6-K
UBS AG (AMUB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
REPORT OF FOREIGN PRIVATE
ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: February 5, 2025
UBS Group AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
(Address of principal executive office)
Commission File Number: 1-36764
UBS AG
(Registrant's Name)
Bahnhofstrasse 45, 8001 Zurich, Switzerland
Aeschenvorstadt 1, 4051 Basel, Switzerland
(Address of principal executive offices)
Commission File Number: 1-15060
Indicate by check mark whether the registrants file or will file annual
reports under cover of Form
20-F or Form 40-
F.
Form 20-F
☒
Form 40-F
☐
This Form 6-K consists of the transcripts of the 4Q24 Earnings call remarks
and Analyst Q&A, which
appear immediately following this page.
1
Fourth quarter 2024 results
4 February 2025
Speeches
by
Sergio
P.
Ermotti
,
Group
Chief
Executive
Officer,
and
Todd
Tuckner
,
Group Chief Financial
Officer
Including analyst
Q&A session
Transcript.
Numbers for
slides refer
to the
fourth quarter 2024
results presentation. Materials
and a
webcast
replay are available at
www.ubs.com/investors
Sergio P.
Ermotti
Slide 3 – Key messages
Thank you, Sarah and good morning,
everyone.
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.
Strong fourth-quarter
results contributed
to even
stronger full-year financial
performance, as
we rebuilt profitability
across our businesses. Our full-year net profit
of 5.1 billion and underlying return on CET1 capital of
8.7% reflect
our unwavering commitment
to serving our clients,
our diversified global franchise
and the disciplined
progress we
have made on our integration plans.
Throughout
2024, we
maintained robust
momentum as
we captured
growth across
our
global
asset-gathering
platform and gained market
share in the Investment Bank
in the areas where we have
made strategic investments.
With over
70 billion
Swiss francs
of loans
granted or
renewed during
the year,
and outstanding
balance of
350
billion, we also maintained our
commitment as a reliable
partner for the Swiss economy,
supporting families and
businesses to achieve their goals.
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 in
Luxembourg, Hong
Kong, Singapore
and Japan
in the
fourth quarter.
This builds upon the
successful integration of
our key operating entities,
the optimization of
our balance sheet and
the
reduction
of
costs
and
risk-weighted
assets
in
Non-core
and
Legacy.
Combined,
these
milestones
have
significantly reduced the execution risk of the Credit Suisse acquisition.
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.
2
Our capital position remains
robust as we ended the
year with a CET1
capital ratio of 14.3%.
For the financial year
2024, we intend to propose a dividend of
90 cents, representing a 29% increase year-on-year.
This is in line with
our intention to calibrate the proportion of cash dividends
and share repurchases.
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. This
will allow
us to
better serve
our clients
and position
UBS for
future success.
That includes the Americas, a
region that remains a
core component of both our asset-gathering
foundation and
our capital-efficient business model.
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.
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.
Now, I hand over to Todd
who will cover the fourth-quarter results.
3
Todd
Tuckner
Slide 4 – Continued positive operating leverage
in 4Q24 on higher revenues and lower costs
Thank you Sergio, and good morning
everyone.
Throughout my remarks, I’ll refer
to underlying results in US dollars
and make year-over-year
comparisons, unless
stated otherwise.
For the fourth quarter,
profit before tax tripled to 1.8 billion. Revenue momentum in
our core franchises and cost
synergies across the Group
drove a 12-point
improvement in operating leverage. Our
EPS for the quarter
was 23
cents with a 7.2% underlying return on CET1 capital.
Our underlying cost-income ratio was 82%.
Slide 5 – 4Q24 net profit at 0.8bn, with integration
continuing at pace
Looking at
the drivers
of our
fourth quarter
Group performance
on slide 5.
Total revenues rose by 6%
to 11
billion,
driven mainly by strong top-line growth in Global Wealth Management
and the Investment Bank, powered by our
capabilities and advice in supportive market
conditions.
Operating expenses declined by 6% year-over-year
to 9.1 billion, and were
1% lower sequentially as progress
on
synergies and
a
stronger
US
dollar
more
than
offset
the
expected
4Q
tick-up in
non-personnel expenses.
This
achievement was supported by
a lower overall
employee count, which fell
sequentially by another 2%,
to below
129 thousand.
The total staff count is down 27 thousand, or 17%,
from our 2022 baseline.
Excluding litigation, variable compensation and
currency effects, operating
expenses decreased by 9%
year-over-
year.
The 4% quarter-over-quarter increase was caused
by seasonally higher charges, including the UK bank levy
and increased marketing expenditures.
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%.
We expect a similar tax rate in
the first quarter.
Slide 6 – Global Wealth Management
Turning to our business divisions, and starting with Global Wealth Management on
slide 6.
GWM’s pre
-tax profit
was 1.1
billion, an
increase
of over
80% as
revenues
grew
by
10%.
Excluding litigation
charges, PBT rose to 1.2 billion.
Net new assets reached 18 billion and net new fee-generating assets were 13 billion, fueled by sales of mandates
and separately managed accounts.
Flow performance this quarter reflects the maturity of over 50 billion of fixed-
term deposits associated with
our 2023 win-back campaign.
Like in previous quarters, we managed
to retain over
85% on our platform, including converting
over 20% into more profitable solutions, including mandates.
For
the
full
year
2024,
we
acquired
net
new
assets
of
97
billion,
representing
a
2.5%
growth
rate.
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.
4
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 4Q, and
increasing profitability on sub-hurdle lending relationships from our balance sheet
optimization efforts.
Collectively,
while
these
factors
weighed
down
flows
by
around
30
billion,
importantly
they’ve
contributed
to
enhanced profitability and
returns.
This is evidenced by
the 3 percentage point
year-over-year increase in revenues
over RWA.
Recurring net fee
income increased
by 12% to
3.3 billion as
our invested assets
grew sequentially
to 4.2
trillion,
absorbing roughly 80
billion in
FX headwinds.
Client traction
with mandates
remained 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 SMAs in the US.
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.
This quarter we once again
demonstrated the benefits of
combining our leading markets
solutions and capabilities
with our CIO’s investment calls.
This drove a 12% increase in
transaction-based revenues in an environment that
saw broad re-risking after the US elections.
Structured
products,
equities,
and
alternatives
all
recorded
double-digit
transaction
revenue
increases.
Our
investments in
capabilities, solutions,
and
unified teams
support the
durability of
this
revenue
line
and fuel
our
ability to capture wallet-share in all climates.
Year-on-year
transaction revenue growth was led by APAC and the Americas, up by 30% and 13%, respectively.
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.
I would note
that the planned sweep
deposit pricing changes I
mentioned previously went into
effect for our
US
advisory accounts in early December.
Our 2025 outlook as a result of introducing these rate adjustments remains
unchanged.
Turning to
our NII outlook for GWM.
Since I offered an initial view on 2025 last quarter,
we’ve seen a significant
divergence in
rates expectations
between the
US dollar,
on the
one hand,
and the
Swiss franc
and Euro
on the
other.
This distinction
is important
for GWM.
While our
US business
is effectively
operated entirely
in US
dollars, in
GWM’s
businesses
outside
the
US,
half
of
all
deposits,
and
the
majority
of
loans
and
low-beta
transactional
account
balances, are denominated in currencies other than the
US dollar.
Looking at
the rates
outlook, the
Federal Reserve
is now
expected to
cut US
dollar rates
more gradually.
Meanwhile,
both the Swiss and the European central banks are expected to
continue to more actively cut.
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.
Combined with a lower day count effect, this is expected to result
in a
low-to-mid single-digit-percentage sequential decrease
in GWM’s NII.
5
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
new loan
growth
should also
help. I
should note
that if
we do
see a
more hawkish
US dollar rates
policy,
while helpful to
deposit
margins, this is likely to moderate the extent
of re-leveraging, particularly in Lombard lending.
