UBS Group AG Q3 FY2025 Earnings Call

Ladies and gentlemen, good morning. Welcome to the UBS Third Quarter 2025 Results. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sarah Mackey, UBS Investor Relations. Please go ahead, madam.

Good morning, and welcome, everyone. Before we start, I would like to draw your attention to our cautionary statement slide at the back of today's results presentation. Please also refer to the risk factors included in our annual report together with additional disclosures in our SEC filings. On Slide 2, you can see our agenda for today. It's now my pleasure to hand over to Sergio Ermotti, Group CEO.

Thank you, Sarah, and good morning, everyone. The power of our unique business model, diversified global footprint and balance sheet for all seasons was evident once again in our excellent performance this quarter. Regardless of how you measure our third quarter results, we delivered strong returns driven by significant momentum in our core businesses and disciplined execution on our strategic priorities. Invested assets reached nearly $7 trillion across the group, supported by robust flows in Global Wealth Management and also Asset Management, where we surpassed $2 trillion in invested assets for the first time. In APAC, invested assets across our asset gathering businesses now exceed $1 trillion. And this quarter's exceptionally strong flows underscore our position as the region's largest global wealth manager. The buildup of our investment banking capabilities in areas of strategic importance supported our outperformance of industry fee pools and is consistent with our ambition to increase market share. We also saw healthy private and institutional client activity across the globe. In Switzerland, our clients continue to benefit from UBS' unique global footprint and capabilities as we supported businesses and households with around CHF 40 billion of loans granted or renewed during the quarter. I'm particularly pleased that we achieved all of this while further advancing on our integration efforts. Over 2/3 of client accounts in Switzerland, more than 700,000 have now been migrated onto UBS platforms. We have substantially completed the migration of personal banking clients and commenced corporate and institutional client transfers. We are encouraged to see improved satisfaction from clients who are now on the UBS platform, and we remain on track to complete the final migrations by the end of the first quarter next year. The integration of Asset Management is also substantially completed, allowing us to fully focus on opportunities to drive efficient growth. Across the group, we continue to streamline our operations. We are nearly halfway through our application decommissioning roadmap, and we have shut down 60% of legacy servers and processed around 40 petabytes of data. This keeps us well positioned to deliver on our gross cost savings ambitions by the end of 2026. Our recent employee survey highlighted what, in my view, is one of the most important markers of our integration progress. Sentiment across UBS and former Credit Suisse colleagues is now equally positive and well above industry benchmarks, further validating our efforts to create a common culture and vision across the organization. I'm also pleased that we resolved significant legacy litigation related to Credit Suisse's RMBS matter and UBS' legacy cross-border matter in France in the best interest of our shareholders. All of this progress and business momentum further reinforces our capital strength and confidence in our ability to execute on our capital return plans as we continue to deliver on our 2025 objectives for dividends and buybacks. As previously communicated, we will provide more details on our plans for 2026 with our full year results in February. Our priorities extend beyond staying close to our clients and successfully completing the integration. We also remain committed to strategically investing across our platform to position UBS for sustainable growth. Earlier this week, we filed our application for a national bank charter in the U.S., and we expect approval in 2026, a pivotal milestone in our multiyear strategy to improve the breadth and depth of our client offering and setting the stage for long-term value creation. At the same time, we are advancing our AI capabilities. We now have 340 live AI use cases across the bank, increasing resilience and building the foundation to enhance the client experience and deliver meaningful gains in efficiency and productivity. With respect to the ongoing political process on banking regulation in Switzerland, as you saw at the end of the quarter, we submitted our response to the Capital Adequacy Ordinance consultation. We will do the same for the ongoing consultation on capital requirements related to foreign subsidiaries before it ends in early January. Looking to the fourth quarter, with valuations elevated across most asset classes, investors remain engaged but increasingly focused on managing downside risks, which is also evident in periodic headline-driven spikes in volatility. Against this backdrop, transactional activity and our deal pipelines remain healthy, though sentiment can shift quickly as confidence in the outlook is tested and seasonal effects come into play. Furthermore, macro uncertainties along with a strong Swiss franc and higher U.S. tariffs are clouding the outlook for the Swiss economy and a prolonged U.S. government shutdown may delay capital market activities. Summing up, I'm very pleased with our strong results this quarter, and I am extremely thankful to my colleagues for their continued dedication and focus amid ongoing macroeconomic and regulatory uncertainty. We will stay very focused on executing on our strategic priorities while we remain a trusted partner in the communities where we live and work and position UBS for long-term value creation for all stakeholders. With that, I hand over to Todd.

