UBS Group Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2024

There are 14 speakers on the call.

Operator

Ladies and gentlemen, good morning. Welcome to the UBS First Quarter 2024 Results Presentation. The conference must not be recorded for publication or broadcast. You can register for questions at any time by pressing star and 1 on your telephone. At this time, it's my pleasure to hand over to Sara Mekki, UBS Investor Relations.

Operator

Please go ahead, madam.

Speaker 1

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

Speaker 2

Thank you, Sarah, and good morning, everyone. A little over a year ago, we were asked to play a critical role in stabilizing the Swiss and Global Financial Systems through the acquisition of Credit Suisse, and we are delivering on our commitments. This quarter marks the return to reported net profit and capital accretion, a testament to the strength of our client franchises and significant progress on our integration plans. Reported net profit was €1,800,000,000 with underlying PBT of 2.6 €1,000,000,000 and an underlying return on CET1 capital of 9.6%. Our commitment to stay close to clients supported healthy revenue growth in our core businesses and flows across our asset gathering franchises.

Speaker 2

Meanwhile, we are executing on our restructuring plans at pace and actively winding down non core and legacy assets. We also achieved another $1,000,000,000 in annualized run rate gross cost savings during the quarter as we progress towards our $13,000,000,000 target. As for the next significant integration milestones, we remain on track with our plans to simplify our Beagle entity structure. The merger of our parent banks is expected by the end of May and the transition to a single U. S.

Speaker 2

Intermediate holding company is expected to occur shortly thereafter. The merger of our Swiss bank entities is set to take place before the end of Q3. All of this is subject to final regulatory approvals. These critical milestones will facilitate the migration of clients onto UBS platforms beginning later this year and unlock the next phase of the cost, capital, funding and tax benefits from the second half of twenty twenty four and more so by the end of 20 25 and into 2026. Lastly, improvements in our CET1 capital ratio was supported by our optimization of risk weighted assets.

Speaker 2

As a consequence, we remain well positioned to deliver on our capital return targets for this year. Our underlying financial performance was driven by significant positive operating leverage at the group level with 15% revenue growth alongside a 5% reduction in operating expenses compared to the 4th quarter. Compared to a year ago, we reduced operating expenses by around 12%. We had excellent performance in Global Wealth Management as underlying PBT doubled sequentially to 1,300,000,000 dollars Personal and Corporate Banking delivered underlying profit growth quarter on quarter, driven by higher revenues and lower credit loss expenses. Meanwhile, Asset Management posted solid results, thanks to cost discipline.

Speaker 2

As a result of the restructuring efforts that we have undertaken over the last 9 months, I'm particularly pleased that Credit Suisse's Wealth Management, Swiss Bank and Asset Management franchises are now all profitable and contributed to our financial performance. Investment Bank delivered a double digit underlying return on attributed equity supported by lower operating expenses compared to Q4 and another strong quarter in Global Banking revenues. Lastly, we had a positive revenue contribution from non core legacy as we accelerated position exits while further reducing costs. While we continue to deliver on the integration, helping our clients manage, grow and protect their assets remains our top priority. We maintain our momentum with clients in GWM.

Speaker 2

Invested assets have now surpassed $4,000,000,000,000 dollars as we generated $27,000,000,000 of net new assets. Though geopolitical volatility and macroeconomic uncertainty continued to weigh on client sentiment, we observed an improvement in risk appetite and activity. We also saw an improvement in client activity within P&C, particularly among corporates. In Asset Management, our clients continue to value our separately managed account and sustainability offerings. We have generated $21,000,000,000 in net new money during the quarter.

Speaker 2

In Global Banking, we outperformed the fee pools in all regions, but most notably in the U. S, where the integration of Credit Suisse teams progressing well and our pipeline continues to build. Let's move to non core and legacy. As I said before, and you can see on this slide, we are making good progress in taking out costs and streamlining our operations as we run down the portfolio. We accelerated the wind down of several complex and longer dated positions this quarter, supporting a capital release of around 2,000,000,000 dollars and a material improvement in our natural runoff profile.

Speaker 2

We are well positioned to achieve our targets to reduce non core legacy risk weighted assets to around 5% of the group by the end of 2026, and we remain focused on accelerating positions exit in a manner that continues to optimize value. Turning to capital. As you can see, the combination of our highly capital generative business and the restructuring and active management of financial resources has further reinforced our balance sheet for all seasons. This permits us to follow through on our capital return plans for 2024. During the quarter, we began accruing for a mid teen percentage year on year increase in our dividend.

Speaker 2

And as previously communicated, we expect to resume share repurchases following the completion of the parent bank merger, targeting up to $1,000,000,000 Our ambition is to continue to repurchase in 2025 and for our capital returns in 2026 to exceed pre acquisition levels. Of course, all of this is now subject to our assessment of any proposed requirements related to Switzerland's ongoing review of its regulatory regime. In this respect, I'd like to address the recent proposals in Switzerland to strengthen the too big to fail regime. It is clear both to us and several expert groups that too low capital requirements were not why Credit Suisse needed rescuing. However, we agree with the Swiss Federal Council's view that capital and liquidity requirements on their own are not sufficient to ensure the resilience and stability of a systemically important bank.

Speaker 2

In addition to adding a strong capital position, it is key to maintain a sustainable business model centered around risk adjusted profitability and a robust risk management framework. All of these are core principles for UBS. For over 10 years, this approach has served our clients, employees, investors and the Swiss economy well. It is what allowed UBS to respond to the Swiss government's request in March 2023 to be part of the solutions to stabilize the financial system. While some modifications to the regulatory regime may be necessary and we have endorsed many, the discussion around capital should be based on facts.

Speaker 2

That includes a full and transparent account of what led to the idiosyncratic failures of Credit Suisse. The ultimate and crucial objective of the Tobik to fail regime must be to credibly demonstrate that a systemically important bank could be saved in a crisis largely through his own financial resources. We believe UBS has and will continue to demonstrate its resolvability from both an operational and capital point of view. With around $200,000,000,000 in total loss absorbing capacity, our shareholders and structurally subordinated bondholders bear the significant costs and risks to ensure taxpayers would not suffer in the highly unlikely scenario that a major systemic event affects UBS. We appreciate that many of you would like a quantification of the potential impact of any new capital regime, but it's too soon to jump to conclusions.

