Tom Hallett: Good morning. Good morning. Good morning. Yeah. Hi, guys. So most of my questions have been answered, but just maybe going back to NII. You’ll say it will grow again in the second half of the planning period. Am I right in just assuming that’s the second half of 2025? So I kind of NII should decline through to early 2025. And then, secondly, one of your peers in the U.S. said the deposit mix changes were kind of ending. Is that what you’re seeing as well and could you maybe just clarify the wider international business, what’s going on with deposit mix changes there or what you expect going forward? Thanks.
Sergio Ermotti: Sure. Hey, Tom. So in terms of NII, yeah, it’s — we see the recovery coming from more mid-2025. So that’s correct, that that’s the right read. So, again, just given how we’re pricing in rate reductions, whether they come, I think, as you know, the different views, but whether they come over 12 months or 18 months. So we’re running our models, but we definitely have rate reductions before we see stability into 2025, for sure. And then that stability then corresponds as well with what we think would be a pickup in loan volumes and loan revenues overall on top of, of course, the funding efficiencies that I talked about at length during my comments that really start to accelerate the recovery in NII in the latter part of the or the second half effectively of the three-year planning cycle.
In terms of deposit mix effects, absolutely, we’ve seen a tapering in the U.S. We started seeing that even last quarter. We’ve been in 3Q. We’re seeing that continue to taper. Still seeing a little bit of that, though, where there’s spillover in higher rates in some of the non-U.S. dollar currencies, in particular in Switzerland. So we’re still seeing a bit of deposit mix shifts, but we sort of price them more or less out of our outlook, once we get beyond 1Q. And in terms of how that looks, across, I think the U.S., we’re now — we’ve seen stability first time since 4Q 2021 that we’ve had the net deposit inflows. So that’s good. In APAC, we’ve actually seen some good deposit inflows also, not least just given wind back.
So there’s that impact as well. And in Switzerland, we’re seeing a bit of a slightly downward move in terms of deposit inflows. So just to give you a sense of sort of the deposit volume as I see it across the spectrum.
Tom Hallett: That’s very clear. Thank you.
Sergio Ermotti: Thanks, Tom.
Sarah Mackey: Great. Thank you. And our next caller is Andrew Lim from Société Générale. Andrew, good morning. We can see you now.
Andrew Lim: Fantastic. Thanks for taking my questions. So the first one on capital, I’m really trying to square your RWA guidance with how you feel about buybacks. So looking at that equation, that $510 billion on RWAs, obviously, quite low versus consensus. But if we take consensus capital, let’s say, $80 billion, $81 billion, then you’re looking at about 15.8% CET1 ratio. So either get to the conclusion that your buyback potential is quite a lot higher than what you’ve indicated or maybe your expectation for CET1 capital is maybe materially lower than $81 billion. So I just wanted to see how you feel about that. And then the second question is on the NII guidance that you’ve given. Obviously, we’ve drawn down into the deposit mid-shift.
But we’ve noted from one of your competitors that also one of the big drivers there has been the leveraging of Lombard loans and I wanted to see if that was actually a big driver for yourselves as well and how this has impacted your thoughts on NII for this year and going forward?
Todd Tuckner: Yeah. Thanks. Thanks for that, Andrew. So I’ll take — on the second one, no, we’re not seeing, I mean, we’ve had some deleveraging that we’ve highlighted in prior quarters. But in — we’re not seeing that as a major factor in our guidance at this point, other than around, the impacts from the resource optimization that I’ve highlighted. But in particular around Lombard deleveraging, we’re not pricing that to any significant degree into our guidance. And I was just trying to pick up on your first point where you were, sorry, you were trying to square where the RWA levels are in terms of how that informs the way you want to think about share buybacks. I just want to understand your point, if you can repeat that?
Andrew Lim: Yeah. So, let’s say we’re taking that consensus of $81 billion CET1 capital. You’ve indicated $510 billion on RWA. So…
Todd Tuckner: Yeah.
Andrew Lim: … that would be 0.15%, 0.9% CET1 ratio. So actually there’s quite a lot of buffer, maybe $5 billion or so above $5.5 billion buybacks that you might be pointing towards from 2026. So, there’s a lot more capacity for you to actually push up your buybacks there or maybe you’re thinking that CET1 capital might be a bit lower than what consensus thinks. So I just want to see what you think about it.
