Our plan is not relying on overly optimistic market assumptions, and if necessary, we have the flexibility to adjust our plans as needed to respond to changes in the underlying assumptions. When our cost and capital efficiency measures are behind us, we expect to increase — we expect our increased scale and enhanced client franchises will position us to attain sustainably higher returns, starting with a reported return on CET1 capital of around 18% in 2028. With that, I hand back to Todd for more details on our plans.
Todd Tuckner: Thanks again, Sergio. The strategic and detailed planning we’ve undertaken over the last several months now informs a clear path towards our objectives of generating an underlying return on CET1 capital of around 15% and an underlying cost income ratio of less than 70% by the time we complete the integration of Credit Suisse at the end of 2026. In the next few minutes, I’ll describe the ways in which we expect to achieve these objectives, offer details on trajectories and comment on how we’ll measure progress. I want to emphasize that our plans are based on the complex work required to restructure a cost base that at present supports the infrastructure of two GSIBs and to enhance the returns on financial resources deployed in our core businesses that have been diluted by the acquisition.
These significant efficiency undertakings come at a cost, whether through integration-related expenses or somewhat slower net new asset growth while we optimize the balance sheet over the next few quarters. Ultimately, the key to delivering our long-term financial ambitions is the discipline we’re applying now in driving cost and financial resource efficiency. Moving to slide 30, which provides an overview of the main drivers of the expected return on capital uplift between now and the end of 2026. Our financial ambitions are mainly dependent on controllable factors and market assumptions that are in line with consensus rather than blue-sky scenarios. Our focus is on building high-quality and sustainable revenue streams to support healthy and attractive returns over the long-term.
In this respect, we’ll drive most of the improvement over the integration timeline by right-sizing our cost base, optimizing financial resources and normalizing the tax rate. Importantly, by building our plans primarily around cost and resource optimization, we retain flexibility and optionality in execution. For example, while we expect to continue investing for growth in our core businesses, we have discretion to pace the spend in case markets are less constructive. Finally, as we progress with simplification of our legal entity structure, we’ll see additional support to our capital returns from the normalization of the effective tax rate, dropping to around 23% by 2026. Moving to details of our revenue expectations on slide 31. First, we believe GWM’s income outside of NII will be one of the main drivers of our growth.
As we expand our GWM invested asset base and enhance our solution offerings and capabilities, we expect to increase both recurring fee and transaction-based income with stronger net margins. By staying close to our clients, continuing to win back assets and offering differentiated products and services to help navigate challenging market conditions, we expect to attract around $200 billion in net new assets over the next two years. While optimizing returns on financial resources. Beyond 2025, with the optimization work largely behind us, we expect annual net new asset growth to build to $200 billion by 2028 and to surpass $5 trillion in assets under management at that time. In addition to growing our asset base, we believe we’re in a strong position to offset some of the structural fee margin pressure visible in the industry by leveraging a unified shelf of CIO-led products and solutions, as well as increasing discretionary mandate penetration across our expanded client base.
Further positive contribution to our GWM topline is expected from transaction-based fees. This growth is expected to be driven by the continued expansion of distribution channels and product capabilities, including growing and leveraging our successful GWM IB joint coverage initiatives, as well as broadening our scalable transaction-based advisory offerings for high and ultra-high net worth clients and clients with professional markets expertise. On top of revenue improvement, we also believe we can enhance GWM’s net margins and drive greater returns overall by leveraging the benefits of increased scale, realizing cost synergies from the Credit Suisse integration and emphasizing data and AI capabilities to improve advisor productivity. Second, in our Investment Bank, we’re well positioned to achieve revenue accretion relatively quickly, especially as we’re selectively adding key Credit Suisse IB resources directly to the UBS platform.
As a result, we accelerate our IB strategy by doubling our banking presence in the U.S. and building on our market-leading strengths in Switzerland, EMEA and APAC. As the newly onboarded bankers return to full productivity over the next 12 months to 18 months, we expect banking to generate almost twice its baseline revenues by 2026, assuming supportive markets. We also aim to drive incremental client flow across derivatives and solutions, execution services and financing, with support from around 400 Credit Suisse colleagues joining our markets business. Additionally, we expect continued revenue growth in the IB from technology and resource investments we’ve made in capabilities such as research, FX, prime brokerage and equity derivatives and from increased connectivity between the IB and GWM.
