 2025 Swiss implementation of the standardized approach imposes an internal loss multiplier well above one.
Speaker Change: Thereby resulting in significant <unk>, primarily for losses in matters, we inherited from credit Suisse.
Speaker Change: Picking up on my earlier comments slide 32 showcases our strong financial position at year end 2024 and related regulatory measures our balance sheet for all seasons underpins our ability to consistently deliver for our clients and shareholders, while we ourselves maintain resilience through disciplined risk management.
Speaker Change: <unk> and strong capital and liquidity levels.
Speaker Change: At the end of 2020 for our group total loss absorbing capacity stood at 185 billion with a going concern capital ratio of 17, 6% and as mentioned our CET one capital ratio of 14, 3%.
Speaker Change: We closed 2024 with 81 capital of three 3% of <unk> during the year, we successfully issued $3 5 billion and 81 as we build towards our ambition and regulatory allowance of four 3% of <unk>.
Speaker Change: Given our progress to date and based on our projected 2025 funding needs. We expect our 81 capital to remain at current levels through 2025, with new issuance offsetting potential calls.
Speaker Change: [noise] gone concern capital at year end was 98 billion.
Speaker Change: As a reminder, while this is around $40 billion above the group regulatory minimum our binding constraint is UBS AG standalone requirement.
Speaker Change: Looking ahead, we're targeting to bring down group holdco to around $90 billion by the end of 2025, while still retaining resilient buffers over regulatory minimums.
Speaker Change: This target, which is expected to contribute substantial savings and funding costs is based on the expectation that UBS AG standalone requirements will decrease as a result of further balance sheet reductions and the reorganization of remaining former credit Suisse operating companies.
Speaker Change: <unk> Standalone CET, one capital ratio at year end is estimated to be 13, 5%.
Speaker Change: For the foreseeable future, we expect UBS AG to operate with a standalone CET one capital ratio in the range of 12, 5% to 13% around two five points above the current regulatory minimum on a fully applied basis.
Speaker Change: This guidance factors in the effects of our ongoing integration efforts and also considers the prospect of settling credit Suisse legacy litigation matters that could result in charges to the parent bank. Despite coverage at the group level from PPA reserves established on the acquisition date.
Speaker Change: This target capital level also accounts for planned dividends and capital from subsidiaries.
Speaker Change: During the fourth quarter $13 billion of capital was repatriated to the parent bank from its subsidiaries in the U K and the U S.
Speaker Change: Of the total 6 billion was paid up from UBS Americas holding.
Speaker Change: The U K subsidiary Credit Suisse International repatriated 7 billion with around 5 billion of additional distributions expected as we continue to unwind or transfer its positions subject to customary regulatory approval.
Sergio MLT: As Sergio mentioned, it's important to note that we plan for this distribution of capital from subsidiaries since the acquisition.
Sergio MLT: As such it forms part of our capital return ambitions, while maintaining our target capital ratios at both the group level and the parent bank.
Sergio MLT: Therefore, broadly speaking new capital requirements from too big to fail imposed at the parent bank level would need to be funded by a higher retention of profits. Consequently, leading to an overshooting is capital at the group level and resulting in a lower overall return on CET, one capital all other things being <unk>.
Sergio MLT: Equal.
Sergio MLT: Onto liquidity and funding.
Sergio MLT: As we aim to balance efficiency with resiliency and safety over the past 18 months, we've been maintaining our LCR above pre acquisition levels. This approach was necessary to facilitate the phase in of the more stringent Swiss liquidity requirements, which has now been completed and to sustain our conservative liquidity profile during the <unk>.
Sergio MLT: Initial stages of our balance sheet stabilization and integration process.
Sergio MLT: Moving forward, we expect to operate with an LCR below <unk> 24 level of 188%, reflecting continued efforts to manage towards a more efficient funding structure and reduced uncertainties associated with execution risk.
Sergio MLT: Overall, our current funding strategy focuses on enhancing the quality of our liability portfolios, while delivering cost efficiencies. This involves the right sizing of our 81 and T. Lack stacks disciplined deposit pricing and active management of our liabilities across tenors and products to ensure a.
Sergio MLT: Just diversified and resilient funding profile coupled.
Sergio MLT: Coupled with significant balance sheet reductions achieved in 2024.
Sergio MLT: And tighter spreads these measures have already generated annual funding cost savings of $650 million with an additional $350 million expected by 2026.
Turning to slide 33 on <unk> and starting with an update on the implementation of the final Basel III reforms, which in Switzerland took effect on January one.