Thank you, Sergio, and good morning, everyone. Throughout my remarks, I'll refer to underlying results in U.S. dollars and make year-over-year comparisons unless stated otherwise. In the third quarter, we delivered reported net profit of $2.5 billion, up 74% and earnings per share of $0.76. Our underlying pretax profit was $3.6 billion, up 50% on 5% revenue growth, and our return on CET1 capital was 16.3%. Included in our underlying performance are net litigation reserve releases of $668 million, primarily driven by the resolution of legal matters related to Credit Suisse's RMBS business and UBS' legacy cross-border case in France. Excluding litigation, our return on CET1 capital was 12.7% as we grew pretax profits by 26% across the group and by 19% in our core divisions. Moving to Slide 6. This quarter's strong financial performance is once again proof of the enduring advantages of our platform. We saw broad-based client momentum in constructive markets and disciplined execution across the franchise. On a reported basis, our pretax profit was $2.8 billion with $561 million of revenue adjustments and $1.3 billion of integration-related expenses. Our tax expense in 3Q was $341 million, representing an effective tax rate of 12%, supported by the net litigation releases. In the fourth quarter, we expect our tax rate to normalize, resulting in a low double-digit effective tax rate for full year 2025. This excludes any effect from revaluing our DTAs as part of the year-end planning process. Turning to our cost update on Slide 7. In the third quarter, we continued to deliver on our cost reduction program as we make steady progress in rightsizing our technology estate, streamlining functions and reducing third-party spend. These efforts translated into $900 million of incremental gross run rate cost savings in 3Q with the cumulative total reaching the $10 billion mark, 1 quarter ahead of schedule. Compared to our 2022 baseline, we nominally decreased our overall cost base by around 13% or by 24% when excluding variable compensation, litigation and currency effects. On this basis, our conversion rate of gross to net sales is 77%. Similarly, integration costs this quarter are indicative of the scale and intensity of the ongoing Swiss platform migration effort. We expect moderately lower levels of cost to achieve in the fourth quarter as the program enters its final stretch with completion early next year, after which these change-related expenses will taper further. Our integration costs to date also reflect the additional opportunities we've identified along the way to realize further efficiencies, accelerate benefit capture and in select cases, drive incremental revenues. We'll update you next quarter on our 2026 integration cost budget and the gross cost savings we expect to deliver as we sunset integration at the end of next year. As in prior years, we expect more modest gross and net saves in the fourth quarter as a result of our continued focus on the Swiss platform migration and a seasonal uptick in select non-personnel items, notably the U.K. bank levy. Turning to Slide 8. As of the end of September, our balance sheet for all seasons consisted of $1.6 trillion in total assets, down $38 billion versus the end of the second quarter. Loan balances remained broadly stable at $666 billion with around 92% secured by collateral. Mortgages accounted for 58% of the total with average loan to values of about 50%, while Lombard lending represented a further 24%. Credit-impaired exposures in our lending book remained stable quarter-on-quarter at 90 basis points, while the cost of risk decreased by 4 basis points. Group credit loss expense was $102 million, mainly relating to nonperforming positions in our Swiss business. Our tangible book value per share grew sequentially by 2% to $26.54, primarily from our net profit, which was partly offset by share repurchases. Overall, we continue to operate with a highly fortified and resilient balance sheet with total loss-absorbing capacity of $199 billion, a net stable funding ratio of 120% and an LCR of 182%. We were active issuers during the quarter, capitalizing on particularly favorable market conditions. We placed around $3 billion in AT1s and over $7 billion in HoldCo, both at attractive levels, enhancing our funding position and reducing financing needs for next year. Looking ahead, we'll remain focused on further strengthening our funding profile as market conditions allow. Turning to capital on Slide 9. Our CET1 capital ratio at the end of September was 14.8%, and our CET1 leverage ratio was 4.6%, both up quarter-over-quarter and above our target levels of around 14% and above 4%, respectively. Looking ahead, we expect our year-end 2025 CET1 capital ratio to decrease sequentially, driven by an accrual for intended share repurchases in 2026 as well as the full year 2025 dividend. The amount of the accrual will be informed by our ongoing strategic planning process and remains subject to the continued successful execution of the Swiss platform migration as well as visibility on the shape and timing of future capital requirements in Switzerland. Turning to UBS AG. The parent bank stand-alone CET1 capital ratio was roughly unchanged at 13.3%. Similar to last quarter, we continue to pace intercompany dividend accruals to maintain prudent capital buffers and offset the FX-driven headwind on leverage ratios across group entities. While we maintain our intention to operate UBS AG's stand-alone CET1 capital ratio between 12.5% and 13%, we'd expect the parent bank to remain above the upper end of the target range, particularly if dollar Swiss stays near current levels. Turning to our business divisions and starting on Slide 10 with Global Wealth Management. In a constructive macro environment, GWM delivered a pretax profit of $1.8 billion. Excluding litigation, profit before tax was $1.6 billion, up 21% year-over-year, with APAC, the Americas and EMEA, all delivering double-digit profit growth. Asia Pacific was a standout with pretax profit up 48%, driven by 16 percentage points of positive operating leverage. With the platform migration work largely behind us in the region, the team is now fully focused on delivering for clients and growing the franchise. We're building on our distinctive advantages in scale, global connectivity and cross-divisional capabilities. That's evident in this quarter's strong flow momentum, top line expansion and disciplined cost management. Americas pretax profits grew by 26%, reflecting another quarter of strong revenue growth across all revenue lines and positive operating leverage that lifted pretax margins to 13.4%. Transactional revenues continue to benefit from the sustained momentum of GWM's collaboration with the Investment Bank, where jointly developed capabilities and solutions are resonating with advisers and deepening relationships with clients. The Americas team also made further progress enhancing its banking platform to support ongoing net interest income expansion. Excluding litigation, EMEA delivered a 13% increase in pretax profit, driven by higher transactional revenues as clients actively hedged equity and U.S. dollar exposures. On the same basis, in our Swiss wealth business, profit before tax decreased by 3% as NII headwinds from Swiss franc interest rates offset strong recurring fees, while transactional activity was somewhat softer than in other wealth regions. On to flows. GWM's invested assets increased by 4% sequentially to $4.7 trillion from favorable market conditions and strong asset flows. In the third quarter, we delivered net new assets of $38 billion, representing a 3.3% annualized growth rate. The quarterly performance was driven by exceptional inflows in Asia Pacific, which alone contributed $38 billion. This included a small number of sizable flows linked to strategic holdings as well as strong client momentum across the region. EMEA and Switzerland also contributed positive net new assets of $6 billion and $3 billion, respectively. Net new assets in the Americas were negative $9 billion, primarily reflecting adviser movement following the structural changes we introduced last year, including to the compensation grid as part of the franchise's broader realignment. Importantly, the strategic reset is already driving improvements in the region's pretax margins and operating leverage, thereby unlocking investment capacity to further enhance the platform's capabilities and solutions to help advisers grow their books and better serve clients. Looking ahead, we expect turnover to moderate, supported by a healthy recruiting pipeline and a record number of advisers choosing to stay and ultimately retire at UBS. Net new fee-generating assets in the quarter were $9 billion, supported by sustained demand for discretionary mandates, including our SMA solution in the U.S. and My Way in our Swiss and international franchises as well as our advisory offerings. Regionally, NNFGA growth was especially strong in APAC and EMEA with annualized growth rates of 8% and 6%, respectively. At the same time, net new deposit outflows of $9 billion largely reflect the reversal of dynamics observed in the prior quarter. While the uneven market backdrop in Q2 prompted clients to tactically reposition towards liquidity solutions, in the third quarter, clients actively redeployed capital into investment and trading solutions on our platform. Client releveraging continued for the third consecutive quarter, driving positive net new loans across all regions. In 3Q, net new