Speaker 2

It would be inappropriate for us to speculate or respond to speculations on the potential impact. We were not involved in the consultation process leading to the publication of the Federal Council's report and we do not have clarity on any proposed changes and how they would be implemented. Nonetheless, one point on which we may offer some clarification is the topic of parent bank capital. Our Tarent Bank was already well capitalized in both absolute and relative terms and is in a position today to absorb the removal of substantial regulatory concessions granted to Credit Suisse. By fully aligning the treatment of capital at Credit Suisse to our more rigorous approach, UBS has to provide the additional capital required for the phasing of risk weighted assets for Credit Suisse participations.

Speaker 2

UBS had already done this for its subsidiaries when the rules were introduced in 2017. Further, UBS will not rely upon the regulatory filter historically applied to Credit Suisse. Overall, this requires additional capital in the amount of about $9,000,000,000 When applied consistently and coherently, the Basel III rules that UBS and its global peers must follow are robust. They too are being significantly tightened. In addition, the phasing in of progressive capital add ons will already lead to substantially higher capital requirements for UBS' parent bank, about another 10,000,000,000 dollars So overall, we are adding almost $20,000,000,000 in additional capital, which of course was already reflected in our previously communicated capital and financial targets.

Speaker 2

In our view, all of this must be considered when new requirements are discussed, defined and calibrated. In this respect, we will be constructively contributing our views to the relevant authorities and various policymakers. As the 3rd largest private employer, one of the country's largest taxpayer and as importantly, a significant provider of credit to households and businesses in Switzerland, we believe it is also our responsibility to share our perspectives with the wider public. This is an important discussion for the country and I remain hopeful for a proportionate outcome. In the meantime, in addition to executing on our integration plans, we will remain focused on what we are able to control, serving our clients, following through on our strategy, investing in our people and remaining a pillar of economic support in the communities where we live and work.

Speaker 2

With that, I'll hand over to Todd.

Speaker 3

Thank you, Sergio, and good morning, everyone. Before I begin, I would offer a reminder that the Q1 financial report published today includes select inter divisional changes we signaled last year. We shifted the Swiss high net worth segment from P&C to GWM and pushed out residual centrally held costs and financial resources to our business divisions, ultimately increasing the equity we allocate to them. These divisional shifts support continued resource discipline and accountability. They also align with interest of shareholders by reflecting group performance as a whole through the reporting lens of the respective individual businesses.

Speaker 3

In my remarks today, I will refer to underlying numbers in U. S. Dollars and compare them to our performance last quarter unless stated otherwise. As illustrated on Slide 9, our financial performance this quarter reflects strength in our core businesses as well as excellent progress across our integration work streams, resulting in substantial reductions in operating expenses and risk weighted assets. Profit before tax increased significantly to $2,600,000,000 from strong operating leverage quarter on quarter, driven by higher revenues and lower costs, both of which I will cover in more detail shortly.

Speaker 3

Net credit loss expenses declined by $30,000,000 this quarter to $106,000,000 On a reported basis, the 1st quarter net profit was $1,800,000,000 including a tax expense of $600,000,000 The effective tax rate for the quarter was 26% lower than previously guided, primarily due to the strong performance in non core and legacy that reduced the level of losses in select Credit Suisse legal entities. We expect the effective tax rate in the 2nd quarter to return to more elevated levels from higher forecasted losses in these entities before the first of the planned mergers takes place later this month. We then expect the Group's effective tax rate in the second half of twenty twenty four to continue to normalize, ultimately falling to its structural level of 23% by 2026, driven by further legal entity optimization and cost elimination. Total revenues on Slide 10 increased by 15% to $12,000,000,000 dollars with strong sequential gains in Global Wealth Management, the Investment Bank and Non Core and Legacy. Included a gain from the closeout of the main aspects of the transaction relating to the former Credit Suisse Securitized Products Business, which was announced earlier in the quarter.

Speaker 3

Partially offsetting our top line performance was a decline of $446,000,000 in group items, driven primarily from hedging P and L, reflecting higher interest rates and widening currency basis spreads in the quarter. Total reported revenues reached $12,700,000,000 which included $800,000,000 from purchase price allocation adjustments in our core businesses. Since the Credit Suisse acquisition, these adjustments totaled $3,100,000,000 excluding the effects in NCL and mainly relate to loans that will pull to par if held to maturity. We continue to expect to report additional revenues of around 7 $400,000,000 through the end of 2028 from these acquisition related effects, of which $600,000,000 is expected in the Q2. Moving to Slide 11.

Speaker 3

Operating expenses for the Group decreased by 5% quarter on quarter to $9,200,000,000 with the largest reductions in non core and legacy, Global Wealth Management and the Investment Bank. Personnel costs, excluding variable and financial advisor compensation, decreased by around $120,000,000 or 3% quarter on quarter. Variable and FA compensation expenses were up 11% sequentially on the back of higher revenues. Overall, personnel expenses increased by 2%. There were almost 2,000 fewer total staff at the end of the Q1 when compared to the end of Q4 of 2023 and over 19,000 fewer versus the end of 2022, down 12.5% over the past 5 quarters.

Speaker 3

Non personnel expenses were down $600,000,000 quarter on quarter, driven by lower real estate expenses combined with a reduction in 3rd party spend. Additionally, the 4th quarter contained charges for the UK Bank Levy and the U. S. FDIC special assessment that were not present in our the Q1 were $1,000,000,000 split roughly half half between personnel and non personnel costs, resulting in reported operating expenses of $10,300,000,000 On Slide 12, we report on the progress against our cost ambitions as described during the investor update in February. Exiting the Q1, we realized an additional $1,000,000,000 in gross cost saves when compared to the 2023 exit rate.

Speaker 3

Since the end of 2022, we have achieved $5,000,000,000 in gross saves or nearly 40% of our 20 26 exit rate ambition of 13,000,000,000 dollars As I highlighted in February, we expect our integration work to intensify over the next several pivotal quarters. This will require appropriate staff levels to ensure efficient, effective and well controlled execution. Accordingly, the pace of gross cost saves is likely to decelerate from the run rate savings output achieved over the last 5 quarters, with another $1,500,000,000 in gross cost saves expected by the end of the year. Following this intensive phase, we continue to expect the pace of gross saves to pick up again in 2025. Integration related expenses linked to our cost saving actions reached a total of $5,500,000,000 since the Credit Suisse acquisition, including the $1,000,000,000 incurred in the Q1.