For full
year 2025
compared to
2024, we
expect a
low single
digit percentage
decrease in
NII, inflecting
by 2Q,
with the second half of the year broadly flat versus
2H24.
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.
To
offer a look-
through comparison, excluding litigation,
variable compensation, FX,
and last year’s FDIC special
assessment, costs
were down 5% year-over-year.
Slide 7 – Personal & Corporate Banking (CHF)
Turning to Personal and Corporate Banking on slide 7.
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.
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.
Sequentially, NII decreased slightly by 1%.
We offset some of the effects of the
SNB’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.
After the 50
basis point cut
by the
SNB in
December there is
a reasonable
likelihood that we’ll
see interest rates
drop to zero by mid-2025.
The
impact
of
near-zero
rates
will
drive
down
deposit
margins
both
sequentially
and
for
the
full
year
2025.
Additional headwinds in
1Q are
expected from
the sequential
day count
effect and
lower rates
in US
dollar and
Euro affecting deposit margins on transactional accounts.
Hence, for P&C’s Swiss
franc NII, we currently expect
a roughly 10% sequential decline
in the first quarter.
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.
From
there,
any
move in
interest
rates, whether
negative or
positive, should
be constructive
to our
NII
and net
interest margin in P&C.
Credit loss expense was 155 million Swiss francs, a 25-basis point cost of risk on an average loan portfolio of 243
billion.
The quarterly result was driven by Stage 3 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.
These
exposures, by
and large,
are
on
the Credit
Suisse platform,
reflecting lending
practices and
underwriting
standards from the pre-acquisition period.
We expect CLE 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
exposures still having more
than a year until
maturity.
In the
first quarter, we may see lower CLE versus the implied quarterly average due to seasonal
factors.
6
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.
Slide 8 – Asset Management
Moving to Asset Management, on slide 8.
Pre-tax profit increased by 20% to 224 million as strong cost discipline
more than offset lower revenues.
Overall revenues were down 7%, or 6% excluding gains
on asset sales.
Net management fees
declined by 5%,
mainly from
continuing shifts out
of active equities
compressing top-line
margins.
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.
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.
Slide 9 – Investment Bank
On to slide
9 and the
Investment Bank.
Pre-tax profit of
452 million was
driven by strong
revenue performance,
up 37% year-on-year.
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%.
Markets
revenues
increased
by
44%
to
1.9
billion
with
increased
client
activity
on
higher
cash
volumes
and
supportive volatility
across equities
and FX.
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.
Operating expenses were down 4% on lower personnel
costs.
Slide 10 – Non-core and Legacy
On slide 10,
Non-core and Legacy’s
pre-tax loss in
the quarter
was 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
in our
now much smaller credit
book.
Operating expenses were down
by nearly 50% year-on-year
and 5% sequentially,
as we continue to
make good
progress in driving out costs.
NCL risk-weighted assets were
41 billion, down 3
billion sequentially,
mainly from position
exits.
LRD was down
15 billion, or 22% quarter-on-quarter.
7
Slide 11 – A balance sheet for all seasons as a
key pillar of our strategy
Turning
to our
capital and
balance sheet
position on
slide 11.
As of
the end
of the
fourth quarter,
our balance
sheet for all seasons consisted
of 1.6 trillion in total
assets, including around 600
billion in end-of-period loans
and
750 billion in end-of-period deposits.
Our loan portfolio reflected credit-impaired exposures of 1%, up sequentially by 4 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.
We ended the year with a sequentially unchanged CET1 capital
ratio of 14.3%, as a decline in CET1 capital of 2.8
billion was
offset by
a proportionate
decrease in
risk weighted
assets of
21 billion.
CET1 capital
was mainly
affected
by
the stronger
US dollar
as well
as by
higher cash
taxes and
dividend accruals,
more
than
offsetting quarterly
profits.
RWA likewise was lower on currency effects as well as asset size reductions, mainly
in the IB and NCL.
Slide 12 – Strong execution in 2024, delivering ahead
of plan
To
summarize, our
fourth quarter
performance caps
off a
strong 2024
in which
our Non-core
and Legacy
team
successfully ran
down balance
sheet and
costs and
our core
franchises demonstrated
strength and
scale in
delivering
for our clients, even while absorbing substantial
costs associated with the integration.
With that, I hand back to Sergio
for the investor update.
8
Sergio P.
Ermotti
Slide 14: Executing on our proven strategy to deliver
for all stakeholders
Thank you, Todd.
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 a balance
sheet for all seasons.
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 efficiency is at
the forefront of our culture. This is why
our clients continue to
extend
their
trust
and
confidence
in
UBS,
and
our
employees
are
proud
to
work
here.
It
is
how
we
generate
significant value
for our
shareholders while
remaining a
consistent and
reliable economic
partner in
the communities
where we
operate. And
it has
also allowed
us to
be a
source of
financial stability for
Switzerland and
the wider
financial system in March of 2023.
The same
principles guide
us as
we build
an even
stronger,
safer and
more
efficient firm,
and position
UBS for
sustainably higher returns and long-term growth.
Slide 15: Unique globally diversified model focused
on asset gathering businesses
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.
We are the largest truly global wealth manager, and the leading universal bank in Switzerland.
These
two
key
pillars
of
our
strategy
are
enhanced
by
a
portfolio
of
best-in-class
capabilities
across
Asset
Management and our competitive, but capital-light
Investment Bank.
With leading
franchises in the
world’s largest and
fastest-growing markets,
our regional diversification
is a strategic
advantage and also provides us unique value for
both our clients and investors.
Slide 16: On track to substantially complete
the integration by the end of 2026
Turning to the integration.
As I
highlighted earlier,
we are
on track
with our
plans thanks
to the
successful delivery of
our key
objectives in
2024, having completed over 4,000 milestones
during the year.
Following
the
merger
of
our
Parent
Banks,
we
have
now
migrated
over
90%
of
client
accounts
outside
of
Switzerland onto UBS platforms.
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.
We also
continue to
follow our technology
decommissioning roadmap. To
date, we
have removed
over 40%
of
Non-core
and
Legacy’s
applications, worked
through
16
petabytes
of
data
and
reduced
the
number
of
legacy
servers by over 40%.
9
Thanks to
our restructuring
efforts and
the active
wind-down
of NCL,
we have
captured almost
60% of
our targeted
13 billion gross cost savings.
We will look to maintain this
momentum in 2025 as
our focus shifts to migrating
the majority of client accounts
in
Switzerland, and decommissioning over twelve
hundred Credit Suisse models and applications.
We
have
always
said
that
our
progress
on
the
integration
of
Credit
Suisse
will
not
be
a
straight
line.
Our
performance in
2025 will
continue to
reflect significant
restructuring work
necessary to
integrate our
businesses
and right-size our cost base.
Having said that, our progress to date
supports an incremental improvement in our returns this year compared to
our previous guidance.
We remain
confident
in our
ability to
substantially complete
the integration
and deliver
on our
targets and
ambitions
by the end of 2026. At the same time, we will continue to invest to drive sustainable growth and long-term value
beyond the integration.
Slide 17: Continuing to invest in technology
to drive business outcomes
Investing in technology
to benefit our
clients and empower
our colleagues is
one of the
key ways we
are preparing
for the future.
We continue to invest in our
best-in-class Cloud infrastructure with over
70% in the public and private
Cloud. This
is a
key facilitator
of our
integration progress,
allowing us
to reduce
complexity and
costs 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.
A good
example is our
roll-out of
50,000 Microsoft
Copilot licenses to
our employees in
the largest deployment
within the global financial services industry to
date.
We are also seeing
strong benefits from
our proprietary generative
A.I. solutions.
One example is
in the U.S.,
where
our
advanced
analytics
platform
supported
our
financial
advisors
with
over
13
million
automated
insights
and
actionable opportunities. Solutions like this improve productivity and our ability to deliver tailored solutions to our
clients.