Sergio MLT: We intend to report a day one impact of around 1 billion of incremental RW, a broadly neutral to our CET one capital ratio a result reflective of many months of intense diligent preparation.
Sergio MLT: This amount of <unk> includes increases related to F. R T b of $9 billion.
Sergio MLT: Decreases from credit risk related adjustments of $1 billion and a reduction in operational risk of $7 billion.
Sergio MLT: Looking at our expectations through 2026 over the next two years, we expect our group <unk> to increase by around 2% at constant FX from our January one 2025 pro forma levels.
Sergio MLT: This reflects around 15 billion higher <unk> from business growth in the core businesses with the offset driven by the ongoing run off and NCL.
Sergio MLT: Summing this up we get to the same expected at the OE level at the end of 2026, as we guided a year ago, however, with faster NCL reductions than foreseen, a lower than expected headwind from Basel, III finalization and accelerated benefits from our balance sheet optimization efforts, we increased <unk>.
Sergio MLT: <unk> to support additional <unk> growth in our core businesses to drive incremental revenues.
Sergio MLT: In conclusion, we're pleased with the progress and achievement made in 2024 and as we move forward. We're confident in our ability to successfully deliver on our integration plans meet our financial targets and drive long term value creation for our shareholders with that let's open up for questions.
Sergio MLT: We will now begin the question and answer session for analysts and investors participants are requested to use only hand, just asking a question anyone who has a question press star one at this time.
Speaker Change: The first question is from Craig Hallum from Goldman Sachs. Please go ahead.
Sergio MLT: Yes, good morning, everybody so on integration on the one hand.
Sergio MLT: Do you run ahead of plan in 2024, clearly the CET. One is ended up much better than expected, but on the other hydro for guiding to around that extra $1 billion in cumulative integration costs by year end 2006 with.
With an unchanged exit rates over time.
Speaker Change: I guess to what extent can we characterize this as essentially the easy part of the integration has now come to an end and now the hardware can decommissioning and data integration begins I have we seen have we sort of frontloaded integration tailwind or is it still scope to outperform here over the next couple of years.
Sergio MLT: And then second on capital.
Sergio MLT: The caveat to the buyback target that this is on the basis of no material and immediate change in the current capital regime.
Sergio MLT: What's your assessment of the likelihood that such.
Sergio MLT: Changes could be both material and immediate like versus the potential for them being material, but with a long phase in or smaller than expected, but with immediate.
Sergio MLT: Flexibility on when is your best sense.
Sergio MLT: When we might get final clarity and resolution on this topic. So as you I think you mentioned earlier that the public consultation begins in may Thank you.
Todd: Let me pick up the second question and then I'll pass it to Todd So I think in terms of.
Sergio MLT: Yeah.
Speaker Change: The caveat on our capital returns is quite consistent with previous language.
Sergio MLT: Being.
Sergio MLT: Staying up 14% delivering on our financial plans, but also.
Sergio MLT: Reducing our risk of the execution of the integration so in that sense.
Sergio MLT: I just want to remind it to massive migration.
Sergio MLT: Nation of data, we're going to go.
Sergio MLT: In 2025 creates potential operational risk. So we have to be prudent about how we also look at our.
Sergio MLT: Share buybacks have you can say that I am stay confident that we will be able to to do that now.
Sergio MLT: I have no more visibility than you have in respect of how things are going to develop other than what is publicly.
Sergio MLT: Presented I have.
Sergio MLT: I can point to you to say that is.
Sergio MLT: For us it's not appropriate.
Sergio MLT: To speculate on any outcome.
Sergio MLT: And.
Sergio MLT: So we will we will engage deals allows maintenance to make sure that whatever proposal is put into place is reflecting a.
Sergio MLT: After concerns and.
Sergio MLT: And topics that I raised in my remarks.
Sergio MLT: And Chris on the first one just to point out a few things that no. It's not the change is not reflective of what we consider to be more and more complex versus less complex important to note that.
Sergio MLT: When we developed this view a year back.
Sergio MLT: This was seen as a very low.
Sergio MLT: Multiplier when you look at the $13 billion of cost to achieve versus the gross cost saves that we anticipated.
Sergio MLT: And we're still.
Sergio MLT: Even with $14 billion at a very low multiplier.
Sergio MLT: And so it should be seen in that light, but it's also important to highlight that.
Sergio MLT: The changes were invited by certain assumptions, we modeled a year ago, where we saw changes, which I highlighted in my comments earlier, but also importantly, we've identified incremental opportunities.