Speaker 3

As previously mentioned, we expect to incur around $13,000,000,000 of integration related expenses by the end of 2026

Speaker 4

or a

Speaker 3

ratio of about 1:one between cost to achieve and gross saves. As these integration charges enable and unlock future cost reductions, we expect them to outpace gross saves through the rest of 2024, totaling $3,500,000,000 of which we estimate $1,300,000,000 in the 2nd quarter. Of course, what matters is turning gross saves into clear progress in our underlying OpEx performance. Our 1Q 2024 underlying operating expenses of $9,200,000,000 signal a significant improvement against our 2022 benchmark, meaning a majority of the gross cost saves we realized to date have translated into net reductions in our underlying OpEx. Thus far, most of these life to date net saves benefit non core and legacy.

Speaker 3

I highlighted in February that we expect around half of the group's planned gross cost saves and a considerable majority of net saves to be achieved from running down NCL's book as well as eliminating expenses associated with maintaining Credit Suisse's many legal entities and branches. We are seeing this dynamic reflected in our cost performance. We also expect NCL to benefit further from the upcoming legal entity mergers and from continued position exits, working towards a 2026 OpEx exit rate of less than 1,000,000,000 dollars Finally, in our core businesses, we expect to realize a significant portion of integration cost synergies beginning in 2025, when client accounts and positions are moved to UBS platforms and applications and Credit Suisse infrastructure is shut down. Moving to the quarterly performance of our business divisions and starting with Global Wealth Management on Slide 13. In the quarter, GWM's pre tax profit doubled to $1,300,000,000 on stronger revenues and lower operating expenses.

Speaker 3

Notably, on a combined basis, PBT increased by around 20% year over year with the Credit Suisse platform returning firmly to profitability. Overall, we see very good client momentum across GWM with net new assets of $27,000,000,000 and strong contributions from the Americas, Switzerland and APAC. Net new fee generating assets reached almost $18,000,000,000 from healthy net inflows to SMAs in the U. S. And discretionary mandates in EMEA and Switzerland.

Speaker 3

The business achieved this full performance while focusing on financial resource efficiency and balance sheet management, seeking to reprice loans with sub hurdle returns or to otherwise exit such positions. This ongoing work mitigates some of the headwinds from inherited Credit Suisse risk models and led to a decline in credit and counterparty risk RWAs of $4,000,000,000 in the quarter. We've also begun to see progress in GWM's revenue over RWA metric, particularly on the Credit Suisse platform. GWM also attracted $8,000,000,000 in net new deposits in the quarter, while our pricing our pricing increasingly reflects the Group's strong liquidity profile and tighter funding spreads. I would note that we estimate seasonal tax related outflows in our U.

Speaker 3

S. Business in the mid to high single digit billions as a headwind to divisional net new asset performance in the 2nd quarter. Now on to GWM's financials. Revenues increased by 10% sequentially with improvements across all lines, driven by higher client activity and increased average asset levels. Revenue performance related to client transactional activity was particularly strong across the business.

Speaker 3

NII increased by 4% sequentially to $1,600,000,000 as higher revenues from reinvestments as well as increased U. S. Dollar deposit rates and volumes offset the effects of tapering deposit mix shifts and client deleveraging. In the second quarter, we expect a lowtomidsingledigitpercentage decline in GWM NII due to moderately lower lending and deposit volumes and lower interest rates in Switzerland, partly offset by additional revenues, primarily from higher U. S.

Speaker 3

Dollar rates combined with our repricing efforts. For the full year 2024, we expect NII and GWM to be roughly flat versus 4Q 'twenty three annualized. Specifically, we see NII and margins holding broadly steady in 2H 'twenty four and after the Q2 broadly reverses out the sequential gains we realized this quarter. This outcome, which models 3 U. S.

Speaker 3

Dollar rate cuts, is helped by lower funding costs as well as our balance sheet initiatives. Recurring net fee income increased by 4% to $3,000,000,000 in the quarter from higher client balances and inflows in net new fee generating assets. This was partly offset by margin compression from more of the back book reflecting greater penetration into lower margin mandates across higher wealth bands. Transaction based income increased by a third sequentially to $1,200,000,000 dollars driven by higher trading volumes, particularly in structured products, partly due to the seasonal increase in client activity levels with significant improvements across all regions. Combined transaction revenues were also 9% higher year over year.

Speaker 3

Our APAC franchise had a particularly impressive transaction revenue quarter, doubling from 4Q with strength demonstrated across all product classes, despite the economic uncertainties weighing on sentiment for most of the Q1. We also saw positive momentum in the Americas, where the introduction of our international model of joint coverage of GWM clients with the IB led to transaction based revenue gains of 11% quarter on quarter and a mid teens increase year on year. Expenses for the quarter were down 3% sequentially, mainly from decreases in salaries and non personnel costs and with non recurring items in the 4th quarter falling away, outweighing increases this quarter in variable and financial advisor compensation. Turning to Personal and Corporate Banking on Slide 14. With good momentum and the front office teams now more closely aligned to strengthen client engagement, P and C increased pretax profit by 11% sequentially to CHF774,000,000, its highest PBT since before the Credit Suisse acquisition.

Speaker 3

Revenues were up by 4% with gains across each significant revenue line, further supported by a 47% decline in credit loss expense quarter on quarter. Deposit balances in Swiss franc terms remained roughly stable with inflows in personal banking largely offset by outflows in corporate balances with lower liquidity value. This was a strong outcome considering the current rates environment in Switzerland and the ongoing work in the business to gain share of wallet and to improve balance sheet efficiency, supporting our net interest margin in 1Q. NII increased by 3% sequentially to 1,100,000,000 dollars principally as higher reinvestment income more than offset declines in revenue from lower lending volumes and ongoing deposit mix shifts. In the Q2, we expect a mid to high single digit percentage decrease in P and C's NII in U.

Speaker 3

S. Dollars, more than offsetting the Q1 sequential gains, especially as the effects of the Swiss Central Bank's March interest rate cut hit through for a full quarter. For the full year 2024, we likewise expect a mid to high single digit percentage decline in P&C's NII versus 4Q 'twenty three annualized. We see NII holding broadly steady in U. S.

Speaker 3

Dollar terms in 2H 'twenty four as P and C's balance sheet management efforts to improve loan margins help to mitigate lower loan and deposit volumes as well as the modeled effects of 2 further 25 basis point rate cuts in Switzerland. The outlook also includes a $50,000,000 annualized headwind from the effects of higher minimum reserve requirements at the Swiss Central Bank. Transaction based revenues were up 9% in the quarter, principally on strong corporate client engagement. Recurring net fee income gained 5% sequentially on higher client asset balances supported by net new inflows in the quarter. Credit loss expense was $39,000,000 as PPA adjustments offset a similar level of charges on impaired loans acquired from Credit Suisse.