Slide 18: On track to deliver on our cost
and profitability ambitions in our core businesses
We are
on track to deliver
on our 2026
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.
In GWM, we remain focused on
leveraging our enhanced capabilities
and solutions to maintain client
momentum.
At the same time,
we aim to
capture the benefits
of integration-related synergies
and improve advisor
productivity.
With
the
client
account
migrations
achieved
in
APAC,
we
are
even
better
placed
to
leverage
our
number-one
position in the region to drive market-leading growth.
10
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.
These growth initiatives
will be supported
by actions we have
already taken to
enhance our technology offering,
simplify our organizational structure and improve execution.
I am
confident in
our ability
to deliver
mid-teen PBT
margins as
we exit
- Then,
the business
will be
better
positioned to further expand profit margins and
capture long-term growth. Todd
will take you through our
plans
in more detail.
In P&C, as we have said
previously, declining Swiss franc rates are expected to continue
to affect revenues. We are
still de-facto 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.
Unfortunately, as we
reported previously, this will
lead to
certain role
reductions in
Switzerland. We
plan to
mitigate
the impact of these as much as possible through natural
attrition, early retirement and other measures.
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
plans. I
am also
especially proud
of
efforts to
prioritize the
hiring of
internal candidates: over
two-thirds of
open positions in
Switzerland were
filled
this way in 2024.
In Asset Management, we remain focused on continuing to capture opportunities where we have a differentiated
and scalable offering.
This includes our newly launched Unified
Global Alternatives unit, which makes
us the fifth-largest Limited Partner
in
Alternatives
with
promising
growth
prospects.
At
the
same
time,
we
will
remain
focused
on
realizing
cost
synergies and structural efficiencies to create capacity
for investments and improve profitability.
In the Investment
Bank, I am
encouraged by
the progress our
fully integrated
teams are making
to deliver
for clients
as we seize market share gains in our areas of strategic
importance.
As
we
continue
to
deploy
our
products
and
services
across
our
broader
institutional
client
base
and
increase
connectivity to GWM
and P&C to
deliver on our
return ambitions, we
will maintain our
well-established risk and
capital discipline.
Slide 19: Well placed to balance resiliency, growth and attractive capital returns
Turning to capital.
We
continue
to
target
a
CET1
capital
ratio
of
around
14%.
At
this
level,
we
will
be
able
to
go
through
the
integration period and beyond with a strong capital buffer relative to minimum requirements. This will allow
us to
remain a source of stability while we self-fund growth and deliver attractive
capital returns to our shareholders.
For the 2025 financial year,
we plan to accrue for an increase in our dividend of around
10 percent. We also plan
to repurchase another 1 billion dollars
of shares in the first half of
this year, and up to an additional 2 billion in the
second
half. As
in
the past,
our
share
repurchases
will
be
consistent with
delivering on
our
financial plans
and
maintaining our
CET1 capital
ratio target
of around
14%, and
assuming no
material, immediate
changes to the
current capital regime.
11
Our ambition for capital returns to exceed pre-acquisition
levels in 2026 remains unchanged.
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.
Based
on
the
latest
public
communication
from
the
State
Secretariat
for
International
Finance,
the
public
consultation
on
the
proposal
is
expected to begin in May. Therefore, at this time, we are not in a position to offer any new information.
As we have said in
the past, we support the vast
majority of proposals from the
Swiss Federal Council on how to
enhance the
regulatory framework
in Switzerland.
In our
discussions with
Swiss authorities,
we continue
to maintain
our view that the Swiss capital regime is one
of the strongest when consistently and coherently applied.
While it is
also crystal clear that the overall quality
of our capital is of a much higher
standard than Credit Suisse’s, we accept
that some adjustments and clarifications to
the current regime may be necessary.
However, a disproportionate outcome in terms of requirements at the Parent Bank level would drive our capital at
the
Group
level
to
overshoot
the
current
requirements.
Therefore,
we
believe
that
any
significant
change
is
unjustified. Offsetting
the consequences
of higher
requirements would
make us
uncompetitive domestically and
abroad, hamper our ability to help clients grow and, importantly, make banking services more expensive for Swiss
families and enterprises in
the long run.
It will also
damage the nation’s standing
as an attractive global
financial
center and ultimately hurt our position as the third-largest
private employer in Switzerland.
Of course, this
would have an
impact on our
returns on capital.
But even more
importantly it would
impede our
ability to compete for capital in the
global marketplace, particularly in
a moment of financial stress. As a reminder,
our current ambitions are based on a 14% CET1 capital ratio.
I’ve been reading some recent reports.
So, let me be very clear.
There are no easy fixes
in terms of repatriation of
capital from foreign subsidiaries or balance sheet optimization
that are not already included in our plans.
Therefore, while I
am extremely confident in our
capital generation capacity under any outcome, our shareholder
returns and returns on capital would be affected.
Todd
will provide more detail later.
We want to continue to be a source of strength for our clients,
employees, shareholders and Switzerland.
For that reason,
it is very
important that
a comprehensive cost/benefit
analysis on
the consequences
of any material
changes of
capital requirements
is carried
out. We remain
hopeful that
any potential
changes will
be proportionate,
targeted, internationally aligned and
coherent with the strategic objectives set out
by the Swiss Federal Council.
Slide 20: Rebuilding profitability and positioning for
sustainable growth post-integration
As I mentioned before, we have substantially de-risked
the integration across many dimensions.
This is reflected in our return profile, which has significantly
improved compared to a year ago.
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.
We remain well positioned
to deliver on
our 15% return
on CET1 capital
target by the
end 2026. We
will then look
to achieve UBS’s pre-acquisition levels of profitability and
deliver on our 2028 ambitions.
12
We have achieved so much over the last two years,
and I am proud of the immense effort of all of my
colleagues.
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.
With that, I hand back to Todd for more details on our plans.
Todd
Tuckner
Slide 21 – Growth in core business profitability to drive returns
Thanks
again,
Sergio.
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.
With each of
our core businesses
well positioned to
drive sustainable growth,
in 2025 we
expect to generate
an
underlying return
on CET1
capital of
around
10% versus
8.7% in
- This
year-on-year increase
reflects
our
expectation that Non-core and Legacy will weigh on our
financial performance more significantly than last
year.
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 acquisition.
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 US.
The acceleration
we expect
in 2026, when
our in-year return
on CET1
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.
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.
Revenues 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
credit
loss
expenses
in
Switzerland,
with
the
latter,
starting
next
year,
expected
to
reflect
a
substantial conversion towards P&C’s historical average cost of risk as a
result of increased allowances and legacy
Credit Suisse loan maturities.
Additionally, as we exit
2026, we
expect to
see better
profitability in our
US wealth
business, and
further reductions
to our Non-core and Legacy portfolio, decreasing its drag
on resources and profits.
As
I’ve
mentioned
before,
the
plans
underpinning
our
ambitions
are
largely
determined
by
factors
within
our
control.
While
we
expect
to
continue
to
invest
for
growth,
we
retain
the
necessary optionality
and
operating
flexibility to support our profitability and returns ambitions,
regardless of market conditions.
13
Slide 22 – Achieved 58% of gross cost saves ambition,
on track to ~13bn by year-end 2026
Turning to costs on Slide 22. As of year-end, we‘ve delivered 7.5 billion of cumulative gross run-rate cost saves, of
which 3.4 billion in
2024, putting us well on
track towards achieving our goal
of around 13 billion
by the end of
2026.
Of
the cumulative
gross
saves achieved
to date,
4
billion contributed
to net
cost reductions,
with much
of this
progress driven by NCL.
Importantly,
while the
overall cost
base decreased
by 10%
from its
2022 base
line, 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 and
a half
billion of additional
gross cost
saves across
technology, third party spend, real estate and from unlocking additional staff capacity.