Sergio MLT: As we've worked through the integration too.
Sergio MLT: To unlock additional shareholder value and that's taken some incremental cost to to achieve that.
Sergio MLT: Okay. Thanks very much.
Speaker Change: The next question is from <unk> <unk> from RBC. Please go ahead.
Speaker Change: Oh, sorry, yeah. Thank you for taking my question two questions. Please.
Speaker Change: One coming back to the too big to St. Louis.
Speaker Change: A few times.
Speaker Change: The potential impact on you.
Speaker Change: Okay got it.
Speaker Change: Based on 14, I know, there's a lot of uncertainty.
Speaker Change: In considering dependent on the outcome.
Speaker Change: To offset.
Speaker Change: Ali dilution.
Speaker Change: My two questions.
Speaker Change: And then thank you.
Speaker Change: The U S wealth management operation so detached yeah.
Speaker Change: Just wondering.
Speaker Change: You talked about improving the performance of the U S.
Speaker Change: A few times before so what we did differently. This time that this will work out thank you very much.
Speaker Change: Thank you Alan kit.
Speaker Change: Unfortunately, as I mentioned before there is no easy fixes and there is no potential offset on the table that is not already planned and communicated so.
Speaker Change: No easy fixes no low hanging fruits, whatever comms is on top of our plans and it will be dilutive.
Speaker Change: Yeah.
Speaker Change: Got it.
Speaker Change: Yeah.
Speaker Change: Look in terms of what's different.
Speaker Change: We wanted to highlight the things that we're doing now and demonstrate the.
Speaker Change: The initiatives, we're undertaking and the plans that we have that will help us chip away.
Speaker Change: So we're being realistic in terms of what we think the margins can be over the midterm and we have a very comprehensive way at that there is no silver bullet, where theres one thing where you say you know that's going to effectively transformed the pretax margin.
Speaker Change: You heard me say and Sergio alluded to in his opening is that we're very focused to execute across these various levers.
Speaker Change: We're implementing them all in there in the collective we are going to contribute to improving the efficiency of the business. So I'd say, that's our focus and that's where that's the outcome we're looking to drive.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: The next question is from Jeremy <unk> from BNP Paribas. Please go ahead.
Jeremy: Hey, good morning. Thank you two questions. Please firstly, just so to revenue in the quarter the capital market's growth, so ECM and DCM.
Jeremy: It was a bit less than some of the peer group's 11% year on year I was just wondering if there's any mix reasons for that or if there's any sort of delay still in credit Suisse teams, becoming fully productive. So just a question on capital markets revenues and then second question is on the foreign subsidiaries topic it sounds like you've reduced.
Jeremy: The UBS Americas, CET, one ratio to around 20% from the previous 27% in the past you've run anywhere from 14% to 22%.
Jeremy: Is it realistic to think about going back into the mid to high teens in that subsidiary on a five year view.
Jeremy: Hey, Jeremy just on the on the second one so we are targeting.
Jeremy: And as you acknowledged from the capital repatriation the CET one capital in the IHG has come down significantly we are targeting a lower.
Jeremy: CET, one capital ratio say in the upper teens level, but on a like for like basis under the Swiss standards, that's more in line with a 13% to 15%.
Jeremy: See it's one CET one capital ratio so that.
Jeremy: That addresses that on the on the I B.
Jeremy: Question.
Jeremy: Just to point out on DCM, clearly, we're underweight versus peers, so you're seeing that manifest in the.
Jeremy: In our performance in ECM as I highlighted we're building, but the timing of our pipeline build is likely to yield.
Jeremy: More payback later in 2025 into 2026.
Jeremy: Okay. Thank you.
Speaker Change: The next question is from Kian <unk> from Jpmorgan. Please go ahead.
Speaker Change: Yes. Thanks for taking my question I really only have question regarding the key slide 32.
Speaker Change: I get the message don't get overly excited in terms of how capital could be repatriated and salt potentially a capital issue.
Speaker Change: But if I look at slide 32, and I got very excited when I saw the $30 billion, but clearly it hasnt ended up into the parent bank. It has been for the upstream.
Speaker Change: It looks like it and I'm just trying to understand.
Speaker Change: The rationale of the upstream.
Speaker Change: And.
Speaker Change: Also trying to understand.
Speaker Change: Theres room to downstream again if necessary.
Speaker Change: And in that context, and also trying to understand how much more capital is an international it should be something like $5 billion to $6 billion.