Speaker 3

Operating expenses were up 4% quarter on quarter, principally due to higher staff costs in Switzerland and a lease accounting credit recorded in the comparable quarter. As illustrated on Slide 15, underlying PBT and asset management decreased by 2% quarter on quarter to $182,000,000 as lower revenues were only partially offset by reduced operating expenses. While net management fees were steady quarter on quarter, the sequential drop in the top line is explained by 4th quarter revenues, which included the gain from the sale of an investment stake, as well as seasonally higher performance fees. Net new money in the quarter was $21,000,000,000 due to several big ticket inflows in mainly passive equity and fixed income funds, including money markets. We also continue to see client demand for SMA, sustainable investments and our private markets capabilities.

Speaker 3

OpEx decreased by 7% to $594,000,000 mainly from lower personnel, technology and litigation costs. As I highlighted during the investor update in February, we aim to improve operating leverage and asset management by focusing on cost optimization across the entire division and realizing synergies from migration of clients onto UBS infrastructure over the course of 2025. Onto our Investment Bank's performance on Slide 16. As in prior quarters, we compare the results of the combined IB with standalone UBS performance on a year on year basis. Operating profit was $404,000,000 marking the IB's 1st profitable quarter since the acquisition and broad completion of the restructuring of the parts of Credit Suisse's IB that are core to our own.

Speaker 3

Return on attributed equity also turned positive and reached 10% for the quarter. Underlying revenues increased by 4% to $2,500,000,000 Underscoring our efforts to increase the IB's market share in the U. S, the IB's top line increased by 29% in the region. Banking maintained its strong momentum with overall revenues up by 50 2%. Notably, we also increased market share in the U.

Speaker 3

S. Where banking now contributes a third of total IB revenues, up from less than 20% a year ago. We continue to be pleased with our performance in Capital Markets, up 85% year over year as LCM, DCM and ECM all saw increased activity levels, building on the momentum we saw in the Q4. Advisory revenues increased by 11% as we continue to outperform the global fee pool. The recovery in M and A is continuing, particularly in the U.

Speaker 3

S, albeit with more subdued client sentiment and activity in APAC, where we have a large share of the market. With our banking coverage teams now fully integrated, our pipeline offers encouraging revenue potential in the second half of twenty twenty four and into 2025. Revenues in markets declined 5% to $1,900,000,000 but were up 6% year over year in the Americas. Equities revenues, driven by cash equities, were up 3%. FRC, where we remain underweight by design, was down 21% with both rates and FX affected by lower volatility and decreased client activity.

Speaker 3

Operating expenses rose 8%, predominantly from additional costs related to personnel onboarded from Credit Suisse's Investment Bank, but importantly dropped 4% sequentially, while revenues were up 32% quarter on quarter. Moving to Slide 17. Non core and legacy's pre tax profit in the quarter was 197,000,000 dollars supported by $1,000,000,000 in revenues, principally from gains on position exits. In addition to the securitized products transaction I mentioned earlier, the business recognized proceeds from the closeout of several complex and longer dated positions above their book carrying amounts, including in its conduit and corporate loan books and within its longevity portfolio. Despite the strong revenue performance in the Q1, we continue to expect the NCL book to ultimately close out across its various positions at more or less their current carrying values, meaning it is still appropriate to assume revenues of nil going forward, net of hedging and funding costs.

Speaker 3

It is also important to reiterate that in pursuit of our priorities in NCL, we may at times sacrifice P and L on position exits to eliminate costs and release sub optimally deployed capital. Nevertheless, given the strong revenue performance in 1Q along with the significant progress we've made on costs, we now expect NCL's full year 2024 underlying PBT to be a loss of around $2,500,000,000 versus the expected $4,000,000,000 loss we signaled in February. As Sergio highlighted, we made substantial progress in reducing the NCL portfolio in the quarter, decreasing RWAs by $16,000,000,000 principally in credit and market risk. In just 9 months, we've run down $28,000,000,000 or almost a third of NCL's risk weighted assets. From an LRD perspective, the overall portfolio is down by roughly half from 2Q2023 after a further reduction of $49,000,000,000 in the Q1.

Speaker 3

As I covered earlier, a significant portion of the Group's overall OpEx decline this quarter was delivered by NCL, which saw a 26% sequential drop in underlying costs to $769,000,000 primarily due to lower third party, real estate and technology costs. Moving to Capital and Financial Resources on Slide 18. CET1 Capital was broadly flat in the quarter with profits generated in 1Q offsetting our dividend accruals and $1,300,000,000 in negative currency translation effects. As we've highlighted, we made significant progress this quarter in reducing financial resource consumption across the bank from both the active rundown of NCL as well as balance sheet management initiatives across the core businesses. This resulted in a 4% sequential decline in RWA and a 6% reduction in LRD.

Speaker 3

Credit and counterparty risk RWAs dropped by $11,000,000,000 from position sales and roll offs, as well as from risk model mitigation, with currency effects contributing another $11,000,000,000 to the quarter on quarter decline. Market risk RWAs increased by $3,000,000,000 as asset size decreases were more than offset by the effects of model updates from the integration of time decay into our VAR calculations. Slide 19 illustrates our strong capital position with a CET1 capital ratio of 14.8%, increasing by 40 basis points over the course of 1Q. As previously highlighted, a surplus above our CET1 capital ratio target of around 14% is necessary to cater for expected volatility in our reported profitability as we execute on the various phases of the integration. Our LCR at quarter end was 2 20%, reflecting ample levels of liquidity to remain compliant with the new Swiss liquidity ordinance that went live at the start of the year.

Speaker 3

We remain focused on raising stable deposits with tenors, products and counterparty selection, resulting in higher liquidity value, and we continue to apply discipline on pricing. Strong investor demand for our name in capital markets and improving conditions allowed us to complete nearly half of our full year funding plan during the Q1. We successfully placed over $5,000,000,000 in attractively priced HoldCo in January and $1,500,000,000 in AT1 across 2 transactions February at spreads that were around 100 basis points inside our heavily subscribed November placement. Similarly, secondary market spreads continue to tighten post acquisition, having now dropped to February 2023 levels and together with ongoing diversification of our funding sources are supporting our plan to lower funding by around $1,000,000,000 by 2026. As part of the broadening out of our funding sources, we structured 2 first of their kind transactions for UBS, including an issue of $1,000,000,000 in euro denominated covered bonds and a private placement for size via repo of a portion of our portfolio of Swiss franc denominated covered bonds.