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.
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.
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.
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
facing platforms.
The continued run-down
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%.
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 costs to achieve the
successful completion of our integration
plans.
We
now expect
cumulative integration-related
expenses to
total
around
14
billion.
The
1
billion in
incremental
spend largely compensates 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 in connection with select Credit
Suisse businesses.
Slide 23 – GWM – Unrivaled scale with interconnected
global franchises
Turning to our business divisions and starting with Global Wealth Management,
on slide 23.
With over 4
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.
GWM
Americas,
which
comprises
our
US,
Canada
and
Latin
America
wealth
businesses
is
a
leading
wealth
management provider, with 2.1 trillion of assets served by nearly 6 thousand financial
advisors.
14
In Switzerland and EMEA, we’re the number
one player,
combining our global offering with regional
adaptations
and client proximity.
And, in APAC,
with a broad and well-diversified footprint, we’re the number
one wealth manager,
twice as large
as our next closest competitor.
Slide 24 – GWM – Capitalizing on integration
and growing the platform
Moving to
slide 24.
In 2024,
GWM recorded
an underlying
pre-tax profit
of almost
5 billion
and an
underlying
cost/income ratio of 80%, while restoring its capital efficiency
to levels similar to those before the acquisition.
In 2025,
returns are
expected to
grow
year-over-year
as we
continue to
capitalize on
our enduring
competitive
advantages, underpinned by secular tailwinds.
The industry
trends we
see accelerating
across our
global family, ultra
and high
net worth
client segments,
including
legacy and
longevity-based planning
needs, geographic
wealth migration
and multi-disciplinary
client solutions,
play right to our strengths. We expect these dynamics
to drive revenue growth in 2025.
Moreover,
our teams
of advisors,
investment managers and
solution specialists are
leveraging our
client account
migration efforts
as a
unique opportunity
to review
and rebalance
client portfolios,
while supporting
our clients
during
their
transition
to
the
UBS
platform.
This
work
supports
our
outlook
of
continued,
increasing
mandate
penetration and gross margin stability.
Also, GWM’s 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.
As in 2024, GWM’s
net new asset
ambition will continue to
reflect the actions and
other dynamics I’ve
highlighted
that support higher pre-tax margins and returns
on attributed equity, but, at times, come at the expense of flows.
While in Switzerland, EMEA
and APAC,
the impact on flows
is expected to soften
over the course of
the year,
in
the US,
our efforts
to align
financial advisor
incentives with
our strategic
priorities may
result in
a short-term
increase
in FA
attrition, creating an additional headwind for net new
assets in the coming months. We
therefore maintain
our net new asset ambition of around 100 billion
for 2025.
Yet, in 2026, with the integration behind
us, and flow headwinds
fully addressed, we expect
GWM net new
assets
to begin to
accelerate towards our
ambition of 200
billion per annum
and over 5
trillion in invested
assets by 2028.
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 wallet,
and
deliver advice and solutions.
Slide 25 – GWM Americas – Strong franchise with upside
on profitability
Moving to the Americas on slide 25.
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.
15
In addition to
accounting for around
50% of our
total asset base,
it also contributes
a similar proportion
to GWM’s
global revenues. Given
the strategic importance
of the Americas
business, we recognize
that improving its
financial
performance is both a necessity and a priority.
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. After reaching a record pre-tax margin of 19% in 2021, we’ve seen
profitability retreat to its current level of around 10%.
While our revenues have grown, expenses have grown faster.
With a business model mostly geared towards the most financially sophisticated ultra and family clients, the 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 our clients and advisors, but also to address past investments in large programs where delivery had
been suboptimal. On top of this, the cost of
recruiting advisors, back office spend and litigation
charges all grew.
To
address these challenges, we’re
changing how we
operate to improve profitability and
position the business
for
more efficient and sustainable growth.
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 advisors to our strategic objectives. 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. We then expect to make more material progress and steadily
improve towards mid-teens
by 2027.
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 a greater than 30% underlying pre-tax margin.
Let me highlight the key changes we’re implementing
on slide 26.
Slide 26 –
GWM Americas – Working to deliver ~15% PBT margin
by 2027 (1/2)
First, on service models. Our strong
track record in serving
sophisticated clients demonstrates the effectiveness of
close collaboration across the
organization. This is
clearly reflected in the
21% year-over-year increase in Americas’
transactional revenues after we introduced joint coverage of GWM
clients with IB markets specialists.
Moreover,
our
experience tells
us
that
the
use
of
one
or
more
of
our
specialized
capabilities has
a
meaningful
multiplier effect on revenue generation.
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 this set-up immediately, and scaling it over the course of 2025.
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
product and
content distribution
and developing
more tailored
segment-specific solutions, leveraging our CIO and
National Sales capabilities.
16
In
addition,
we’re
investing
in
our
digitally-led
advice
model
in
the
Wealth
Advice
Center
to
make
it
a
more
meaningful contributor
to organic
growth and to
lower our cost
to serve.
By 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
FAs and a
more cost-efficient way to
scale our business.
Another
key
aspect
of
our
rebalancing
efforts
relates
to
enhancing
our
feeder channels.
We
intend
to
expand
sources of asset
acquisition by
revising our
referral and
incentive structures
while centralizing
and investing
in digital
marketing.
We’re
also
developing
a
comprehensive,
integrated
workplace
wealth
solution
across
equity
and
retirement plans, and
financial planning
and wellness.
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.
Third. On the capabilities 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.
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.
Expanding and enhancing
our banking product
offering requires
that we obtain
a National Charter,
a multi-year
process that is presently in full swing.
Slide 27 –
GWM Americas – Working to deliver ~15% PBT margin
by 2027 (2/2)
Now moving to slide 27.
Underpinning
these
initiatives
and
their
success
is
a
necessary
operational
re-alignment
of
the
structure,
performance culture and tech strategy in our Americas
wealth franchise.
So, fourth, effective January first,
we simplified the organizational structure to drive
greater collaboration, reduce
duplication
and
create
synergies,
thereby
contributing
to
improved
productivity
and
efficiency.
This
includes
regionally
aligning
our
client-facing
teams,
reducing
management
layers
and
fostering
clear
accountability and
faster decision-making.
Recently,
we also
announced changes
to our
financial advisor
compensation model.
We
aim
to better
align
FA
incentives
with
the
strategic
goals
of
the
firm
by
rewarding
net
new
money,
new
client
acquisition
and
the
broadening of existing client relationships, with a specific
incentive for NII growth.
While we designed 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 rise in FA attrition, which is reflected in our pre-tax
margin expectation for 2025.
And
finally,
we’re
implementing
a
strategic
re-set
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 roadmap
with
improved
payback, which,
together with
an expanded
tech budget,
will create
additional capacity
to fund
innovative solutions
to improve
advisor productivity and drive growth.
17
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.
A final word
on providing more
visibility to track our
performance going forward. While
the ultimate measure of
our progress
in the Americas
is improvement in
our regional pre
-tax margin, beginning in
1Q, we’ll enhance
our
regional disclosure by breaking out revenue across the various categories and including
prior period comparatives.
Slide 28 – P&C – A core pillar of our strategy and reliable partner
to the Swiss economy
Turning to slide
26 and
onto our
Swiss business.
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.
Even while
absorbing NII
and CLE
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 pre-tax profits.
As we expect the headwinds I
highlighted earlier to weigh on P&C’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.
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.
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.
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.
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.
Slide 29 –
AM – Driving focused growth and improving operating
leverage
I now turn to Asset Management on
slide 29.
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 45 billion in
net new money
enter our platform
in 2024 while
we remain focused
on continuing
to capture opportunities
where
we have a 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 and
top-5 limited partner. By combining our
leading manager selection
franchises
across GWM and
Asset Management, 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.