Speaker Change: What I calculate and if there's any other subsidiaries that you would highlight where there's room for potential further upstream.
Speaker Change: Into the parent going forward, so really just trying to square the process I'm a little bit confused in that sense and if you could help me I would really appreciate it.
Speaker Change: Thank you Kevin I'm sorry.
Speaker Change: I really appreciate your enthusiasm in I'm, sorry that you started with an enthusiasm that and then you ended up being confused.
Speaker Change: Confused so in that sense I can only reiterate that we don't really have some so much low hanging fruits here. There is no short fixes there are technicalities debts.
Speaker Change: I think that's a thought can explain you know.
Speaker Change: But that's essentially the situation. So we have been quite coherent and consistent in saying and planning for capital.
Speaker Change: Well ahead of the curve when we started to.
Speaker Change: The plan for 2026 targeted targets.
Speaker Change: Yeah, just to add I'm, a bank analysts I can't get too excited and very quickly.
Speaker Change: Yeah well.
Speaker Change: Thanks.
Speaker Change: Yeah.
Ken: Ken I think I think it's worth just pointing out.
Ken: Remember when.
Ken: We acquired credit Suisse and the.
Ken: Capital ratios at the parent bank.
Ken: Sure.
Ken: Distressed relative to what <unk> fully applied <unk> capital ratio was in the strength and resilience of our capital.
Ken: On the UBS side also to consider the equity double leverage that was.
Ken: Was was there on the credit Suisse side, and as we inherited that the pressure put on our own just given what we had to address and pushing up that.
Ken: Double levered so you're.
Ken: Taking out the capital and rebalancing of capital from.
Ken: The former credit Suisse subsidiaries in say, the U K and the U S up to the parent.
Ken: Fundamentally at group level as you say has been part of the plan, but also helps to alleviate the pressure.
Ken: In the.
Ken: And the equity double leverage and I think that's an important point to mention and that's why we made the comment that.
Ken: If theres going to be onerous.
Ken: Capital imposed on the parent bank, it's going to be funded with the retention of future profits.
Speaker Change: And just on double leverage how much also 13 billion do you actually require put double leverage and how much do you allocate for payback to shareholders. So we just get an idea how much is potentially excess in the holding.
It's it's.
Speaker Change: Of that amount that we have repatriated a significant part of it that is.
Speaker Change: <unk> is used to support moving to a more normalized equity double leverage level.
A significant portion of it.
Speaker Change: And just on the $6 billion in the international roughly five to 6 billion is that correct fix what's remaining yes, I highlighted that in my my comments as well that that's what we see.
Speaker Change: Naturally it's a function of timing.
And ensuring that we continue to run down the positions in that entity.
Speaker Change: Well get the support from the regulator to repatriate the remaining capital in that entity as we transfer our positions as I mentioned.
Speaker Change: And there could be leakage between now and then if we have losses in the entities. So conservatively I had mentioned around $5 billion that would come from CSI from here.
Speaker Change: Thank you.
Speaker Change: The next question is from Giuliani Alba from Morgan Stanley. Please go ahead.
Speaker Change: Yes, hi, good morning, Thank you for taking my questions I have two.
Speaker Change: Going back to slide 31 on the noncore deleveraging.
Speaker Change: Is it possible that if I exclude the openings could which I understand is that even may afford me now that's fine but the.
Speaker Change: The market today is kind of bad news came down.
Speaker Change: By 42 billion since Q2, 'twenty three and now you only plan two cuts hadn't been done in 'twenty five.
Speaker Change: Yes.
Speaker Change: Why wouldn't we expect a faster.
Speaker Change: Given that the market is supportive.
Speaker Change: And then secondly, thanks for the additional detail on the Gws in the U S.
Speaker Change: The discussion in that division, which I look forward to these closures. Thank you one and I guess, having opened under the national charter.
Speaker Change: That would help but how quickly do you expect that to get that.
Speaker Change: The license piece.
Speaker Change: Julia.
Speaker Change: So on the on the credit and market risk.
Speaker Change: Ambition in terms of the levels, taking it down I think this goes really to the point I highlighted in my comments.
Speaker Change: In the context of the <unk>.
PBT, we see in 'twenty five versus 24.
Speaker Change: I made comments that.
Speaker Change: The positions at this point are much smaller than.
Speaker Change: And then we've seen their hedged at times they could be.
It could have transfer restrictions associated with them, we have to ensure the counterparty is willing to terminate there could be exotic security types with bespoke features that limit potential buyers. So there are a lot of issues as you get down into the portfolio and you have a much smaller positions in these book.
