Transcription
Sergio, strong numbers. Anything stand out?
Well, first of all, I think that, uh, what's standing out is that we are getting almost at the end of the tunnel. So three years ago, we reported our first, uh, consolidated, uh, number as opposed to the acquisition of Credit Suisse. And now seeing, uh, the full, uh, the results of, uh, of all the hard work we put, uh, down and the hard decisions we had to take in the journey are starting to pay off. And, uh, so what stands out is, uh, good momentum across all our businesses. Uh, you know, you can see that in, uh, in the 45% increase of our underlying PBT and, uh, so basically the synergies and the top line developments are working well. And, uh, net assets, uh, are up, uh, 7.2, 7.3 trillions of uh, assets. Uh, we manage, uh, good inflows and the integration is almost done. Uh, still not fully done, but, uh, I'm very pleased with the momentum near the end of the tunnel.
Um, let's talk about the buyback. Everybody's been very, um, eager to hear what you had to say on the buyback. You've announced 3 billion over six months, but 1 billion over three months. Why? Why that structure? Why not go 50/50? Is it because you think maybe in three months time we might have more clarity on on the Swiss capital rules? Can I read something into that structure?
Not really. Because really, I mean, the issue is that what we have is this programs that we have to file with, uh, the stock exchange in terms of buyback programs that we can execute in theory over two years. And, uh, our capital return policy and ambition has been set at the beginning of 2026, when we say that our aim was basically to start with 3 billion and then, uh, assess the situation at the end of the first, um, uh, half. And, uh, so what we do now is, uh, we have a new plan, a new, uh, program that, uh, and, uh, we intend to execute it over the next 12 months. Uh, but the pace and size will be determined by our capital position. So, uh, staying at 14% and also the ongoing development in the business, which we are very positive of, but also the ongoing discussion on too big to fail like we did in the last two years. The language hasn't really changed. The language hasn't really changed. So I shouldn't I shouldn't expect in three months time something. Some countdown to this failed. The dealer asked to be seen as a minimum commitment that we will do it. And, uh, you know, putting a clear indication on anything more than that.
Equities very strong, plus 53%. I think is is the number. That's it. That's a nice number. The surprising thing is that you've done it without any extra capital. I that's that's the real standout here. Let me ask you the same question Alice Van Castle, Barclays yesterday, if you'd have given that division a bit more extra capital, if you'd have funded it differently, if you'd have provided more for it, could that number have been significantly higher? Are you throttling back equities at the moment? Like how like it that number be?
Uh, not really, actually. What we did, uh, the point you raised is a good point. But you know what we did within the investment bank? We also shifted some, uh, capital from, uh, the, uh, fixed income businesses to the equity business to help them. But our focus is really, which I, I also believe that the numbers are very strong because they are mainly driven by, uh, uh, uh, intermediation, uh, activities. Uh, so and rather than deploying, uh, capital in, in prime brokerage. Uh, and, uh, so, uh, but going back to your story, this is more about our strategic, um, capital allocation at group level. We made that decision into in 2012. Uh, that's, uh, you know, uh, our investment bank, uh, fits, uh, uh, strategic, uh, ambitions that we have to support our wealth management clients, our institutional clients, our corporate clients, but with a defined capital allocation. So we had ups and downs in times in which was very rewarding to have that and times in which you may have some opportunity cost. But when I look at the full, uh, results, a 23% return on allocated capital for the investment bank is pretty strong results. So we are very happy with it.
Okay, but let's look at the opportunity cost. Let's just talk about the opportunity. The opportunity cost at 86%. Yeah. Could you have done that kind of number?
Yeah. But we is not some things, uh, if and when it doesn't matter because I think our, uh, our philosophy, our, uh, capital allocation and our stock is rewarded by, uh, this business mix and not by taking, uh, opportunistic and tactical view on, on momentum in any of our businesses.
Do you think if you were a US bank, you do something close to what was it 86% for JPM? Goldman Sachs did 71%. If you were a US bank, do you think you get those kinds?
It's too hypothetical to answer that question. Well, it's kind of US bank. We are a Swiss bank. And, uh, and we are very happy with, uh, that.
Okay. Um, you can see where I'm going with that. If you, if you read domiciled, is there a cost to being a Swiss bank?
I think there are also a lot of good opportunities. But of course, uh, things have to be fully balanced. But, uh, uh, I'm very happy with our results, and what we achieved as a business makes.
All right. So if you look at wealth management, you look at the Swiss business, asset management and the investment bank, all together put up a very strong set of results. Just going back to what you did in equities and why you did it, as you say, not extra capital. The reason was because markets like there's volatility. The volatility is extraordinary at the moment. To expect that to continue. Is that something that we should expect to the markets? So frothy to you right now? What what do you see?