18
Overall, with a focus on alternatives,
improved traditional investment performance
and customized client solutions
at scale, we continue to
expect positive net new
money growth in 2025 while
completing our fund shelf
transition
and platform consolidation.
At the same time, we’re investing in our existing platform
to build-out key capabilities, create cost efficiencies and
support our AI strategy.
We’ll
also
remain
focused
on
realizing
cost
synergies
from
the
integration
and
driving
structural
operational
efficiencies from our strategic cost
program. 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.
Slide 30 – IB - Integration complete, unlocking opportunities
for long-term value
Now moving to the Investment Bank, on slide
30.
Over the last twelve
months, we’ve generated
more than half a billion
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, we aim to enhance
our IB’s returns in 2025.
In Banking, we remain
encouraged by our pipeline in M&A
and LCM and our improved
position in the Americas,
which together are expected to support year-on-year revenue
growth in 2025.
I should note
that, while
there continues to
be broad-based positive
sentiment around the
market backdrop,
global
fee
pools in
January were
off
by
more
than 20%
year-on-year.
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.
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
2022 baseline.
It’s
also
worth
highlighting
that
our
Investment
Bank
will
be
the
only
major
player
in
the
US
and
Europe
implementing final Basel III regulations, and in particular FRTB. Upholding our capital-light business model despite
this additional cost
of capital, the
IB 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.
Slide 31 –
NCL – Run-down well ahead of schedule
Turning to Non-core and Legacy on slide 31.
The performance delivered by
the Non-core
and Legacy team in
2024 contributed to a
significant acceleration in
our de-risking, cost saving and capital release plans.
In particular, what we achieved during the last 6 quarters has fundamentally altered NCL’s
balance sheet and risk
position entering 2025, with
RWA from its Credit, Securitized Products,
Equities and Macro books
reduced by over
70%.
In addition to now being
much smaller, and yielding less net carry, these books are broadly
hedged against market
moves, thereby effectively mitigating risks but also limiting
revenue upside.
19
Additionally,
a significant portion
of the
funding costs associated
with the
overall portfolio relates
to long-dated
Holdco and Opco
debt that Credit
Suisse issued during
its crisis. These
instruments are prohibitively
expensive to
redeem prior to maturity, making them a sticky component of NCL’s costs, irrespective of funding
needs.
As a
result,
for full
year 2025,
we estimate
NCL’s top
line at
around negative
500 million,
mainly from
funding
costs, with revenues from remaining fair value positions and continued exits
expected around zero. Excluded from
this estimate is a
gain of around 100
million expected in
the first quarter
from closing the sale of
Credit Suisse’s US
mortgage servicing company that we announced
last year.
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.
Accordingly,
in 2025, NCL’s underlying pre-tax loss excluding litigation is expected to be around 2.2 billion, albeit
with sequential improvements as expenses and consumption-based
funding costs decrease.
This compares to
an underlying pre-tax loss
in 2024 of around
800 million, inclusive of
litigation releases. 2024’s
performance benefitted
from net
carry income
and our
exiting positions
at prices
above
book value,
neither of
which is
expected to
repeat
at
similar levels.
Consequently,
in
2025, NCL
is
expected to
substantially weigh
on
returns year-over-year.
Looking further
out, we
expect NCL
to exit
2026 with
less than
5% of
Group RWA, consisting
of less
than 10
billion
of market and credit risk.
We also expect to exit 2026
with pre-tax loss of under
1 billion as the business
continues
its strong cost reduction
trajectory.
This is anticipated to consist
of annualized operating expenses of around
750
million and annualized net funding costs of around 200
million.
We then intend
to run down
NCL’s legacy operating
expenses to a
level below 250
million by the
end of 2028
with
funding costs tapering over an extended timeframe as legacy Credit
Suisse funding matures. By the end of
2028,
we forecast around 100 million of legacy funding costs
per annum, fully running down by 2033.
Our outlook for the run-off of NCL’s operational risk RWA for now remains in line
with the trajectory we modeled
under our internal
method and
disclosed previously. This reflects
the fact that,
unlike what
is expected to
eventually
apply in the US, UK and across Europe,
the 2025 Swiss implementation of the standardized approach imposes an
internal
loss
multiplier
well
above
1,
thereby
resulting
in
significant
RWA
primarily
for
losses
and
matters
we
inherited from Credit Suisse.
Slide 32 – Disciplined management of capital,
liquidity and funding
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 and strong
capital
and liquidity levels.
At the end of
2024, our Group total
loss-absorbing capacity stood
at 185 billion,
with a going concern
capital ratio
of 17.6%, and, as mentioned, a CET1 capital
ratio of 14.3%.
We closed 2024 with AT1 capital at 3.3%
of RWA. During the year, we successfully issued 3.5
billion in AT1 as we
build towards our ambition and regulatory allowance of
4.3% of RWA. Given
our progress to date and
based on
our projected 2025 funding needs, we expect our AT1
capital to remain at current levels through
2025 with new
issuance offsetting potential calls.
20
Gone-concern capital at
year-end was 98
billion. As
a reminder,
while this
is around
40 billion
above the Group
regulatory minimum, our binding constraint is UBS AG’s standalone requirement. 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. This target, which is expected
to contribute substantial savings
in 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.
UBS AG’s
standalone CET1
capital ratio
at year-end is
estimated to
be 13.5%.
For the
foreseeable future,
we expect
UBS AG to operate
with a standalone
CET1 capital ratio
in the range of
12.5% to 13%,
around 2 and a
half points
above the current regulatory minimum on a fully applied basis.
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.
This
target
capital
level
also
accounts
for
planned
dividends and capital from subsidiaries.
During the fourth quarter,
13 billion of
capital was repatriated
to the parent
bank from its
subsidiaries in the
UK
and the US.
Of
the
total,
6
billion
was
paid
up
from
UBS
Americas
Holding.
The
UK
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.
As Sergio
mentioned, it’s
important to
note that
we’ve planned
for this
distribution of
capital from
subsidiaries
since the
acquisition. 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.
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 of
capital at
the Group
level and resulting in a lower overall return on CET1 capital,
all other things being equal.
On to liquidity
and funding. 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
a conservative
liquidity profile during the initial stages of our
balance sheet stabilization and integration
process.
Going forward, we expect to operate with an LCR below our
4Q24 level of 188%, reflecting continued efforts to
manage towards a more efficient funding structure and reduced uncertainties
associated with execution risk.
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 AT1
and TLAC stacks,
disciplined deposit pricing, and
active
management of
our liabilities
across tenors
and products
to ensure
a robust,
diversified,
and resilient
funding profile.
Coupled
with
significant
balance
sheet
reductions
achieved
in
2024
and
tighter
spreads,
these
measures
have
already generated annual funding cost savings of 650
million, with an additional 350 million expected
by 2026.
21
Slide 33 – Balance sheet optimization funds
profitable growth
Turning to slide 33 on RWA
and starting with
an update on
the implementation
of the final Basel
III reforms, which
in Switzerland took effect on January 1st.
We intend to
report a
day-1 impact of
around 1
billion of incremental
RWA, broadly
neutral to our
CET1 capital
ratio, a
result reflective
of many
months of intense,
diligent preparation. This
amount of RWA
includes increases
related to
FRTB of
9 billion,
decreases from
credit-risk related
adjustments of
1 billion,
and a
reduction in
operational
risk of 7 billion.
Looking at
our expectations
through 2026.
Over the
next two
years, we
expect our
Group RWA
to increase
by
around 2 percent
at constant FX from
our 1 January 2025
pro-forma levels. This reflects
around 15 billion higher
RWA from business growth in the core businesses, with the offset driven by the ongoing
run-off in NCL.
Summing this up, we get to the same expected RWA 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 capacity
to support additional
RWA
growth in our core businesses to drive incremental revenues.
Slide 34 – Reiterating our financial targets
and long-term ambitions
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.