Speaker 3

I would highlight that these trades were priced below the spread on the outstanding Ella line with the Swiss Central Bank. As to Ella, we have now repaid $29,000,000,000 of this line extended to Credit Suisse pre acquisition, including CHF9 1,000,000,000 just yesterday. We expect to repay the remaining CHF9 1,000,000,000 in the coming months. Overall, our balance sheet management initiatives together with actions on the funding side that I just described improved our loan to deposit ratio this quarter and narrowed the funding gap we inherited from Credit Suisse. Importantly, our efforts are helping us to offset NII headwinds and are contributing to the strength of our overall liquidity and funding profile.

Speaker 3

With that, let's open for questions.

Operator

We will now begin the question and answer session for analysts and investors. The first question is from Brian Alister from Bank of America. Please go ahead.

Speaker 5

Yes. Thank you. Thank you. Good morning. A $1,000,000,000 beat in the quarter, I never did quite get the hang of this forecasting lark.

Speaker 5

Just on that then, so noncore, very strong performance. I appreciate the updated runoff profile you gave us on Slide 6. Is there any reason that you're just reverting to natural runoff? Or can we expect continued sales if markets stay favorable? Because clearly, there's quite a meaningful driver of the very favorable capital ratio, the interactions of all of those.

Speaker 5

And then secondly, the project to improve the revenue to risk weighted assets in Wealth Management. I presume you wouldn't represent the Q1 performance as kind of the payoff of that project. It's too early. But just what's the profile of that project? How long is that repricing sitting on the net new asset generation?

Speaker 5

And how has it started? Thank you.

Speaker 2

Alistair, before I pass to Todd, I wanted to you were the first to ask the question not by coincidence since I understand it's your last day in the office.

Speaker 5

Yes. Thank you, Sergio.

Speaker 2

Well, enjoy your time off going forward. So I'll pass it over to Todd. Thank you.

Speaker 3

Hey, Alastair. Thanks for the questions. So on NCL, I mean, first, reverting to natural runoff, I mean, we've been consistent in just reflecting the natural runoff profile. What I think the Slide 6 really does indicate is it really narrows that delta between where we started, as you could see where we said our ambition is to reduce to 5% and that the natural runoff profile has really come in. And so now you see that the delta between the natural runoff profile and where we our ambition is, is narrowed.

Speaker 3

So that should eliminate whatever uncertainty was considered. But I do think that it's appropriate still to reflect it that way. In terms of whether we can do more, of course, we're going to continue to do what we can. We'll try to position we'll try to exit positions at or above their book values wherever possible. But it's appropriate to continue to stick with our guidance on NCL in terms of our approach and in terms of our expectations around revenues.

Speaker 3

On GWM in terms of revenue over the RWA, I mentioned that we're starting to see progress, which of course does suggest you asked has it started and it has. In fact, it started at the end of last year and the business is quite active in it. And so we would expect that we're going to continue to make progress on driving up RWA efficiency with respect to revenues in that respect Over the course of the next couple of years, you asked how long that will impact, how long will it go, how long will it impact net new assets. We said it's going to take the better part of 2 years, which is why we guided net new assets of around $200,000,000,000 over that 2 year timeframe. And we think that's the appropriate guidance still.

Speaker 5

Okay. Thank you. And Sergio, thank you.

Speaker 2

Sure. Pleasure.

Operator

The next question is from Chris Hallum from Goldman Sachs. Please go ahead.

Speaker 6

Yes. So 2 for me. By the end of the year, I guess you'll be effectively halfway through the integration process in terms of gross savings. So as you get through that process, are you starting to get a better picture of what you could expect for the net savings figure in relation to the €13,000,000,000 Todd, I think you mentioned the majority earlier. And does that change at all the phasing of the multiyear return on quarter 1 pass you laid out at the full year?

Speaker 6

And then second question, Sergio, you referenced earlier that insufficient capital didn't cause the collapse of CS. And I guess in the final instance, what we really saw was a crisis in client confidence that drove that liquidity shortfall. So when we talk about capital distribution, it's sort of automatic to assume that higher or earlier capital distribution capital distribution results in lower capital ratios, which in turn reduces resilience. But when you talk to clients, how important is that distribution ambition as an indicator and driver of confidence in the business, I. E, could you argue that ultimately aligning your distribution strategy more closely with the distribution policies we see elsewhere in European Financials actually increases client confidence in the business and improves resilience?

Speaker 6

There's a big perception difference basically between a firm that's buying back stock versus a firm that's issuing stock.

Speaker 3

Yes, Chris. I'll take the first. So on whether the OpEx progress that we saw sort of informs a better view on the net that we'll get to. Look, I think we're quite pleased with our 1Q operating expense performance. We did highlight that we expect gross saves to be halfway to our $1,000,000,000 ambition at the end of the year, which is a bit better than we highlighted in February in large part because of the 1Q performance that we saw.

Speaker 3

But look, we still our ambition is a costincome ratio of less than 70 percent at the end of 2026. That's what we're really focused on to manage to. And so how we pace any investments, which we'll continue to make in, for example, the resilience of our infrastructure, the organic growth in our core businesses, how we pace that will be a function of the revenue environment. So it is still way too early to change that perspective. But of course, we are pleased with the OpEx performance we saw in 1Q.

Speaker 3

As to how that impacts on the return on CET1 path that you mentioned, I would say that coupled with the updated NCL full year PBT guidance I gave would have roughly 100 to slightly above basis point impact on the return on CET1. But I would still say mid single digits is the right way to think about the full year ROCE T1 even with the 1Q performance that we produced?

Speaker 2

Yes, Chris. First of all, of course, having a strong capital position and a balance sheet for all season, as we call it, having a strict risk management approach on policies and being very disciplined in the way we consume and manage all our resources is the pillar number 1 of our strategy. And I think it's almost a prerequisite to create the trust that clients needs to have in any bank or any organization. So in that sense, I would only add that another very important indicator, which sometimes is in conflict with clients is your funding cost. Of course, our clients would like to have always higher returns on the deposits and place with us.