lending was $3.5 billion, largely driven by Lombard and mortgages in Switzerland and the Americas. Turning to revenues, which increased by 7%. Recurring net fee income grew by 7% to $3.5 billion, supported by positive market performance and over $55 billion in net new fee-generating assets over the past 12 months. Transaction-based income rose 11% to $1.3 billion, with notable strength across structured products and cash equities. Net interest income of $1.6 billion was up 3% year-over-year and up 5% quarter-over-quarter, with the sequential trend reflecting a favorable mix shift towards transactional deposits as well as lower funding costs. Looking ahead to 4Q, we expect net interest income to be broadly stable sequentially as modest growth in lending balances should largely offset headwinds from lower rates. Operating expenses in GWM were down 1% and were lower by 2% when looking through variable compensation, litigation and currency effects. Turning to Personal & Corporate Banking on Slide 11, where my comments will refer to Swiss francs. P&C delivered a third quarter pretax profit of CHF 668 million, up 1% or down 3% excluding litigation, a resilient result given the Swiss macro backdrop of 0 interest rates, a stronger Swiss franc and trade uncertainty. Importantly, these results were achieved during the most operationally intensive phase of our integration efforts, demonstrating disciplined execution and client focus, while the team continues to advance the client platform migration in the Swiss booking center. Revenues across recurring net fee and transaction-based income were up 2%. In Personal Banking, the migration of Credit Suisse client accounts onto UBS' platform is already supporting positive revenue momentum through deeper client engagement and adoption of our discretionary solutions. Personal Banking transactional revenues increased by 10% and recurring fee income was up 6% alongside positive net new client assets. In our Corporate and Institutional Client business, non-NII revenues rose modestly year-over-year despite the Swiss operating environment. Growth in Corporate Finance revenues more than offset softer FX hedging and export finance activity, reflecting currency and trade policy effects, respectively. Net interest income decreased by 9% year-on-year. Sequentially, Swiss franc NII increased by 1%, driven by lower funding costs and deposit pricing measures offsetting the impact of the 25 basis point rate cut announced in June. For the fourth quarter, we expect NII to be broadly flat sequentially, both in Swiss franc and U.S. dollar terms. Turning to credit loss expense. CLE in the third quarter was CHF 58 million on an average loan portfolio of $248 billion, translating to a 9 basis point cost of risk, down 5 basis points sequentially. This included Stage 3 charges of CHF 56 million, largely driven by a small number of positions in our corporate loan book. For the fourth quarter, we expect CLE to be around CHF 80 million, reflecting continuing global macro uncertainties that are also affecting Switzerland. Operating expenses declined by 8% this quarter or 6% excluding litigation, underscoring continued cost discipline with further synergies to come once the Swiss client migration is completed. Moving to Slide 12. Asset Management delivered a pretax profit of $282 million, up 19% year-on-year. Excluding net gains on disposals, AM's profit before tax was up 70% on 5% higher revenues. Performance fees in the quarter nearly doubled to $87 million, supported by strong hedge fund results. Net management fees were stable at $755 million, reflecting higher balances and favorable currency effects, which were offset by industry-wide headwinds from clients shifting into lower-margin products over the past year. Invested assets in the quarter grew by 5% sequentially, surpassing the $2 trillion mark for the first time. With integration now substantially complete, Asset Management is well placed to leverage its broader scale, enhanced product offering and improved efficiency to drive sustained value creation. Net new money was $18 billion, a 3.7% growth rate, with positive flows across all asset classes, with particular strength in strategic growth segments, including $6 billion in ETFs and $4 billion in U.S. SMAs. Flows were also strong in Unified Global Alternatives, where Asset Management's new client commitments in the third quarter reached nearly $2 billion, alongside $8 billion from Global Wealth Management clients. Overall, assets invested in UGA reached $317 billion, up 4% quarter-over-quarter. Operating expenses declined by 12% year-on-year, reflecting execution on AM's commitment to improving operating efficiency. On to the IB on Slide 13. Our Investment Bank delivered a very strong third quarter with pretax profit of $787 million, more than double year-on-year. While maintaining its capital discipline, the IB generated a return on attributed equity of 17%. These results highlight the strategic value of our investments in expanding our global reach and strengthening our talent, technology and capabilities. At the same time, the IB's close partnership with Global Wealth Management continues to drive increased client activity and revenues, particularly through jointly delivered structured solutions, a key differentiator in serving our wealth clients. Across the franchise, we saw broad-based regional momentum, driving revenues up by 23% to $3 billion with the highest third quarter revenues in both Global Banking and Global Markets. APAC was again a standout, posting its best quarter on record with strength across the franchise as our deep regional coverage and scale allowed us to capture elevated market activity and reinforce the region's strategic importance to the group. We're also pleased that our strength in APAC was recognized by Euromoney, which named us Best Investment Bank in Asia. Banking revenues reached $844 million, a 52% increase year-on-year, with each region outpacing the fee pool and delivering top line growth in excess of 40%. In Advisory, revenues increased by 47%, led by M&A delivering its best quarter on record. Capital Markets was 55% higher as LCM fees nearly doubled, led by outperformance in the Americas and EMEA and ECM revenues grew by 1.5x, driven by the pronounced uptick in IPOs and convertible activity. For the fourth quarter, we expect banking activity to normalize from Q3's exceptional levels. In addition to seasonality factors, our guidance reflects both transactions brought forward into the third quarter and potential timing effects from the U.S. government shutdown delaying capital markets activities. Looking further ahead, our strong pipeline positions us well to deliver on our medium-term objectives provided market conditions remain constructive into next year. Supported by high equity volumes and sustained client activity, Global Markets revenues rose by 14% to $2.2 billion despite a strong prior year comparative and more normalized levels of volatility, showcasing the strength of our equities and FX businesses. Equities revenues increased by 15%, with cash equities reaching a new high as we capitalized on our strongest market share to date. In financing, top line growth of 33% was supported by prime brokerage delivering record level revenues and client balances. FRC increased by 13% with growth across all products. For the fourth quarter, we expect more normalized levels of transactional volumes in Global Markets, particularly when compared to the especially strong prior year period, which was supported by unusually elevated market activity ahead of the U.S. administration transition. For the IB overall, operating expenses rose by 7%, largely driven by increases in personnel expenses. On Slide 14, noncore and Legacy's pretax profit was $102 million with negative revenues of $42 million. Within revenues, funding costs of around $100 million were partly offset by gains from position exits in securitized products and macro. Operating expenses in the quarter were negative $149 million, driven by net litigation releases of $440 million. Excluding litigation, expenses were down 56% year-on-year and 18% sequentially as the team continues to make strong progress in driving out costs. On to Slide 15. Since the second quarter of 2023, NCL has reduced its non-operational risk RWAs by almost 90%, including additional reductions of $2 billion this quarter, freeing up over $7 billion of capital for the group life to date. The wind-down efforts expertly executed by the team over the past several quarters have not only significantly strengthened our capital and risk position, but have also reduced the divisional cost base by nearly 75%. As of the end of September, NCL had closed 94% of the 14,000 books it started with and decommissioned 65% of its IT applications, further reducing operational complexity and driving its strong cost reduction performance. To conclude, the third quarter marks another step forward in our integration agenda. We addressed legacy risks and advanced the client migration in the Swiss booking center, all while continuing to drive profitable growth across our core franchises by staying close to clients. The quarter's strong financial performance lifted our 9-month underlying return on CET1 capital to 14%. Excluding litigation and normalizing for taxes, our return was 11%, above our full year guidance of around 10%. We look forward to updating you on our expectations for 2026 when we present our fourth quarter results early next year. With that, let's open up for questions.