22
Analyst Q&A (CEO
and CFO)
Chris Hallam, Goldman Sachs
Yeah. Good morning, everybody. So on integration, on the one hand, you ran ahead of plan in 2024, clearly,
the RoCET1 has ended up much better than
expected, but on the other hand, you're
also guiding to around an
extra 1 billion in cumulative integration cost
by year end 2026 with an unchanged exit
rate on returns. So, I
guess, to what extent can we characterize
this? Is it essentially the easy part of the
integration has now come
to an end and now the hard work on decommissioning
and data integration begins, i.e., have we seen,
have
we sort of front loaded the integration tailwinds or
is there still scope to outperform here over the next couple
of years?
And then second, on capital, you have the
caveats on the buyback target that this
is on the basis of no material
and immediate change in the current capital regime. What's
your assessment of the likelihood that such
changes could be both material and immediate,
versus the potential for them being material,
but with a long
phase in or smaller than expected, but with
immediate applicability? And what is your
best sense on when we
might get final clarity and resolution on this topic? Sergio,
I think you mentioned earlier that the public
consultation begins in May. Thank you.
Sergio P.
Ermotti
Let me pick up the second question and
then I'll pass it to Todd. So, I think in terms of, you know, the
caveating on our capital returns is quite consistent
with previous language. You know, being, you know,
staying at 14%, delivering on our financial plans,
but also reducing the risk of the execution of the
integration.
So in that sense, you know, I just want to remind that the massive migration of
data we're going to go through
in 2025 creates potential operational risk. So we have
to be prudent about how we also look at share
buybacks. Having said that, I'm still confident
that we will be able to do that.
Now, you know, I have no more visibility than you have in respect of how things are going to develop other
than what is publicly presented. I have, you know, I can continue to say that
it is for us not appropriate to
speculate on any outcome. And, you know, so we will engage till the
last minutes to make sure that whatever
proposal is put on the place is reflecting of the concerns
and topics that I raised in my remarks.
Todd
Tuckner
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, more complex versus less complex.
Important to note that, you know, when we
developed this view a year back, this was seen
as a very low multiplier when you look at
13 billion of cost to
achieve versus the gross cost saves that we
anticipated. And we're still even with 14 billion at a
very low
multiplier.
And so it should be seen in that light, but it's
important to highlight that the changes
were invited by certain
assumptions we modeled a year ago and we
saw changes which I highlighted in
my comments earlier. But also
importantly, we've identified incremental opportunities as we've worked through the integration to
unlock
additional shareholder value, and that's taken some incremental
cost to achieve that.
Chris Hallam, Goldman Sachs
Okay. Thanks very much.
23
Anke Reingen, RBC
Sorry. Yeah.
Thank you much for taking my question.
Two questions, please. On the first one coming back to
the too big to fail was, I mean, you stressed a few
times the potential impact on your return currently, on your
current assumptions based on 14%. I know there's a lot
of uncertainty, but do you think considering
depending on the outcome, you will have
room to offset your ROE dilution for more capital requirements? And
then thank you on the US wealth management
operation, a few details here. I'm just wondering
obviously you
talked about improving the performance of the
US operations a few times before. So what will be
different this
time that this will work out? Thank you very
much.
Sergio P.
Ermotti
Thank you, Anke. 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 no easy fixes, no low hanging fruits.
Whatever
comes is on top of our plans, and it will be dilutive.
Todd?
Todd
Tuckner
Hi, Anke. You know,
look, in terms of what's different, we wanted to highlight
the things that we're doing
now and demonstrate the initiatives we're undertaking
and the plans that we have that will help us
chip away.
You know,
we're being realistic in terms of what we think the margins
can be over the mid-term, and we have
a very comprehensive way at that. There is no silver bullet
where there's one thing where you say that's going
to effectively transform the pre-tax margin. But what I
think you heard me say, and Sergio alluded to in his
opening, is that we're very focused to actually across these
various levers. We're implementing them all. And
they're, you know, in the collective, we're going to contribute to improving the efficiency of the
business. So
I'd say that's our focus and that's where we look, that's
the outcome we're looking to drive.
Anke Reingen, RBC
Thank you.
Jeremy Sigee, BNP Paribas
Yeah. Morning. Thank you. Two questions, please. Firstly,
just to sort of revenue in the quarter, the capital
markets growth. So ECM and DCM was a bit less than
some of the peer groups, 11% year-on-year. I just
wondered 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 the UBS Americas
CET1 ratio to around 20% from the previous 27%. In the past,
you've run that anywhere from 14% to 22%. Is
it realistic to think about going back into the mid to
high teens in that subsidiary on a, say, five-year view?
Todd
Tuckner
Hi, Jeremy. Just on the second one. So we are targeting and as you acknowledge from the capital repatriation,
the CET1, capital in the IHC has come down
significantly. We are targeting a lower CET1 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 the 13% to
15% CET1 capital ratio. So that addresses that.
On the IB question, I'll – just to point out on
DCM, clearly, we're underweight versus peers. So you're seeing
that manifest in the, in our performance. In
ECM, as I highlighted, you know, we're building, but the timing of
our pipeline build is likely to yield more payback later
in 2025 into 2026.
24
Jeremy Sigee, BNP Paribas
Okay. Thank you.
Kian Abouhossein, JPMorgan
Yes, thanks for taking my question. I really only have question regarding the key slide 32. Sergio, I get
the
message: don't get overexcited in terms of how
capital would be repatriated and solve potentially
a capital
issue. But if I look at slide 32 and I got very
excited when I saw the 13 billion, but
clearly, it hasn't ended up in
the parent bank. It has been further upstreamed. It looks
like it. And I'm just trying to understand the
rationale
of the upstream and also trying to understand if
there's room to downstream again, if necessary.
And in that context and also trying to understand
how much more capital is there in CS International?
It should
be something like 5 billion to 6 billion from what I calculate.
And if there's any other subsidiaries that you
would highlight, where there's room for potential further upstreaming 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.
Sergio P.
Ermotti
Thank you, Kian. I'm sorry, and I really appreciate your enthusiasm. And I'm sorry that you started
with an
enthusiasm and then you ended up being 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 that I think that
Todd
can explain you now, but that's essentially the situation. So
we have been quite coherent and consistent
in saying and planning for capital, you know, well ahead of the
curve when we started to plan for the 2026
targets.
Kian Abouhossein, JPMorgan
Sergio, just to add. I'm a bank analyst. I can
get excited very quickly so just to put
in context.
Sergio P.
Ermotti
Well don’t tell me.
Todd
Tuckner
Kian, I think it's worth just pointing out that,
remember, when we acquired Credit Suisse and the capital ratios
at the parent bank were, you know, distressed relative to what the UBS AG's fully applied capital ratio
was and
the strength and resilience of our capital on the UBS side.
Also to consider, you know, the equity double
leverage that was there on the Credit Suisse side. And
as we inherited that, the pressure it put, you know, on
our own, just given what we had to address and pushing
up that double leverage.
So, you know, taking out the capital and rebalancing the capital from former Credit Suisse
subsidiaries in, say,
the UK and the US, you know, up to the parent and fundamentally at group level,
as you say, has been part of
the plan, but also helps to alleviate the pressure in the
equity double leverage. And I think that's
an important
point to mention. And that's why we made
the comment that, you know, if there's going to be onerous capital
imposed on the parent bank, it's going to be funded
with the retention of future profits.
25
Kian Abouhossein, JPMorgan
And just on double leverage, how much of
the 13 billion do you actually require for 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, if there's any.
Todd
Tuckner
It's a – look, of that amount that we have
repatriated, there's a significant part of it that is used to support
moving to a more normalized level of equity double
leverage level, a significant portion of it.
Thank you, Kian.
Kian Abouhossein, JPMorgan
Thank you. Okay. And just on the 6 billion in the CS International, roughly 5
to 6 billion, is that correct, that's
what's remaining?