Speaker 2

But on the other end, when they see our funding cost being as competitive as we have now, they have the ultimate confirmation of the strength and the solidity of our franchise. So ultimately, at the end of the day, it's always a trade off between different dynamics, but I would say emotional and psychological dynamics. But I can only tell you that, of course, last but not least, having a full alignment of client trust and satisfaction, having shareholders being happy and having your employees being happy is the ultimate way to create sustainable value and trust in any bank. And this is our philosophy. So of course, having an ability to compete in terms of growth and our global ambitions, But at the same time, being able to deliver attractive returns to shareholders, it's very important to influence the 3 stakeholders I mentioned.

Speaker 2

Great. Thank you.

Operator

The next question is from Kianna Bostein from JPMorgan. Please go ahead.

Speaker 7

Yes. Thank you for taking my question. I have a lot of detailed questions, but I wanted to ask 2 questions actually to Sergio, if I may. The first one is, Sergio, your first comments on the call today were we were asked to do a critical role in Switzerland. And the key here is you were asked to buy a distressed asset, a GSIB asset.

Speaker 7

And when you buy something, which you asked to buy, you clearly are in control of the process. And I would assume just like you do in an M and A transaction, you know that better than me, you have a MAC loss. And in this instance, I would assume after all the financial crisis issues that we had in 2012, 2013 with mergers by regulators, there would have been an agreement that there's not overregulation for UBS post the NewCo transaction. And I wanted to see if there's anything like this. The second question I have is, better know the outcome of these regulations.

Speaker 7

And one option is also to look at your legal entities and maybe close some of the legal entities or exit. And clearly, a lot of capital is tied up in the U. S. They make lower returns if I look at U. S.

Speaker 7

Wealth ex LatAm as well as the U. S. IB, I assume makes lower returns. So one option would be restructuring or exiting of markets to rather than reducing capital return. I wanted to see if that is also an alternative.

Speaker 7

Thank you.

Speaker 2

Thank you. Yes, very good question, Kian. I think that let me put it that way that some of the conditions that were discussed and agreed over that weekend were clearly defined and communicated. For example, the non the one in respect of the antitrust and the competitive nature in our local markets that has been very well defined and agreed. Others, I would say, were also discussed and agreed.

Speaker 2

Let me put it that way. I'm not so sure we can talk about a MAC close, but as I mentioned in my opening remarks, we are delivering on our commitments. So I probably stop here. And in respect of the amount of capital and I think it's clearly too early to speculate or respond to speculations around the capital. I just want to underline that when we talk about our parent company, UBS had already one of the best in class capitalization.

Speaker 2

The quality of our capital in the parent company was very strong. What I mentioned that is already embedded in our plan. We are absorbing $9,000,000,000 of concession granted to Credit Suisse. We are absorbing the progressive buffers that will come in as a consequence of market share and size. And we believe this is feasible and is part of the plan.

Speaker 2

So before we speculate about what we would do in to respond to any other changes in regulatory requirements, we need to understand what they are because believe me, we have not been consulted. We don't know what they are. And so we need to have the full picture before we respond to this kind of situations. But let me just say that having a global franchise, being competitive globally is what makes us a very attractive bank to our clients. Shrinking back to greatness is not a strategy and is not what will serve not only our clients and our shareholders well, but I also convinced it's not going to serve well Switzerland and its ambitions to be one of the leading financial center in the world.

Speaker 2

That's pretty clear to me.

Speaker 1

Thank you.

Operator

Next question is from Giulia Rora Miotto from Morgan Stanley. Please go ahead.

Speaker 8

Yes, hi. Good morning. So two questions for me as well. The first one, just going back on the capital proposal again. You said you were not consulted on this document and you need to see what the final proposal looks like.

Speaker 8

So looking forward, what are the next steps? Do we need to wait until June? Or are you now part of the discussion? Do you expect to have more clarity throughout the year? That's the first question.

Speaker 8

And then the second question more related to the quarter. There was a strong performance in transaction fees, better than I expected in Wealth. I'm wondering, is this just a transitory Q1 thing? Or is this continuing? And what should we expect there?

Speaker 8

Thank you.

Speaker 2

Pick up the first one and then I'll pass to Todd for the second. I mean, there is we are not yet clear if we're going to be formally a part of any consultation or any discussions. Of course, as I mentioned in my remarks, we will make sure that our considerations are heard by the regulatory bodies and policymakers and so that we can contribute to a fact based discussions. And of course, we also hope that the report of the investigating commission of the parliament will highlight some of the reasons why Credit Suisse failed. And that should be a crucial element in contributing to a fact based discussions on future regulations.

Speaker 2

So June, you mentioned June. June is not a credible data because the commission is not expected to report before the end of the year. I also think that June

Speaker 8

25, I meant, sorry.

Speaker 2

Yes, yes, no. That one is I don't know about June 2025. I think that it's very unlikely that we're going to have more clarity about this matter in terms of what it means before year end or the early or even the early part of next year. So in the meantime, we have to accept some level of uncertainty around this topic.

Speaker 3

Yes. Hi, Julie. On the second question about TRx in GWM, so yes, very strong 1Q. In terms of how we how one should think about it overall and going forward, I'd say a few things. I mean, naturally, the environment needs to be conducive to strong transactional flows and 1Q was, but I would really highlight that it wasn't so much just beta, but actually it's an environment where you started to see risk come on, you saw some uncertainty and it's an environment that plays to our strengths, where we were able to advise in particular across our regions in more complex structured products where we saw significant volume up.

Speaker 3

So it really played to our strengths. And it also, I think structurally, reflects a couple of things in addition that I would say, gives us confidence as we look out forward. One is that the aligned product shelf, so across Credit Suisse and UBS coming together and the way we've approached clients from that sense. And on the U. S.

Speaker 3

Side, as I highlighted, just really borrowing from the playbook outside the U. S, inside the U. S. To really approach clients more jointly with the investment bank is also paying off. So we see there are some structural things that bode well as we look out.

Speaker 3

Of course, the environment needs to be conducive, but also an environment like the current one is one that plays to our strengths as mentioned and really allows us to drive transactional flows higher.

Speaker 8

Thanks.

Operator

The next question is from Jeremy Siggy from BNP Paribas. Please go ahead.

Speaker 9

Thank you. Good morning. Two questions, please. One is, you talked about the Investment Bank and the core businesses that you've retained from Credit Suisse and the people you've brought over. I just wondered, are they now fully productive in revenue terms?