Speaker Change: That's gonna take an extensive amount of work to see chip away at progress So a lot of the <unk>.
Speaker Change: Big rocks and larger positions that generated.
<unk> reduction, but also invited.
Speaker Change: And ability to exit at levels above book value.
Speaker Change: We're gonna become further off.
Speaker Change: And our father and unless I'm less likely as we as we move forward. So I think it's just important to to understand that in the context as well as the <unk> rundown.
Speaker Change: In terms of the.
Speaker Change: Then your second question on the National Charter and the timing look we're working on moving forward with.
Getting the application in a lot of work being done and we're going to work as as quickly as we can to get that.
Speaker Change: Rolled out and to enhance our banking.
Speaker Change: Banking product offering I mean, we're not standing still at the moment, we're doing a lot of work in that respect now also to go live, but certainly the having that license will unlock certain.
Speaker Change: Product capabilities that just aren't possible until we have it.
Speaker Change: Got it but is it fair to expect that three years.
Speaker Change: Longer short there.
Julia: Julia I think that's just something we'll continue to update you on I don't.
Speaker Change: Want to.
Speaker Change: Predict the process because we're working obviously also with supervisors to get that.
Speaker Change: Get the license approved so.
Speaker Change: The timeline is something we're working actively on but we'll keep you updated.
Speaker Change: Thank you and maybe just to add on that.
Speaker Change: On non core.
Speaker Change: We always say that at the end of the day of course, if really want to take down market in <unk>.
Speaker Change: Credit risk overnight, we put broadly find a price at which to do it but now if that price is well in excess of our cost of capital and expected return that would be a stupid.
Speaker Change: So we are constantly looking to optimize.
Speaker Change: Shareholder interest as we wind down these assets. So it doesn't really make sense to create new capital that caused that it's well above how we how we.
Speaker Change: Back to the lever in terms of returns.
Speaker Change: Okay. Thank you.
Speaker Change: The next question is from Stefan Steinman from Autonomous Research. Please go ahead.
Stefan Steinman: Hey, guys. Good morning, and thank you very much for taking my questions.
Speaker Change: I wanted to ask.
Speaker Change: U S wealth management trends. Please it looks like you're tilting away the business mix from the high end of the market tell us more.
Speaker Change: Affluent and lower wealth brackets.
Speaker Change: It's pretty much the opposite of what <unk> been trying to achieve over the last 20 years I would say.
What has changed why are you coming to this different assessment of the relative attractiveness of different well brackets in the U S.
Speaker Change: And the second question I, just wanted to make sure that I understood. This correctly.
Speaker Change: Plans and teams that you hold line they are not yet accrued and then deducted from tier one capital at the year end isn't it. Thank you very much.
Stefan Steinman: Yeah, Hi, Stefan.
Stefan Steinman: Yeah with respect to the $2 billion that we aim to buyback.
Sergio MLT: On the conditionality that Sergio described here that is correct.
Stefan Steinman: On the U.
Stefan Steinman: U S wealth side I think it's just important to point out that it's not a it's not a it's not a shift in strategy. What we said was we're looking to rebalance.
Stefan Steinman: More into the high net worth and affluent client segments and the reality there is that one where we're quite overweight in ultra which is of course our strength.
Stefan Steinman: But it's also important to point out that.
Stefan Steinman: The return on assets are in.
Stefan Steinman: And that in that segment versus as you move down client segments is of course, lower and so the profitability as you move down segments as is higher and so what we're trying to do is rebalance.
Stefan Steinman: So to stay obviously very.
Stefan Steinman: To stay very penetrated in ultra but to increase our penetration in high net worth and affluent.
Stefan Steinman: Create a better balance in line more in line with the market a bit more in line although of course, we want to stay.
Stefan Steinman: More overweight at the top end because as I said, that's our strength.
Stefan Steinman: And our what we bring to the strength that we bring to the table.
Stefan Steinman: But.
Stefan Steinman: It's really important to emphasize that.
Stefan Steinman:
Stefan Steinman: Yeah that.
Stefan Steinman: Versus the market you could see that as we have on slide 26 that.
Stefan Steinman: Where we're looking just to shift and rebalance more into high net worth and affluent where the profitability has improved.
Stefan Steinman: And it and why it is that it's a rebound it's a rebalancing as opposed to a strategy change.
Stefan Steinman: Okay.
Stefan Steinman: Quick follow up on the first part of the question is the $1 billion.
Stefan Steinman: Buyback plan also.