I look, if I look at the macro picture, the geopolitical picture, the ongoing uh debates. Uh, also the big dispersion we've seen in equity markets, uh, um, and, uh, the, you know, the pressures on energy prices, uh, creates potential, uh, headwinds on inflation. And, uh, and that may turn down to be some things that investors will, uh, not really like. And, and creating potential volatility. So I do expect, uh, spikes of volatility to continue for the rest of the year.
That takes me on to a question about flows, um, and where the net new money came from. How much we came out of the Middle East?
Uh, not really. I mean, yes, Europe was a strong contributor. Switzerland was a strong contributor, uh, to the business. Asia and also the positive developments in the US where, you know, we had a small, uh, a small uptick on, on net new assets, uh, despite the fact that we had a seasonality with tax payments outflows. Um, no, but not particularly from, from the Middle East. And, um, and, uh, okay.
Fully, let's let's look ahead. Um, I read the statement and, and I listened to your CFO this morning and the the briefing sounded quite positive on where you are with the full year. How close are you to being really confident that you can achieve your full year targets? How close are you to saying, actually, I think we can exceed these?
We are confident we can achieve our targets. Uh, exceed, uh, exceeding. It's, uh, is is, uh, is premature because we still have six months to go and the situation is very volatile. We are also facing a seasonality factor, the conclusion of our integration process. But we are, you know, well advanced. And I think the momentum is pretty good. But, uh, we take it quarter by quarter.
In terms of kind of what you're doing with the bank right now. I is like, I see it in the in the state with this one of you working with Oxford, you doing all kinds of things that are trying to enhance your AI capabilities. Are you at the point yet where you can understand what the ROI on that is?
Uh, I think that we are at a point in which we can start to plan for the next 2 or 3 years. So basically, AI is not going to be a journey that changes your quarter on quarter results. So you need to put investments. You need to change processes. You need to train people, uh, and, uh, and it takes time. But, um, uh, I do believe that, uh, the, uh, economy of scale that we can create, uh, in the next 2 or 3 years are significant, uh, for cost, but also for potentially improving our top line and allowing us to also expand into new segments of businesses or new markets. So I opened, uh, you know, a lot of opportunities. This is the reason why we are now, uh, basically already deploying 500 plus, uh, um, uh, agents and applications and, uh, and, uh, we are working on nine big main streams that will allow the bank to be become a more, uh, agile and profitable in that sense, and an efficient also. Uh, and, but, uh, but also but can you nail down I can like everybody sort of work out what the cost of a token? Is that what he's trying to work out? What the cost? I how do I make sure that I know? Because the issues that, you know, you invest, but you also reduce cost and and this is something that will be reflected when when we look at our growth plan for the next 2 to 3 years, uh, that we will present at the beginning of 2027 and, and, uh, going forward, where you will be able to see and measure what are the benefits. But as I said, AI is not changing, uh, firms overnight.
Okay. Um, let me just come back. Just to wrap up, there's a couple of kind of follow-up questions. Um, on on the capital situation and, and what you what you do next. The S&P and the Swiss government say you have enough capital right now. I see the document you put out this morning laying out the kind of the arguments that you have around too big to fail. Why is there such a big gap between your perception of whether or not you have enough capital, and their perception of why, and their belief that you have enough capital?
Well, the big difference is that we don't work on perception. We work on with facts and figures. And, uh, so the issue is that is undisputed even by the authorities that, uh, uh, the proposed regulations that will cost, uh, 22 billion of capital. The fact that we have a strong capital position right now with some buffers doesn't take away that the impact of the new regulation is 22 billion. So it's not correct to say that the impact is 9 billion, the impact is 22 billion. And, uh, so what we put out as, uh, uh, you know, a series of, uh, of topics that tries to explain the difference within, uh, interpretations with facts. And, uh, and what we want to do is to contribute to a fact-based, uh, decision process by the stakeholders that will need to take that decision.
And do you think we are now getting closer to a point at which we can finalize this?
I look at this is in announcing the end of the parliament is a political process. We have no influence on the speed of how they're going to determine that. Yeah. I'm hopeful that, uh, between now and the end of the year, we're going to get some better understanding of, uh, the direction of travel.
I asked that question because three years ago, four years ago, you were one of the best returners of capital to shareholders. You were right at the top. Obviously, what has happened over the last three years. Credit Suisse. What does that mean? The government has has reduced that. When do we get back? Is it next year to the point at which UBS is right back up at the top? How close are we to that point? How much longer do you think investors have to wait?
Well, I think investors have been very patient, and we are very happy that they're going on out to start to be rewarded. The journey. Of course, we had a 17% return on CT1 in 2022. UBS stand alone after three years of work of integrating Credit Suisse. We now going to land, you know, at around 70%. Actually, if you look at our first half, the results, we are at around 17% return on Q1. So this shows how much work we had to put down and how much, you know, investments our shareholders had to put down in order to absorb Credit Suisse. Now we start to look forward, uh, in addition to returning capital through dividend and uh, and share buyback, we have now a better platform that it will allow us to grow further and, um, and to be competitive and successfully successful.