Speaker 9

Or is there some lag still to come through as those people ramp up? Are they up to speed already at this point? And then my second question is sort of again on the capital theme. I saw in the report you reiterate your intention to do the EUR 1,000,000,000 of buybacks in the second half of this year. I guess that's a small enough amount that you can do it pretty much regardless of the new capital proposals.

Speaker 9

But I just wanted to hear your thoughts on that.

Speaker 2

Well, let me take the first question is very of course, everybody is now up and running and productive. And but when you look at banking, as you know, what does it mean being productive? It does there is a phase of going out and pitching and winning mandates and then it takes time until they get executed. So in a sense, if you are asking me if they are productive in pitching and being engaged with clients, they are, everybody is full speed. The momentum in winning mandates is great.

Speaker 2

You could see it in the 4th quarter. In the Q1, we have executed many of them. And we are very comfortable that the investments and the trajectory of growth that we see going forward, if market conditions stay there to allow the execution of those mandates are very promising. In respect of the billion, so I think that's at this stage, the only constraint we have right now is the waiting until the parent bank merger is executed. We expect this to be in at the end of May.

Speaker 2

And if everything goes through successfully, pending the regulatory approvals that we need, we intend to restart the share buyback with up to $1,000,000,000 for 2024.

Speaker 9

Very helpful. Thank you.

Operator

The next question is from Andrew Combs from Citi. Please go ahead.

Speaker 4

Good morning. Two questions, please, both follow ups. Firstly, on the non core result, obviously, a tremendous result both in terms of the RWA rundown, but also the gains that you booked during the quarter. Thank you for the revised guidance for the full year. I just wanted to better understand the source of those gains in Q1.

Speaker 4

I think you said conduit and corporate loan books and longevity portfolio, but you're then saying you don't expect that to repeat going forward. Is that because the low hanging fruit has always been achieved or because you're now selling a different type of assets or anything you can elaborate there would be helpful? And then the second question, thank you for the opening remarks, Sergio, on the parent bank capital. I just wanted to check the €9,000,000,000 you referenced. Is that in relation to a 400% risk weight on foreign subsidiaries?

Speaker 4

Or is it the 300% as it currently is phased? And then more broadly, of course, I guess, both of you, in the event that the risk rate on foreign subsidiaries does go up, to what extent do you think you can mitigate that through the fungibility of capital, dividend and up capital, so forth? Thank you.

Speaker 3

Hi, Andrew. I'll address the first question. I mean, in terms of the source of the gains, I think as you mentioned and as of course I highlighted, it came from a number of the sort of sectors within NCL, conduit and corporate loans, longevity, securitized products. We're also seeing strength in credit and equities and macro as well. And the team has been doing a great job in unwinding these complex longer dated transactions and that continues to be what they're going to be focused on doing.

Speaker 3

So the source of the gains comes from the ability to add a lot of value to these complex transactions and to be able to get the transactions closed out at levels that are above book value. As I highlighted, that's not an expectation that people should continue to have, not least just given that sometimes we're going to make decisions to get out of positions where we know there's significant cost takeout or there's suboptimal capital at the moment. It's very suboptimal from a capital efficiency perspective and so getting out, we'll release that. So there's going to be a number of factors that which is why we don't see 1Q repeating.

Speaker 2

So if I can add on that one before I touch on the second question, I think that's the first of all, there is definitely no low hanging fruit. And if you look at our natural decay profile change, it shows you that we are not really going for easy to sell, but rather complex transaction that also helps in many cases to unwind cost, because priority number 1 in non core is to take down cost and not necessarily to take down risk weighted assets and market or credit risk weighted assets. So in that sense, it's very important that in many cases, we are able, thanks the good work the team is doing in managing these unwinds to leverage the fact that we are not a forced seller. We are only going to dispose assets when they create value to shareholders. And that is a completely different position to be in because our capital is strong.

Speaker 2

We can allow some delays or some time to elapse between the 2. Now on the EUR 9,000,000,000, there are 2 factors actually. 1 is the €250,000,000 risk ratings and €400,000,000 for foreign companies and the elimination of the filter, of the regulatory filter that Chris Suisse had. The 2 combined account for €9,000,000,000

Speaker 4

And the ability to mitigate any increase in the foreign subsidiaries going forward, I assume it's something you're already working on given the already phased increase, but to what extent do you think you could accelerate that?

Speaker 2

No, the mitigation look, the mitigation I go back to is I mean, I have to is like a replay, push the button again and replay what I told you what I said before. We cannot speculate or respond to speculation or do analysis on things that we don't know. What we know is that we're going to hold as a consequence of the Credit Suisse acquisition, dollars 9,000,000,000 plus $10,000,000,000 So almost $20,000,000,000 of additional capital in an already very strong capital position UBS had. That's the fact. The rest, I don't know.

Speaker 2

And we will comment when we know more.

Speaker 4

Very clear. Thank you for that.

Operator

The next question is from Anke Rangan from RBC. Please go ahead.

Speaker 10

Yes. Thank you very much for taking my question. Just I'm sorry to follow-up just one thing. I mean, is it fair to say that a result of the uncertainty, you're not really changing any step in your strategy and execution of the merger? And specifically, with Q4 results, you mentioned the potential amortization of additional DPA, just confirming this at the current stage this is going ahead.

Speaker 10

And then on the net new assets, the €17,000,000,000 in Q1, that'd be running below, if I were thinking about EUR 100,000,000,000 for this year. Should be rather than EUR 100,000,000,000 this year? Is it more like the €200,000,000,000 over the year 2 years and more back end loan loaded towards the 2025 to reach the €200,000,000,000 And has the decline in relationship managers had any impact on the net new asset growth in Q1? In the past, you gave us some numbers about the parting relationship managers and the assets they have taken with them. Is that still the case as being relatively low?

Speaker 10

Thank you very much.

Speaker 2

Thank you. I'll take the first question. I think that's, Henke, I think this is a very complex integration and we cannot afford to be distracted in the execution of it. So we are sticking to our strategy. We are sticking to our plan.

Speaker 2

We need to do that and at the same time staying close to our clients. And so that's the reason why engaging in hypothetical change of strategy or methodology we use in reassess our anything that goes around capital would be absolutely very distracting and not in the best interest of any stakeholders because what we want to have is a successful completion of this integration. And so we stay focused on the existing strategy and our approach.

Speaker 3

Yes. I think on the second question in terms of net new assets in GWM, I would just reiterate that the trajectory that we highlighted over the next 2 years is among other things a function of the financial resource optimization and balance sheet initiatives that the team is hard at work and undertaking. So $27,000,000,000 in the quarter is a strong result. We're on track to deliver on our ambitions, which we said was $200,000,000,000 over the course of 2 years. So I would continue to think about that in those terms.