Our first question comes from Giulia Miotto from Morgan Stanley.

I have two. The first one, it seems clear that UBS is already ahead of, I guess, the plan. Two examples, cost income in Asset Management, 66% against the plan of below 70% noncore delivering ahead of expectations. So why wait for Q4 before upgrading the guidance? And then secondly, a different topic, First Brands. I didn't see any comment this morning, but there has been extensive press coverage about the $500 million hit on the asset management client asset side. So could you please have your comments on this issue? Have you seen outflows on the back of it? Is this impacting your sale of O'Connor? Yes, any comments on this issue, please?

Thanks, Giulia, for the questions. So thanks for recognizing our progress on our plan. You're asking why wait to update the guidance. Well, clearly, as we go through our year-end planning process, which is ongoing and really critical for us, that will inform how we think about 2026 in terms of the things I mentioned in my prepared comments, for example, around integration budgets, also our gross run rate cost saves that we expect to generate, but also the outlook for each of the divisions, specifically around things like NII in our asset gathering businesses and credit loss expenses in our Swiss business. So the planning process is ongoing, and that's the reason that we would seek to update our guidance in the fourth quarter. On the First Brands topic, so to be clear, UBS does not have balance sheet exposure to First Brands and only a small number of funds are effective. Obviously, it's always unfortunate when clients generate losses. That said, it's important to note that the most affected funds were targeted at sophisticated investors and had clear risk disclosures. No investment guidelines were breached. It's also important to note that we've moved swiftly to inform clients of the potential performance impact. And as a priority, we're taking steps to protect clients' interests and maximize recovery through the complex bankruptcy process. You also asked, Giulia, about O'Connor. As previously announced, we continue to progress with the sale of the O'Connor hedge fund business to Cantor Fitzgerald, and we're working closely together towards a first close.

The next question comes from Kian Abouhossein from JPMorgan.

The first one is regarding Wealth Management Americas. You applied for the National Charter. Can you talk about the benefits of the charter and also talk about net new asset outlook post the outflows in the third quarter that we saw in NA and adviser attrition going forward, how we should think about that? And the second question is just coming back to the AT1 document on CS and in particular, point 6, where you talk about the write-down, how it was handled. And I recall from our conversations and public statement by the previous CEO at that time, that the AT1 write-down was prerequisite or was done before or precondition of the takeover of Credit Suisse. So it sounded like two separate steps, whereas if I read #6, it sounds — it was all done in one go, i.e., there was no separation, so to say. And I'm just trying to understand, was this a separate step or not in terms of writing down the AT1 and subsequent offer of UBS with CS?