Stefan Steinman: Not deducted from CET, one capital or is it.
That's it.
Stefan Steinman: Okay. Thank you very much.
Speaker Change: The next question is from Andrew Coombs from Citi. Please go ahead.
Andrew Coombs: Good morning.
Speaker Change: Alright.
Speaker Change: GW of Americans.
Speaker Change: I can touch on P&C NII.
Speaker Change: On the Gws.
Speaker Change: You highlighted a couple of times how are you all.
Speaker Change: Yesterday yeah.
Speaker Change: It seems to be signs of that.
Speaker Change: T J Ross money foreign acquisition.
Speaker Change: NII right.
Speaker Change: Could you just elaborate a bit more down exactly what changes you are making how are you seeing any changes Pat.
Speaker Change: Hey, great.
Speaker Change: Especially given your comments on that topic.
Speaker Change: It might need some.
Speaker Change: Krishnan and seven net new money.
Speaker Change: First question second question on the PNC NII.
Speaker Change: Has been one of the biggest headwinds.
Speaker Change: You're guiding to that.
Joe: Hey, Joe.
Joe: Much more pronounced this year than last year.
Joe: But you're still expecting.
Hi.
Joe: After the second quarter.
Joe: Just what are your rate assumptions.
Joe: Yes.
Joe: And I think you made a comment.
Joe: You should contact with government some random rate trajectory at all perhaps you could elaborate on that and then also when you have 90 minutes, giving you a nice balance has shrunk by another company opinion this quarter.
Joe: Thank you.
Joe: So first on your first question in.
Joe: With respect to the FA comp changes I think the changes that I'm that I highlighted that align better with our strategy also are more aligned to.
Joe: What we believe are observe or the comp models at our.
Joe: <unk> as well we had certain features we think that.
Joe: We're we're perhaps off market and we are looking more to align with what our peers do.
Joe: But I think the more important point, though is that.
Joe: In discussing this with.
Joe: Many financial advisors and getting their take on these changes.
Joe: It's clear that those who are very aligned with our strategy of bringing value to their clients and growing their books of business and.
Joe: As I said, bringing more solutions to their clients from essentially across.
Joe: What we can offer.
Joe: Those phase will benefit in this model and they will get paid more and I think that's the key point my comment about FAA attrition is just that those who may have benefited from features that.
Joe: We have eliminated may decide that that they would be better off trading away and and we have to.
Joe: Cater for that prospect in our in our modeling and so that's why I mentioned that but.
Joe: It's important to keep in mind that the.
Joe: The changes, we're making are really not intended to reduce compensation, but to increase it as long as it's being done in ways that are very aligned with our strategy and I think that's the most important point.
Joe: On on P&C net interest income you had several questions I mean in terms of rate assumptions well first of all you know the current rates are at 50 basis points, having come down 125 basis points over the last three quarters of 2024. There is an expectation if you look at our implied forwards.
Joe: The rate curve will approach near near zero.
Joe: So there is a really a lack of deposit margin room for maneuver.
Joe: As we look out which is why we think that the full year 2025, NII, especially if rates move down further.
Joe: We'll be even more pronounced than than the Q1 guidance I talked about plateauing you know.
Joe: Once we inflect because if you look at the the yield curve its actually quite flat, if not even inverted, but it's certainly flat.
Joe: And as such we don't see movements in it. So therefore, you know if it's effectively.
Joe: Effectively hitting a trough I see it plateauing.
Joe: And then I commented it which was your other question.
Joe: If rates move obviously, if they move up it gives us a bit more deposit margin room for maneuver if they move down into negative territory that is also a helpful. Because we can typically charge certain clients and also drive greater.
Joe: Lending NIM as well.
Joe: As far as the expectation around loan balances, we have a stable outlook for lending.
Joe: In P&C and also a stable outlook for deposits in P&C. So we're quite focused continuing to do balance sheet optimization ensure that the pricing reflects the appropriate cost of risk and capital.
Joe:
Joe: On the deposit side, we've been very thoughtful in how we have moved pricing down.
Joe: In relation to.
Joe: The central bank dropping rates in order to retain deposits where possible.
Joe: Yeah.
Joe: Very helpful. Thank you very much.
Speaker Change: The next question is from Amit <unk> from Mediobanca. Please go ahead.
Amit: Alright, Thank you and thank you for the clarification on the capital.
Speaker Change: And.
Speaker Change: And then just a couple of questions again on the U S business.
Speaker Change: And so I guess, one I was just I just wanted to understand a bit better.