Speaker 3

In terms of the RMs who have left, you mentioned that we had given some numbers in the past. Yes, I mean, that has continued just to taper as an impact, just given the number of RMs who have left has become sort of a non topic at this point in time in terms of any current period And in terms of the assets that they've taken with them, it is a very small percentage ultimately of the given especially given the fact that the RM workforce in Credit Suisse is down 40% from the end of 2022 levels, and we've been able to retain the lion's share of the assets. So we consider that to be sort of a story not terribly worth following. And in the end, we stay focused on our plans and our commitments.

Speaker 10

Thank you. Can I just ask on the DTA, please? Are you reiterating that you expect to convert the $2,000,000,000 and the $500,000,000 you talked about with Q4 results?

Speaker 3

Yes, there's no change in terms of our approach to DTAs at the current time, Anke.

Speaker 10

Thank you very much. Thank you.

Operator

The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.

Speaker 11

Hi, good morning. Two questions, please. 1 on the silver topic, capital. Just conceptually trying to understand because when in the press it's reported or the Minister of Finance speaks for capital, we naturally assume it's CET1 capital. But do you think it also partially include additional Tier 1 capital, which might make it a bit more manageable for you?

Speaker 11

And then secondly, on Global Wealth Management, new loans in the quarter, another decline is very similar to the Q4 decline. Just trying to reconcile that with your risk appetite returning statement in contrast of the yield curve still not favorable, but wondering that it's also more of a risk alignment still going on in the background, which is why your net spending remains negative. Thank you very much.

Speaker 2

Benjamin, the first one is very short. As I said, we don't speculate or respond to speculation in respect of any numbers that has been flagged out there. So it's not we are not in a position to understand where how those numbers are calculated. Therefore, we refrain from doing that. Yes.

Speaker 3

And Benjamin, hi. On the GWM net new lending side, we are seeing continued deleveraging. Some of that is market driven and some of that I. E. Rates driven and some of that is a function of the resource optimization work that we're doing.

Speaker 3

So that's an outcome that we're managing. To the extent it is the latter, we are looking to drive higher revenues and therefore I'm looking for the NIM to sort of hold up in that respect because we're improving the revenue over RWA consideration. But obviously in the current rates environment too, we're seeing either the ends of deleveraging and still yet some reticence to relever in some of our regions. So I expect that we won't have a lot of momentum on relevering in the current rates environment until we start to see rates come down over assuming they do over the next say 12 months to 18 months. So that external factor won't be to me a big driver in terms of re leverage.

Speaker 11

That's it. Thank you very much.

Operator

The next question is from Pierce Brown from HSBC. Please go ahead.

Speaker 7

Yes, good morning. Thanks for

Speaker 12

the questions. Just 2 for me. Just coming back on the cost issue and the cost takeout in the quarter in the NCL unit. I mean, it's quite impressive. You're down 26% quarter on quarter.

Speaker 12

The cost takeout seems to be tracking more or less in line with the asset reduction. I'm just I mean, the question is should we expect that sort of linear relationship to continue or was there something particular in terms of front loading cost takeout in the Q1 in NCL? And then the second question is back to regulation, not on capital, but just wondering if there's anything in any of the remarks, comments, reports published by the Competition Commission that we need to be mindful of just in terms of the domestic market shares of the new group? Thanks.

Speaker 3

Hey, Piers. In terms of the first question on the NCL cost takeout, there isn't a linear relationship. I would say it's it could be key the relationship really doesn't have to flow linearly and that's because the cost takeout will often come as a result of taking out a portfolio that sits on a given system or supported by a given infrastructure or application that we're able to shut down. But there is of course a relationship between the asset takeout and the cost takeout. I wouldn't say it's linear because you can have you could be taking out portions of a portfolio that still needs at least a large share of the headcount supporting that whether it's the front office or mid or back that's still supporting the broader portfolio.

Speaker 3

And if you're not really able to decommission the associated technology, you may not get the saves there. So not linear, but for sure it's something we watch very carefully and we're pleased to see that it is moving with a reasonably high degree of correlation.

Speaker 2

Now on the competitive position, let's forget for a second that we have a crystal clear agreement on that topic. Even if you go down to the substance, which is I think is relevant for us, for consumers, for clients, for everybody to understand. At at loans and mortgages, you look at branch number of branches in any dimension, UBS is not the largest bank in Switzerland in that sense. I think we are the leading bank in Switzerland because of our capabilities, but that should not be confused with market share and size. So in that sense, we are fairly comfortable that both the agreement and the fact support our position that our plan and is the right one to pursue.

Speaker 7

Thank you.

Operator

The next question is from Tom Hallett from KBW. Please go ahead.

Speaker 13

Hi, morning. So just a quick one on Wealth Management NII. I think you were baking in 3 U. S. Rate cuts for this year in your guidance.

Speaker 13

If that was 0, what would that or how would that alter your guidance? And then secondly, on the treatment of software intangible, I suppose it's fair to say it gets a bit more of a benefit relative to your European peers. I mean, if you were to align the rules with Europe, what sort of impacts would that have on your capital? Thank you.

Speaker 2

So on the second question, as I said before, we are not speculating on any change in our regulatory framework. The only thing I can say is that both in absolute global terms, but also vis a vis the European peers, we have a pretty strong capital position, not only in absolute terms, but also the quality of our capital

Speaker 3

base. Yes. Hey, Tom. On GWM NII, yes, we modeled in, as mentioned, 3 U. S.

Speaker 3

Dollar rate cuts. If there were fewer than those. I think Sergio even commented earlier that there is some upside, but of course in our NII, but of course that depends on client behavior. It depends on how the balance sheet behaves. So statically, yes, that would be corrected to be upside.

Speaker 3

If there were no rate cuts, you'd probably have some uptick of a point or 2 on the NII. But of course, we need to consider the dynamic relationship between client behavior and our balance sheet. So it's difficult to predict. But yes, I would just take away that likely to be some degree of upside, all other things equal.

Speaker 13

Okay. Thank

Speaker 7

you. Thank you. I think there

Speaker 1

are no further questions. So with that, we can close the call. And thank you, Sergio and Todd for joining us today. We look forward to speaking with everyone again with our 2Q results.

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Earnings Conference Call
UBS Group Q1 2024
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