Thanks, Kian, for your question. So first, on the National Charter, as Sergio mentioned, we just applied for the license earlier in the week. The expectation there is to broaden our banking capabilities. As I've said many times in the past, expanding NII as a percentage of revenues in the U.S. business is one of our key strategic priorities to narrow the pretax margin gap to peers. We think the National Charter, once we receive it, will enable us to serve our clients on a more comprehensive basis. It will enable us to offer a suite of services on par with other banks in the U.S., including checking and savings accounts as well as an expanded set of lending products. But it's also important to emphasize, as I said also in my prepared comments, Kian, that we're very focused on expanding NII in Wealth U.S. business well before, and we're taking steps to do that. We've had our fourth consecutive quarter of lending growth in the U.S. business, and we believe that our differentiated and specialized lending shelf is increasingly resonating with advisers and clients. In terms of the NNA outlook for the U.S., as you mentioned, and of course, as I mentioned during my comments, the changes that we introduced last year, including vis-a-vis the compensation framework has led to some near-term adviser movement, but importantly, is lifting pretax margins and most importantly, enabling us to reinvest in the platform to help advisers grow their books and better serve clients. Looking ahead, while I do expect some lag effect from the movement that we've seen into next year, we do see turnover tapering, and that's supported by a healthy recruiting pipeline. And as I mentioned on the call in my comments, a record number of advisers choosing to stay and retire at UBS. On your second question regarding point 6, I think it's important here just as we laid out to indicate and really what the most important part of this FAQ6 is that the write-down of the AT1 instruments was an integral part of the rescue package. And that rescue transaction, so that the entirety of the rescue package or rescue transaction included things that we touched on in the paragraph above, which is quite critical. The PLB, the emergency liquidity facilities that were extended. Very importantly, the Swiss government's guarantee or loss protection agreement against losses in Credit Suisse's noncore positions, of course, and our willingness to step in. And the write-down of the AT1 instruments was an integral part of the overall rescue transaction. So hopefully, that addresses your question.

Just quickly a follow-up on the adviser side, is there any time frame you could give us where advisers should be flattening out in terms of turnover? Not exactly, but is there a time frame of first half, second half of next year? And just to follow up very briefly, was the transaction, two transactions of the acquisition? Or was it all done in one transaction, i.e., the FINMA measures and subsequent takeover?

So, Kian, just to follow up on the first point. Look, as I mentioned, we're seeing turnover tapering, and so we're encouraged by the trends. Next quarter, I'll come out with our net new asset guidance for the division overall and can offer more color on how I see the FA movement having an impact on our NNA expectations for 2026. And on the — look, on your follow-up question, the AT1 instruments, as I mentioned, was an integral part of the rescue transaction. It was part and parcel of the requirements that were necessary to inform UBS to come in and acquire Credit Suisse. So that's everything I want to say about the AT1 write-down.

The next question comes from Jeremy Sigee from BNP Paribas.

First question on Asia, phenomenal flows in the quarter. And it sounded like it was a bit of a mix of slightly one-off but also slightly underlying pickup. I just wondered if you could expand on that. Is this something that you expect to see sustained strength? Is this the beginning of a trend of improving flows from Asia? And then the second question, very specifically on the dividend accruals from UBS AG to the group. I'm not sure if you mentioned it. I think at first half, it was about $8 billion that you'd accrued to dividend up. I wonder if you can give us an updated number at the 9-month stage.

Thanks, Jeremy. So just quickly on the second one. So in 3Q, at this point, we did not accrue any additional dividends at UBS AG for upstream, which went to my comment about pacing over time the level of intercompany dividends upstream to manage some of the FX-driven headwinds around the leverage ratios across group entities. I would just comment that we did pay the $6.5 billion, the second tranche of the $13 billion that we accrued in the prior year just after the quarter in terms of the upstream from the parent bank to group. On your first question in terms of Asia flows and drivers, first, thanks for recognizing the strong performance. I'm very pleased with how the unit in Asia is performing. When I look at the quarter, for sure, there was a constructive backdrop. Clients were quite engaged for sure, in terms of their willingness to engage, whether it was to hedge downside risks or still ride what they saw was positive momentum in markets. For sure, we were seeing more APAC for APAC. So China, China Tech. Also, the U.S. remains strong, strong traction from a U.S. investment standpoint and pretty broad-based. That's what we were seeing as well. But just in terms of what the team is delivering, really, as I commented, a lot of post-integration momentum. So the teams are now together, one platform and really demonstrating what the unit can do. So while the performance in the quarter was exceptional, my expectation for the team is that they remain engaged with clients, and we continue to perform very well in the region. I would also call out, as I've said in the past, that what we were missing a little bit over the last couple of years from a macro perspective was monetization coming from ECM type activities, particularly IPOs. We know that the region is quite hot at the moment, and that portends upside for us as we go forward in terms of flows in APAC.

The next question comes from Flora Bocahut from Barclays.

I wanted to ask you a question about your comment in the report regarding your willingness to appeal the AT1 ruling. I'm curious why UBS would choose to appeal, considering that to my knowledge, this has only been from FINMA so far. Do you believe you might be potentially liable in this case? What prompts you to become a party in the appeal as well? My second question is about costs. You are clearly progressing well with client migration in Switzerland, which is expected to lead to IT decommissioning next year and improve your cost/income ratio. Have you provided a specific dollar amount regarding the boost this would give to your cost base?