We also price in a return to more normalized markets versus 2023. Moving to net interest income in GWM and P&C. As I mentioned earlier, we expect NII in U.S. dollar terms to remain roughly stable in the first quarter of 2024 versus 4Q23. As we look out beyond the first quarter, full year 2024 NII is expected to decline by mid-single digits from annualized 4Q23 levels, mainly on lower rates and as our financial resource optimization measures impact loan volumes. Over the second half of the plan horizon, we expect NII to recover, resulting from funding cost efficiencies, stable implied forward rates and improved loan revenues. I’ll cover the steps we’re taking to drive funding efficiencies in a few moments. Rounding out the revenue picture across core businesses, we expect stable revenues in P&C outside of NII and in Asset Management as we take actions to offset market headwinds and potential dissynergies from the Credit Suisse acquisition, while focusing these franchises on driving cost synergy realization and improvements in operating efficiency.
In particular, P&C will continue its focus on winning back flows, improving asset efficiency and defending market share in Switzerland. While Asset Management embeds new investment capabilities acquired from Credit Suisse and continues its key role in providing advisory support to our Global Wealth Management clients. Finally, in NCL, we’re not pricing in revenue growth as we look forward, as the now largely fair value book reflects our expectation of exit prices. The roughly $3.1 billion of PPA adjustments we made to the NCL accrual book before we tagged most of the positions as held for sale are now subsumed in the marks. Hence, we expect NCL revenues in any given quarter from here to be around zero, with position P&L from sales, unwinds and marks, net of hedging and funding costs all to be broadly offsetting.
Of course, as our first priority in NCL remains taking out costs and releasing sub-optimally deployed capital, we’ll at times sacrifice P&L on position exits in pursuit of these aims. Turning to costs on slide 32. Of the around $13 billion in gross cost saves we expect to deliver by the end of 2026, around $4 billion or one-third are already reflected in our 2023 exit rate. By the end of 2024, we expect to generate more than $2 billion in gross exit rate saves, with more towards the latter half of the year after completion of the largest legal entity mergers. As indicated on the slide, we expect to drive further gross cost saves of around $4 billion by the end of 2025, with the balance coming out as we exit 2026. The non-linear trajectory of cost saves between 2023 and 2026 reflects the intensity of our integration work, with the legal entity mergers, migration of over a million clients and decommissioning of platforms requiring significant levels of workforce to execute against our timelines, especially over the next 12 months to 18 months.
As we progress on and ultimately complete these complex aspects of the integration, our resource requirements for these various programs of work will diminish, leading to considerable cost reductions by the end of 2025, when we expect to have delivered a substantial portion of our integration milestones. The back-end portion of our cost save plan relates mainly to completing hardware and software decommissioning, in particular, switching off redundant legacy applications and infrastructure. This includes the applications in the various support and control functions, like risk and finance, where the work is naturally sequenced to follow the completion of client-facing technology decommissioning. As Sergio mentioned, we’ll reinvest part of the gross saves generated from the integration into enhancing the resilience of our technology estate and funding organic business growth in our core divisions.
In terms of the nature of the gross cost saves, we expect that roughly half will be personnel-related costs as we streamline our front office operations across businesses and deliver synergies in our support and control functions. The remaining balance of saves will be derived predominantly from hardware and software decommissioning, real estate rationalization and reduced service requirements from external providers and contractors. Moving to integration-related expenses, which we expect to total to around $13 billion by the end of 2026, including the $4.5 billion incurred to-date. Our objective is to front-load these expenses where possible, as they typically pave the way for run-rate savings. For example, in real estate, we’ve taken restructuring and impairment charges on select properties, reducing the current run-rate cost of our footprint by $400 million per year, down 15% from 2022 levels.
This save comes as a result of taking $1 billion in integration-related real estate charges through the end of 2023, with a payback of two and a half years. This said, the timing of integration-related expenses and the resulting saves vary, depending on the cost category. Some charges can be provisioned upfront, as in the real estate example, while other provisions are recorded later, like severance costs for personnel whose services are required until an integration milestone is completed, such as the legal entity mergers or client platform migration. While we remain focused on accelerating these costs to achieve future savings wherever possible, we nevertheless expect to recognize integration-related expenses over the entire three-year planning horizon, albeit with as much as 80% to 90% incurred by the end of 2025.