Todd Tuckner: Yeah. I think — okay. Clear. So, yeah, I think, in terms of your CET1 capital calculations, I’m not sure that squares with how we model it under one baseline scenario. But I think it’s fair to say that, if we generate, as we go out to 2026, the extent to which we’re able to generate the returns that we expect to generate at the end of 2026, that there will be sufficient capacity, as Sergio said, to be able to undertake as much share buybacks as we had, in fact, more so than pre-acquisition levels. So, I think, I won’t comment specifically on whether your CET1 number is the same number we consider under one scenario, but I think it’s fair to say that there is share buyback capacity naturally if we hit these targets that we’ve set out.
Andrew Lim: Great. Thanks.
Sarah Mackey: Thank you, Andrew. And now moving on to Nicolas Payen from Kepler Cheuvreux. Good morning, Nicolas. We can see you on screen.
Nicolas Payen: Yes. Good morning. I have two questions, please, two on Wealth Management. The first one would be on your pre-tax profit margin targets in the U.S. You’re targeting mid-teens by 2026 and it’s still significantly below what your U.S. peers are doing. So I wanted to know what kind of levers you can pull to have this convergence towards the profitability level that we are seeing at the U.S. peers? And the second one will be on the net inflow that you’re targeting, are there any geographies where you see the most potential or where you are the most excited about, where the CS merger is bringing new capabilities and new outlook? Thank you.
Todd Tuckner: Yeah. Thanks, Nicolas. So on — look, on the pre-tax profit, as we laid out, I think, Sergio and his prepared comments and mine in response to a question earlier, we’re building back to mid-teens through the work that we’ve described, which we think is quite important. At that point in time, getting to what we think is an appropriate level, given where we are now, then at that stage, we have options to consider beyond that, to narrow the gap further and that’s certainly the plan. So it’s a little bit of walk before we run and we wanted to just be clear that we — the things that we think that need to happen in the U.S. business that we’re going to do over the next three years will set us up for success and being able to then at that stage drive greater returns and narrow the gap further beyond 2026.
In terms of the geographies in GWM that we’re excited about, just off the top and I’ve talked about this before, but certainly places where we become really meaningful, we’re excited about many places that the CS integration brings to bear on wealth. But what comes to mind are places where meaningfully change is what we had in the particular region, just given maybe a focus on different client segment, maybe we exited, so two examples come to mind would be Brazil, more on the former in terms of the client segment we focused on. Another is Australia, where we exited, again, more of an affluent practice that we had many years ago, and we have an opportunity now to inherit a business in Australia, aligned by the way, with the IB in Australia, which is quite exciting and that business is more the high net worth and the ultra, that is our bread and butter.
So two examples where, and for different reasons, of what excites us in terms of the acquisition.
Nicolas Payen: Thank you.
Sarah Mackey: Thank you. And our final caller is Piers Brown from HSBC.
Piers Brown: Yeah. Good morning. Most of my questions have been answered, but maybe just a final one on litigation. Just whether there’s anything in the plan for a sort of a business as usual, normalized charge for litigation. I know you’ve taken a lot of adjustments on CS acquisition and you’ve got $4 billion of balance sheet reserves at this stage, but having had a good chance to look at the casebook at this point, is there anything in there which you think might still burden the P&L over the course of the targets that you’ve laid out this morning? Thanks.
Todd Tuckner: Hey, Piers. Thanks for the question. Yeah. I mean, just refer you to the litigation note, which gives both the UBS heritage and Credit Suisse heritage legacies there. Say that’s the best bet. Otherwise, I just tell you that our provision levels, augmented by the PPA that I described in August, we’re comfortable with the levels we’re at, just given where those matters sit, but that’s all I would comment in terms of litigation at this stage.
Piers Brown: Great. Thank you.
Sarah Mackey: Thank you. And there are no more questions. So it just leaves it to me to hand back to Sergio for final remarks.
Sergio Ermotti: Well, it will be very short. I won’t abuse of your patience. You’ve been with us thank you for two hours plus. Thanks for the questions. Thanks for attending. I hope you got enough information. But most importantly, if you have any further needs or any further questions, please reach out to Sarah’s team, IR or I’m sure between myself and Todd, we’ll have a chance to catch up with many of you in the next few weeks. Thank you for attending and enjoy the rest of the day. Thank you.