Thank you, Flora. Regarding the appeal that we announced today in collaboration with FINMA, it's crucial to note that Credit Suisse sought to be part of the proceeding prior to the completion of the legal merger with UBS. UBS joined the proceeding in June 2023, taking over from Credit Suisse due to the acquisition. This involvement is beneficial as it allows us to ensure that our perspective on the relevant facts concerning the acquisition is acknowledged by the court. This is vital for maintaining the credibility of AT1 instruments, given their essential role in bank recovery and resolution. Participating in the proceedings does not increase our potential legal exposure, but we believe it's important to strive for the best possible outcome. As for your cost question regarding the contribution of technology toward achieving the $13 billion mark from our current position, we have reached $10 billion in gross run rate cost savings. We anticipate converting $3 billion of that to significant net savings by 2026, which will help us reach our underlying cost-income ratio target by the end of that year. Looking ahead, I estimate that technology will contribute slightly more than one-third, approximately close to 40%, of the remaining $3 billion in gross run rate cost savings. The headcount reduction will contribute at a similar level, with the remainder coming from third-party costs and real estate. From a divisional standpoint, I expect two-thirds of that benefit to flow to Global Wealth Management and P&C, split two-thirds and one-third, with the balance going to non-core and other core businesses.

The next question comes from Stefan Stalmann from Autonomous.

I would like to come back to the point on the AT1 write-down. You said what you also said in the FAQ document that being a party in the proceedings does not increase our potential legal liability. And in our view, there should be no liability in this matter. On which basis are you exactly saying that, I mean, you are a party of this process, isn't it? Do you actually have an indemnity by the government to compensate for any damages that may arise out of this case? And the second question, relatively broadly a question on what you see in your U.S. business. Is there any evidence that the U.S. banks are changing their competitive behavior on the back of their additional degrees of freedom from a regulatory capital side? In particular, in Wealth Management?

Thank you, Stefan, for your questions. We are proceeding based on legal advice. From an accounting standpoint, we believe there is no liability, and without liabilities, there is no basis for provision. Our belief stems from the understanding that the write-down aligns with the contractual terms of the AT1 instruments and applicable law, and that FINMA's decree was lawful. That underpins our conclusion. Additionally, we do not have an indemnity from the Swiss government. Regarding the question about U.S. competitive dynamics, particularly following indications from U.S. banks of having more capital to work with, we can only manage what we can control in the U.S. I've been transparent about our U.S. Wealth strategy and our efforts to increase investment banking penetration and market share, along with our successes. While some peers may have the capacity to expand their balance sheets, I cannot speculate on that. I do want to highlight that our investment bank has maintained stable balance sheet consumption year-on-year, while RWAs have also remained flat in the IB, yet they have achieved significant revenue increases. We will continue to focus on our capital-light strategy and execute our plans effectively.

The next question comes from Joseph Dickerson from Jefferies.

I have a couple of questions and then just a clarification. Looking at your Global Wealth Management unit, specifically the business you refer to as Global, it has incurred about $1.1 billion in pretax losses over the past four quarters. Can you elaborate on what is driving that? If you could potentially bring that to breakeven or divest it, which might be complex, it would significantly improve your group's pretax figures. So I'm curious about what is included in Global and what the strategy is moving forward. Additionally, regarding the buyback in Q4, how do you plan to account for that? Will it reflect only the buybacks you intend to conditionally execute, or will it include your entire annual buyback strategy? Lastly, for clarification on the AT1 situation, is it true that when you acquired Credit Suisse, it had no outstanding AT1 instruments?

Thanks, Joseph, for your questions. I may want clarification on the last one, again, just to be clear on what you were asking before I respond to it. But on the others, quickly, in terms of what's in divisional items in GWM, that's the integration expense is largely driving that performance that you see in that item. So we don't attribute that to the units, but just have that overall captured in GWM. So those are all the things that are effectively the cost to achieve the cost saves that will ultimately bring to bear and drive down its cost-income ratio further. In terms of Q4 and the buyback accrual, as I said, our expectation at the moment is that whatever we determine to be the level of share buybacks that we are either committed or intend to do in 2026, we will accrue in our capital in the fourth quarter, which is in line with the capital adequacy ordinance rules in Switzerland. So that will be that. Of course, the ultimate level of what we determine is subject to all the things that I mentioned on the call, our ongoing planning process, continued successful integration steps, particularly with the Swiss platform. And then as well, whether there's more visibility or any further visibility around the shape and timing of the capital rules here in Switzerland. So all that will inform what we come out and say we're intending to do in the fourth quarter, and that will inform the accrual. In addition, of course, our full year 2025 dividend will also be accrued in the capital. Now can I just ask you just to — if you wouldn't mind restating the last question?

Yes. I just wanted to clarify that at the time that you acquired Credit Suisse, at that point, Credit Suisse had no outstanding AT1 instruments.

That is correct.

The next question comes from Anke Reingen from RBC.

And the first is just a follow-up question on Joe's question about the buyback. I guess previously, you said when you published your opinion paper that with full year results, you don't expect full visibility on the regulation. I guess nothing has really changed on that aspect. And then I guess, would you be able to sort of like announce another buyback in the course of the year once you have more clarity? Or would that be basically excluded by your sort of like approach to buybacks in 2026? And then secondly, can you talk a bit about the integration of the Swiss operations, how that's been going? I guess there have been some press articles about some system failures. Would you think that's due to the integration? Or is it just sort of like part of the normal business? And I think you had some quite attractive deposit rates out there. Are they basically part of your Q4 NII guidance?