Speaker Change: As you get to 15% PBT margin of 27, and what is the kind of plan with little processing senses getting to kind of peer levels.
Speaker Change: $95, 30% operating margin and he showed you at the Nike think pizza.
Speaker Change: <unk>.
Speaker Change: And what the status there and it's in a building out a more comprehensive banking offering and delivery model.
Speaker Change: It is part of that debt.
Speaker Change: What cost is involved in that.
Speaker Change: And then second I will say just curious.
Speaker Change: In terms of the pvt margin that you're targeting an existing tenant and 27 I think previously you were talking about mid teens and 26.
Speaker Change: Just to check is that slightly later or is it the same.
Speaker Change: Same basic expectation thank you.
Yes.
Speaker Change: And in terms of our expectations, but we haven't really articulated that other than I have said in the past that expected a mid teens in the midterm.
Speaker Change: When we talked about.
The business and Sergio and I have been doing this so I don't think it's inconsistent.
Speaker Change: But where we're talking over.
Over the next couple of years to continue to build and we think by 2027, we'll be at that.
Speaker Change: That mid teens level.
Speaker Change: Level, I mean as far as comparing to peers I mean, we don't this isn't a comparison to peers for us or net or sorry narrowing.
Speaker Change: It's not about effectively catching peers, but it's more about narrowing the gap that's what we've said consistently.
Speaker Change: In order to.
Speaker Change: To improve the overall.
Speaker Change: Cost income ratio for the business overall.
Speaker Change: And in the U S to put us in a position where we're contributing significantly more to the overall profitability of global wealth management.
Speaker Change: In terms of the banking.
Speaker Change: Capabilities and in the other capabilities I talked about those investments are catered for in my comments I did say that we're making incremental.
Speaker Change: Technology investments and also investments in our capabilities.
Speaker Change: And in the collective that's also being priced into.
Speaker Change: Our 2025.
Speaker Change: Pre tax margin expectation, but also as we are you know as we guided looking out to 2027 as well.
Speaker Change: Thank you can I just follow up just in terms of that investment and in intensive points of operating margin would that be kind of T. Three or five percentage points of operating margin that you invest.
Speaker Change: Investing in <unk>. So just to think about thereafter, how much could potentially drop out.
Speaker Change: How much is just don't hang in this thing.
Speaker Change: I just say the investments that we're making we already we've been investing in the business. So it's important to keep that in mind, but we are making now were in.
Speaker Change: Ensuring that the investments that we make in technology are done in a way where the payback is improved as I mentioned the improved ROI. We are also funding incremental investments as I say and that is captured in the pre tax margin expectation for 'twenty.
Speaker Change: 25, and as we grow it so I wouldn't I wouldn't model it falling out I mean, the this will be technology investments, we're going to continue to make for the for the business to help it grow.
Speaker Change: Thank you.
Speaker Change: The next question is from Antonio Reale from Bank of America. Please go ahead.
Good Santana: Good morning, Good Santana from Bank of America two questions from me. Please actually it's two follow ups, one on capital and one on the P&C.
Good Santana: So you've repatriated 13 billion capital at the parent company this quarter and despite that Youll see tier one ratio at the AG level was only up 20 bps or so Q on Q2 13, 5% now could you. Please explain why that was the case and maybe talk us through the moving parts I'm, sorry, if it's repetition, but I think it's a it's important.
Good Santana: And the second question is again, a follow up on your Swiss business.
Good Santana: You've talked about your NII guidance can you just remind us your sensitivity to rates and hedging structuring in Switzerland, and Maureen Jamba, what flexibility would you have to mitigate some of these trends on NII.
The rest of the P&L, even alluded to more cost synergies. So if you can share.
Speaker Change: And then it'll be more about the moving parts of the P&L that'd be that'd be super helpful. Thank you.
Speaker Change: So in terms of the Michigan's.
Speaker Change: Bit too the headwinds, we're definitely focusing on on driving as you saw in <unk>, continuing to drive where possible our non NII revenue growth improve on recurring revenue in P&C and also on transaction revenues.
Speaker Change: Revenues that'll be our focus to partially offset.
Speaker Change: The the headwinds that we see and in P&C.
Speaker Change: I mean as far as abilities to effectively hedge or extend duration I mean, that's just not when the rates are.
Speaker Change: This low and with a flat yield curve.
Speaker Change: Standing duration for example, non maturing deposits doesn't doesn't offer much of an advantage at all in fact in fact, it could lock in funding costs and rather than allow us to benefit from future rate cuts, including if they go below zero.