Todd
Tuckner
Yes, I highlighted that in my comments as well that that's what we see.
You know,
naturally, it's a function of
timing and ensuring that we continue to
run down the positions in that entity and
get the support from the
regulator to repatriate the remaining capital in that entity as we transfer
our positions, as I mentioned. And,
you know, there could be leakage between now and then if we have losses
in the entity. So, you know,
conservatively, I mentioned around 5 billion that would come from CSI from here.
Kian Abouhossein, JPMorgan
Thank you.
Giulia Miotto, Morgan Stanley
Yes. Hi. Good morning. Thank you for taking my questions. I have two.
Going back to slide 31 on the Non-core
deleveraging, how is it possible that, if I exclude
op risk, which I understand is driven by
a formula, that's fine.
But on credit and market risk, capital risk came down
by 42 billion since Q2 2023, and now you
only plan to
cut 7 billion in 2025. Why wouldn't we
expect a faster deleveraging there given the market
is still very
supportive? And then secondly, thanks for all the additional detail on the GWM in
the US. On the NII discussion
in that division, which I look forward to the disclosure in Q1 - I guess
having operating under a national charter
other than Utah would help. But how quickly
do you expect to get that license, please?
Thank you.
Todd
Tuckner
Giulia. So on the credit and market risk ambition
in terms of the levels taking it down, you
know, I think this
goes really to the point I highlighted in my comments
in the context of the underlying PBT we see
in 2025
versus 2024. I made comments that, you know, the positions at this point
are much smaller than we've seen.
They're hedged at times. They could be – 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 much smaller positions
in these
books, that's going to take, you know, extensive amount of work
to see, you know, chip away at progress. So
a lot of the, you know, the big rocks and larger positions that generated significant
RWA reduction, but also
invited an ability to exit at levels above book
value, you know, we're going to become further and farther and
less likely as we move forward. So I think it's just
important to understand that in the context
as well of the
RWA rundown.
26
In terms of your second question on the national
charter and the timing, look, we're working on moving
forward with getting the application in. There's a lot of
work being done. And we're going to work as quickly
as we can to get that rolled out and to enhance our
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,
you know, go live. But certainly, having
that license will unlock certain product capabilities that
just aren't possible until we have it.
Giulia Miotto, Morgan Stanley
Got it. But is it fair to expect that, you know, three years longer, shorter?
Todd
Tuckner
Giulia, I think that's just something we'll continue
to update you on. I don't want
to predict the process
because we're working obviously also with supervisors
to get that, get the license approved. So the timeline
is
something we're working actively on, but we'll keep
you updated.
Giulia Miotto, Morgan Stanley
Understood. Thank you.
Sergio P.
Ermotti
And maybe just to add on, on Non-core, we always
said that at the end of the day, of course, if we really want
to take down market and credit risk overnight,
we could probably 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 trade. So we are
constantly looking to optimize shareholder interest as
we wind down this asset. So it doesn't really make sense
to create new capital at a cost that is well above, how
we expect to deliver in terms of returns.
Giulia Miotto, Morgan Stanley
Got it. Thank you.
Stefan Stalmann, Autonomous Research
Hi. Yes, good morning. Thank you very much for taking my questions. I wanted
to ask about the US wealth
management plans, please. It looks like
you're tilting away the business mix from the high end of
the market
towards more affluent and lower wealth brackets, which is pretty much the
opposite of what you've 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 wealth brackets
in the US?
And the second question, I just wanted to
make sure that I understood this correctly. The share buyback plans
and aims that you outlined, they are not yet accrued
and deducted from CET1 capital at the year end,
isn't it?
Thank you very much.
Todd
Tuckner
Hi, Stefan. The – yeah, with respect to the 2 billion
[
Edit: 3 billion
] that we aim to buy back, you know, based
on the conditionality that Sergio described,
that is correct. On the US wealth side, I think
it's just important to
point out that it's not a shift in strategy. What we said was we're looking to rebalance 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, you know, our strength.
27
But it's also important to point out that the return
on assets in that segment versus as you move
down client
segments is, of course, lower, and so the profitability as you move down segments
is higher. And so what
we're trying to do is rebalance so to stay obviously very, to stay very penetrated in ultra, but to increase our
penetration in high net worth and affluent sort of
to create a better balance in line, more in line with the
market, a bit more in line, although of course, we want
to stay more overweight at the top end because as
I
said, that's our strength and our what we bring to – the
strength that we bring to the table.
But it is really important to emphasize that, yes,
that versus the market, you could see that
as we have on slide
26, that, you know, we're looking just to shift and rebalance, you know, more into high net worth and affluent
where the profitability is improved. And yeah, the point is that...
Stefan Stalmann, Autonomous Research
Thank you
Todd
Tuckner
...it's a – It's a rebalancing as opposed to a strategy change.
Stefan Stalmann, Autonomous Research
Okay. Yeah.
Just to quickly follow up on the first part
of the question. Is the 1 billion share buyback plan
also
not deducted from CET1 capital or is it?
Todd
Tuckner
That's in
[Edit: the CET1 capital i.e. not deducted]
.
Stefan Stalmann, Autonomous Research
It’s in. Okay. Thank you very much.
Andrew Coombs, Citi
Good morning. One follow-up on GWM
Americas and then perhaps I can touch
on P&C, NII. On the GWM
Americas, you highlighted a couple of times
how you are adjusting the FA incentives to align them better with
your strategic goals around net new money, sign acquisition and NII growth. I bet if you can just
elaborate a bit
more there on exactly what changes you are making, how you think
those changes compare to your US peer
group, especially given your comment in the near term
it might lead some FA attrition and lower net new
money? That's the first question.
Second question on the P&C NII, it obviously has
been of your biggest headwinds. You're guiding to, I think
that was, well a much more pronounced drop this year than last
year. But you're still expecting it to plateau
after the second quarter. So if I just ask, what are your rate assumptions? Take the SNB rate. And I think you
made a comment that it should plateau regardless of
where the rate trajectory is thereafter. So perhaps if you
could elaborate on that. And then also what
your loan assumptions, given that your loan
balances shrunk by
another couple of billion this quarter. Thank you.
Todd
Tuckner
So first,
on your first question in respect to the FA comp changes, you know, I think the changes that
I
highlighted that aligned better with our strategy
also are more aligned to what we believe or observe are the
comp models at our competitors as well.
We had certain features we think that were perhaps off market and
we are looking more to align with what our peers do.
28
But I think the more important point though is that,
you know, in discussing this with, you know, many
financial and getting their take on these changes,
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, you know, as I said, bringing more
solutions to their clients from essentially across what we
can offer,
those FAs will benefit in this model, and
they'll get paid more. And I think that's the key point.
My comment about FA attrition is just that those who may have benefited
from features that we have
eliminated may decide that it – that they
would be better off trading away and we have to cater
for that
prospect in our in our modeling and so that's why
I mentioned that. But, you know, it's important to keep in
mind that 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.
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's an expectation, if you look at
implied forwards, that the rate curve will approach
near-zero. So there is really a lack of deposit margin room for maneuver as we look out, which
is why, you
know, we think that the full year 2025 NII, especially if rates move
down further, will be even more
pronounced than the Q1 guidance.
I talked about plateauing, you know, once we inflect because if you
look at the yield curve, it's actually quite
flat if not even inverted, but it's certainly flat.
And as such, you know, we don't see movements in it. So
therefore, you know, if it's effectively hitting a trough, I see it plateauing. And then I commented
that, which
was your other question, you know, 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 helpful because we can
typically charge certain clients and also
drive greater lending NIM as well.
As far as the expectation around loan balances, we
have a stable outlook for lending in P&C
and also a stable
outlook for deposits in P&C. So we're quite focused
continuing to do balance optimization, ensure that the
pricing reflects the appropriate cost of risk and capital.