Thank you for the question, Anke. So I think that's — let me maybe remind what I mentioned in the last few quarters as we were answering the question on capital returns that our capital return policies and in particularly around share buyback will not be a stop and go policy. So as you heard from Todd, we're going to complete our current outstanding share buyback plan. And at year-end, all things being equal, we expect to accrue for share buyback to be executed during 2026. The size of the share buyback will be determined as we complete our process and as we have more visibility both on how the integration is progressing and also on any potential developments on the capital requirements topic in Switzerland. But yes, we're going to have a share buyback in 2026, all things being equal. So, yes. I'll let — on the integration side, Todd, you may probably may chime in. But I would say that, of course, when you go through such an enormous — we have been migrating 40 petabytes of data, migrating 700,000 clients out of 1.2 million clients. So I think that's — what we try to do is always try to make it as smooth as possible for everybody. I would say that so far, the vast majority of the clients that are now part of the UBS platform are happy about the migration. Of course, you always have some kind of people not being happy, like if I ask you to move from iOS telephone to an Android or the other way around the first couple of days, maybe you are not so pleased. But I don't think that we have any major issues here. Actually, things are going pretty well, and we are now very focused on completing that. So the rest of the deposit outflows, I think that was more.

Yes, Sergio, thanks. Just to pick up, you agreed. So just to pick-up on Sergio's point, any system issue is unrelated to the client migration. In terms of — I mean you asked sort of maybe a broader question or maybe a more specific question, but I'll answer it. And the most important thing to remember is that we're managing our net interest income, Anke, in an environment of 0% interest rates. So I think it's fair to say that the balance sheet dynamics play quite an important role in enhancing the NII as best as we can, and you could even see that a bit in the quarter-on-quarter this quarter. So we're pricing to be competitive in the market, since where we want high-value deposits of high funding value. But I wouldn't call out anything unusual about what we're doing other than to enhance our NII wherever possible.

The next question comes from Chris Hallam from Goldman Sachs.

Just 2 quick follow-ups really from me, left. First, you mentioned that you expect to receive approval for the National Bank Charter in 2026. From the point of that approval, how do you see the timeline and the quantum for the PBT margin improvement in U.S. Wealth? Just I would assume that, that's additive to the FY '26 or CET1 exit rate. So just any color there would be super helpful. And then second, you also flagged that a prolonged U.S. government shutdown may delay U.S. capital markets activities in the fourth quarter. Could you just give us a sense of materiality on that? So I guess, if we assume that the Q2 accounts deadline is missed for potential listings, how that may impact the IB numbers for 4Q for you?

Thanks for your questions. So look, on the — I think the important thing on the National Charter in terms of when we get it and what it means. First of all, it's been priced into our longer-term plan, since it's been something that we have been intending to do. I think it's important to understand that — and as I mentioned in response to an earlier question, we're very focused on building out our NII and banking capabilities in the U.S. now. And the National Charter is a natural add-on to that. This is not just a wait for that and then it's going to be transformational, but rather it's going to be part of an evolution. And it's going to — obviously, if we want our clients the great majority of whom are doing their banking with other banks, our peers largely in the U.S., and we want to have those clients start to bank with us. That's going to take time. So — but we can't do it until we have the charter, the license approved. So that's going to enhance things, but I would just say it's going to take time. And we'll keep you up and give you color as to expectations. But right now, from where I sit, that's something where I'm much more focused on ensuring that we're doing the right things to drive NII expansion now and to use the charter as an enhancement to that. In terms of the U.S. government shutdown, very difficult to frame that in a materiality context. We just wanted to flag it as a potential headwind given that if — at some point, if the IPO calendar really does get delayed across the street, it will have ultimately an impact on ECM revenues, potentially even other capital markets revenues. So we just wanted to flag it as a risk factor that we see, but very difficult to frame in terms of materiality at this point.

The next question comes from Andrew Coombs from Citi.

If I could have one on litigation and one on net interest income. On litigation, if I look at Note 14 in your accounts, you do talk about ATA with respect to terrorist attacks in Iraq. You also talk about Madoff and Luxembourg funds in courts. I'm sure you've seen the events with BNP Paribas with respect to Sudan and more recently seen HSBC and the Luxembourg court ruling on cash restitution on Madoff. So is there any point of comparison that you would make any similarities versus differences to the outstanding cases that you have and flag in Note 14 in your accounts? And then completely separately, net interest income trajectory, you obviously had good growth in Q3, better than anticipated, largely seems to be due to the deposit mix and pricing, but you're then guiding to stable net interest income in Q4 again. So is there an additional headwind coming through that you're foreseeing in Q4? Is it just a function of Fed rates? What are the moving parts that mean that you are slightly more conservative on your Q4 guide versus the experience in Q3?

Thank you, Andy. Regarding the second question about net interest income and our outlook, I'd like to break it down a bit. From a property and casualty perspective, it's evident that despite my earlier comments about balance sheet management, net interest income is likely to remain on a flat trajectory since interest rates currently have little room for movement. When rates do change, as I've mentioned before, the favorable shape of the yield curve will be beneficial for our property and casualty net interest income. In wealth management, the dynamics with decreasing rates can be challenging to predict due to ongoing efforts to achieve greater releveraging, which we've seen in the third quarter, indicating a positive trend. Furthermore, as rates decline significantly, we might see a noticeable increase in releveraging due to interest in carry trades, although we're not observing that at the moment. As rates drop, there may also be some favorable mix shift dynamics, although these are difficult to forecast at our current rate levels. We will keep managing the downward pressure on net interest income from lower rates, especially since rates are already very low on half our balance sheet due to euro and Swiss currencies. As U.S. dollar rates decrease, there will be some downward pressure on deposit net interest margin, but we will continue to handle all aspects carefully. Given that net interest income constitutes only a quarter of Global Wealth Management's revenues, a lower rate environment might also lead to increased transactional activity and potentially enhance recurring fees. Regarding your litigation questions, we will not comment on other firms' cases or speculate about what we do not know concerning other institutions' legal situations. We have our litigation disclosures, and I encourage you to review them and draw your own conclusions.