Speaker Change: It also creates some some mismatched risk mismatch risk as well so.
Speaker Change: If the if the rates are going to near zero as I said, we have very limited room for maneuver ability.
Speaker Change: And we just have to wait until we see some daylight in terms of changes in that in that yield curve.
Speaker Change: On the on the capital question you had in terms of what Youre missing a I think in terms of the CET one capital ratio of UBS a G. After received the capital.
Speaker Change: From the subsidiaries.
Speaker Change: We are accruing a dividend to the parent to address the point that I made before in response to Ken's question. So it's a dividend accrual that will serve as an offset to the.
Speaker Change: Sorry, the dividend accrual to group to be clear to offset the capital repatriated to AG its first tier subsidiary.
Speaker Change: Thank you very much.
Piers Brown: The next question is from piers Brown from HSBC. Please go ahead.
Piers Brown: Hey, good morning, everybody I've, just got two follow ups, one I just wanted to make sure on.
Piers Brown: Got the message correct on client risk appetite I mean, you've talked about.
Piers Brown: Then moving to sweep accounts.
Piers Brown: Obviously, the fourth quarter NII was much better than we than we anticipated, but then on the transaction side, you're a little bit below street expectations on a click of a low number that's still.
Piers Brown: Declining so just appetite for re leveraging and sort of look forward on client activity into the first quarter can you comment on that please.
Piers Brown: Then just a technical question maybe on the Basel III final.
Piers Brown: Outcome.
Piers Brown: Really no change to CET, one I think you had guided to a 30 basis points impact.
Piers Brown: Regionally so what's moved in your favor on implementation of Basel III final, that's what's caused that delta.
Piers Brown: Hi, piers so on on I'll just take your second question first so in terms of the Basel III.
Speaker Change: Look I've guided got it down.
Speaker Change: Last quarter to a lower level than I had been guiding you know as we started to.
Speaker Change: Get more visibility and make progress the team has done an excellent job at and ensuring that we were able to mitigate where we can I mean some of the aspects that we're at work our infrastructure improvements.
Speaker Change: Model alignments also exiting positions and running down risks so all of those things contributed to our ability to.
Speaker Change: Be able to Ulta.
Speaker Change: Ultimately printed day, one level, that's that's far inside where.
Speaker Change: Where we had where we had guided.
Speaker Change: In terms in terms of.
Re leveraging opportunities.
Speaker Change: For sure in global wealth management.
Speaker Change: As rates potentially higher or not or not.
Speaker Change: <unk> coming down is as quickly as perhaps we anticipated a quarter ago or certainly two quarters ago, that's going to be helpful. That's going to be helpful for deposit margins as I mentioned.
Speaker Change: But probably we'll have a little bit of a chilling effect on deleveraging, which is something that with rates coming down we expect to see both in the.
Speaker Change: And in all parts of the of the wealth business, which involves really where we have U S. Dollar exposure in the U S business naturally, but also in our APAC are part of the business and so we are.
Speaker Change: If if rates sort of back up then we will have positive effects on deposit margins, but the extensive re leveraging that we're pricing into the outlook, we may see that.
Speaker Change: You know come in less less aggressively.
Speaker Change: That's perfect. Thanks, just on global banking, you mentioned, a 20% change in pipeline.
Speaker Change: Was that up or down I think.
Speaker Change: Yeah.
Speaker Change: So what we mentioned.
Speaker Change: It's not our pipeline what we say it is that according to market data.
Speaker Change: So the industry is down 26% year to date, so for the first months. So our pipeline is building up we are very.
Speaker Change: Im confident about the ability to generate new business and build up a.
And build up our market share, but if you look at according to market data.
Speaker Change: <unk> on January <unk>.
Speaker Change: The amount of fees and activity is down 26%, if I remember correctly.
Speaker Change: So it came in the final number came in yes, sorry appears I got your question, it's the fee pool.
Speaker Change: Is down around 20, 21% of our January so in any case, a two handle in front. So actually that's that's industry cannot UBS just to be clear.
Speaker Change: Okay. So there are no more questions.
Speaker Change: There are no more questions. So thank you for calling in and for your questions. So I'll.
Speaker Change: Touch base next quarter. Thank you.
Speaker Change: Ladies and gentlemen, the webcast and Q&A session for analysts and investors is over you may disconnect your lines.
Speaker Change: We will now take a short break and continue with media Q&A session at 11 30 C. P. Thank you.
Speaker Change: [music].