And on the deposit side, we've been very thoughtful
in
how we have moved pricing down in relation to
the central bank dropping rates in order to retain deposits
where possible.
Stefan Stalmann, Autonomous Research
Very helpful. Thank you very much.
Amit Goel, Mediobanca
Hi. Thank you and thank you for the clarifications
on the capital. I've got just a couple of questions
again on
the US business. And so I guess, one, I was
just wanted to understand a bit better, you know, as you get to the
15% PBT margin in 2027, you know, what is the kind of plan or
thought process in terms of getting to kind
of
peer levels or 25%, 30% operating margin in the
future or do you, I don't know if you think peers are
overearning? But what the step is there? And if, you
know, building out the more comprehensive banking
offering and delivery model is part of that, but
what cost is involved in that?
And then secondly, also just curious, in terms of the PBT margin that you're targeting to
sustain in 2027, I think
previously you were talking about mid-teens in 2026. So
just to check, is that slightly later or is
it the same
basic expectation? Thank you.
29
Todd
Tuckner
Yeah. So in terms of the expectations, we haven't really articulated that other than
I've said in the past that
expected mid-teens in the midterm. We talked about
the business and Sergio and I've been doing
this. So I
don't think it's inconsistent. But where we're talking over
the next couple of years to continue to build and
we
think by 2027, we'll be at that at the
mid-teens level.
I mean, as far as comparing to peers and we
don't – this isn't a comparison to peers
for us or sorry, narrowing.
It's not about effectively catching peers, but it's
more about narrowing the gap. That's what we've said
consistently, in order to, you know, to improve the overall cost-to-income ratio for the business overall. And in
the US, to put us in a position where we're contributing
significantly more to the overall profitability of Global
Wealth Management.
In terms of the banking capabilities and the
other capabilities I talked about, those
investments are catered for
in my comments. I did say that we're making incremental
technology investments and also investments
in our
capabilities and in the collective, you know, that's also being priced
into our 2025 pre-tax margin expectation.
But also as we, you know, as we guided looking out to 2027 as well.
Amit Goel, Mediobanca
Thank you. Can I just follow up just in terms of
that investment and in terms of points
of operating margin,
would that be kind of 2, 3 or 5 percentage points of
operating margin that you're investing in those years
or
just to think about thereafter, how much could potentially drop out or how much is just ongoing
investment?
Todd
Tuckner
I'd 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 we're ensuring that the investments that we
make in
technology are done in a way where the payback is improved, as
I mentioned, improved ROI. We’re also
funding incremental investments, as I say, and that is captured in the pre-tax margin expectation for 2025
and
as we grow it. So, you know, I wouldn't model it falling out. I mean, this
will be technology investments we're
going to continue to make for the business
to help it grow.
Amit Goel, Mediobanca
Thank you.
Antonio Reale, Bank of America
Good morning. It's Antonio from Bank of
America. Two questions for me, please. Actually, it's two follow-ups,
really. One
on capital and one on the P&C. So
you've repatriated the 13 billion capital at the parent company
this quarter. And despite that, your CET1 ratio at the AG level was only up 20
bps or so Q-on-Q to 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 a
repetition, but I think it's important.
And the second question is, again, a follow-up
on your Swiss business. You've talked about your NII guidance.
Can you just remind us your sensitivity to rates
and hedging structure in Switzerland? And more in general,
what flexibility would you have to mitigate some
of this trend on NII with the rest for the P&L? You've alluded
to more cost synergies. So if you can share a little bit
more about the moving parts of the P&L, that would
be
that would be super helpful. Thank you.
30
Todd
Tuckner
So in terms of the mitigants a bit to the headwinds,
you know, we're definitely focusing on driving as you saw
in 4Q continuing to drive where possible, non-NII revenue
growth improve on recurring revenue and P&C and
also on transaction revenues. That will be a focus
to partially offset the headwinds that we
see in P&C.
I mean as far as abilities to effectively hedge or extend
duration, I mean that's just not when the rates
are this
low and with the flat yield curve, you know, extending duration, for
example, on non-maturing deposits
doesn't offer much of an advantage at all. 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 and also creates some mismatched risk, mismatch
risk as well. So, you know, if the rates are going to near zero, as I said, we have very
limited room for
maneuverability, and we just have to wait until we see some daylight in terms
of changes in that yield curve.
On the capital question you had in terms
of what you're missing, I think in terms of
the CET1 capital ratio at
UBS AG after it received the capital from the subsidiaries,
you know, we are accruing a dividend to the parent
to address the point that I made before in response to Kian's question.
So it's a dividend accrual that will serve
as an offset to the – sorry, dividend accrual to group. To
be clear, to offset the capital repatriated to AG, its first
tier subsidiary.
Antonio Reale, Bank of America
Thank you very much.
Piers Brown, HSBC
Yes, good morning, everybody.
I just got two follow-ups. One, I just wanted
to make sure on if I got the
message correct on client risk appetite. I mean, you've
talked about the move into sweep accounts
and
obviously the fourth quarter NII was much
better than we anticipated. But then on
the transaction side, you're
little bit below street expectations. When I look at
the loan number, that's still declining. So just appetite for re-
leveraging and sort of look forward on the client activity
into the first quarter. Can you comment that, please?
And then just a technical question maybe on
the Basel III final outcome. I mean, I said
it's basically no change
to CET1. I think you had guided to a 30 basis
points impact originally. So what's moved in your favor on
implementation of Basel III final that's caused
a delta? Thanks.
Todd
Tuckner
Hi Piers, so on – I'll just take your second question
first. So in terms of the Basel III, look, I guided
down last
quarter to a lower level than I had been guiding.
You know,
as we started to get more visibility and make
progress, the team has done an excellent job at ensuring that
we were able to mitigate where we can in some
of the aspects that were at work or infrastructure improvements,
model alignments, also exiting positions and
running down risks. So all of those things
contributed to our ability to be able to,
you know, ultimately print
the day-one level that's far inside where we had guided.
In terms of re-leveraging opportunities, you know, for sure in Global Wealth Management
with rates, you
know, potentially higher,
you know, we're not or not going, coming down as quickly as perhaps
we
anticipated a quarter ago or certainly two
quarters ago. You know,
that's going to be helpful. That's going
to
be helpful for deposit margins as I mentioned,
but probably, we'll have a little bit of a chilling effect on re-
leveraging, which is something that with rates
coming down, we expect to see both in,
you know, in all parts
of the of the wealth business, which involves
really where we have US dollar exposure in the US business
naturally, but also in our APAC part of the business.
31
And so we, you know, if rates sort of back up, then we'll have positive effects on
deposit margins, but the
extent of re-leveraging that we're pricing into the outlook,
you know, we may see that come in less
aggressively.
Piers Brown, HSBC
That's perfect. Thanks. Just on global banking,
you mentioned a 20% change in pipeline,
was it up or down? I
didn't catch that.
Sergio P.
Ermotti
What we mentioned, it's not our pipeline. What
we said is that according to market data. So the industry
is
down 26% year-to-date [
Edit: 21%
], so for the first month. So our pipeline is
building up. We are very
confident about the ability to generate new
business and build up our market share.
But you know, if you look
at according to market data, January, on January,
you know, the amount of fees and activity is down 26%
[
Edit: 21%
] if I remember correctly.
Todd
Tuckner
So yeah, it came in – the final number came
in, yes, sorry, Piers, I got your question. The fee pool is down
around 21 percentage for January.
Piers Brown, HSBC
21, okay. So in any case, to handle in front so...
Todd
Tuckner
Exactly.
Sergio P.
Ermotti
So that's industry and not UBS. Just to be
clear.
Piers Brown, HSBC
Ok, Thanks very much
Sergio P.
Ermotti
Okay. So there are no more questions. There are no more questions. So thank you for calling in and for your
questions. So I'll touch base next quarter. Thank you.
32
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