The next question comes from Benjamin Goy from Deutsche Bank.

2 questions remain. So first, it looks like you didn't upstream capital out of your New York or Credit Suisse international entities this quarter. But last year, you did a significant ones in Q4. So should we expect something similar this year? Maybe you can share some color on that? And then secondly, asset quality remains rock solid. At least in the U.S. disclosure, we see that your exposure to nondeposit-taking financial institutions is quite low, but any additional details of exposure to private credit, private equity and hedge funds would be appreciated and potentially also broader thoughts on the credit concerns in the market outside of single cases.

Thanks, Benjamin. So in terms of upstreaming capital from our subsidiaries, in particular, the U.K. subsidiary, where I've guided in the past, still expectation over the rest of this year into next year. We don't control the timing. What we control is continuing to derisk the balance sheet and — but ultimately, the timing to upstream requires regulatory approval. So we don't control that, but I'm still expecting that the U.K. capital repatriations from the U.K. will happen over the near to midterm. In the U.S., and I've mentioned in the past, our expectation is to reduce the capital ratio to levels that were pre-CS levels of CET1 capital. You can see this quarter still elevated with a 2 handle in terms of CET1. We're working as well to reduce the capital levels there, and that will also result in there being upstream of capital from the U.S. to the parent bank. I will give more color next quarter on the expectations around what I see for the full year 2026 at this stage, but we continue to work to upstream as much as we can as a function of derisking the balance sheet from the CS acquisition. And on the second question in terms of NBFIs, look, I'm very comfortable with our on-balance sheet exposure from a credit standpoint. I think that's pretty clear, if you take from me my updates each quarter on where our balance sheet is, what it consists of cost of risk. Our NBFI counterparties are largely investment grade, strong protection in terms of collateralized positions. So I have no concerns about the broader credit environment impacting on UBS at this stage. I'm seeing nothing that would suggest any issues beyond what I report regularly on, which is in our Swiss environment, just working through the back book from the Credit Suisse acquisition that we've been doing and bringing to you all my thoughts around the impact, say, of the ongoing and emerging trade policy effects on the — whether the back or the front book in the Swiss business. So those are the things that I think are relevant, and we'll continue to focus on and see no broader stress in the credit market that I would particularly in the private credit market that I would call out.

The last question comes from Amit Goel from Mediobanca.

I have two follow-up questions. First, regarding the U.S. wealth segment, I understand that you'll provide more guidance for the full year. However, with the changes to the grid aimed at capturing more attention and stabilizing flows, could we anticipate a slight decline in operating margin before improvements are seen? Secondly, about the PCB business, you mentioned that the net new deposit outflow was a result of some balance sheet optimization, but I'm a bit unclear on why there would be more favorable deposit offerings being made. I would like to clarify that. Additionally, considering the outlook appears somewhat uncertain for Switzerland, how do you see the balance sheet development there as we move into next year?

So maybe just taking your second question first. So on the balance sheet, we continue to — and we disclosed that continue to extend significant levels of credit to clients here in Switzerland, CHF 40 billion, very focused on that. In terms of how we're thinking about the balance sheet, the balance sheet is critical for us in our Swiss business, as I mentioned, 1, to just manage the franchise. Now particularly post — as we move into a post-integration state, we're going to lean in more and more on the balance sheet to help our clients and to drive NII even if the rates are not helping. So the dynamics here in Switzerland around balance sheet remain quite important to us and ensuring that we're seen as a trusted lender to our counterparties is quite critical to us and that's why we talk about the level of credit that we're extending or rolling over on a regular basis to show the levels that we're maintaining here in the Swiss market. In terms — just quickly on the outflow as part of the optimization, I think it's important to understand that we're also looking to maximize funding value around our deposits, and that's pretty critical, how we price and how we term out deposits, in particular, is important just to also manage some — across the group, some of the FX-driven headwinds I've touched on that make leverage more constraining. So it's just important. It's just a tool we're using across the group to improve or increase funding value along our deposits and just to ensure that we're maximizing it in that respect. On — you asked about the U.S. wealth business and the changes to the grid and the impacts. I've mentioned the impacts. In terms of the outlook on the pretax margin from the changes, if I isolate the pretax margin effects from the changes that we've made, they're pretax margin accretive and they're helpful. They're supportive. And that's not just what's happened life to date, but also as we model out what we might see. Naturally, we're working quite hard to ensure that the outflows taper, as I've said, we'll see some lag effect is likely just given the movement that we've seen and given the time that it takes before advisers are off our platform. But we're — that remains a focus for us. So that, I would say, is pretax margin accretive in the way we see it. And therefore, the changes to the grid that we made, by the way, this most recent year that we announced do not go backwards. They are incentivizing growth and they're resonating really well. The things that we have introduced are resonating well with advisers. So we don't see that going backwards though, because some of the things that we had changed in the year before were not things that we reinstated.

I think we have no further questions. So thank you, everyone, for joining and asking questions, and we look forward to updating you with our fourth quarter results in February. Thank you.