Kian Abouhossein: Yes. First of all, thanks for taking my questions. I — looking at the slides, I can put together a revenue picture as you’re giving some details around risk turn on risk-related assets in the long-term, as well as your risk-related assets overall absolute. So I get to about $48.5 billion of revenues, which implies around a 70% cost income of $34 billion. And clearly, first of all, I wanted to see if the revenue assumption that I’m making here in my calculation is reasonable and what underlying scenarios to use to calculate that? And secondly, on the cost side, clearly, even if I assume some kind of growth rate in cost inflation, I still see that most of the cost savings come from your legacy non-core reduction.
So it looks like a lot of flexibility. So can you talk a little bit about, is my calculation correct to some extent, and secondly, how should I think about the cost flexibility as it seems to mainly come from non-core and legacy? That’s the first question. If I may just, secondly, on the Investment Bank, you’re clearly making a big investment push, and here I want to understand, at what point do you see delivery has to be achieved? I think you mentioned, end 2026 in terms of revenue improvement, but is there any milestone that have to be achieved in order to illustrate that this cost income will continuously improve, not just in the first quarter?
Todd Tuckner: Great questions. Let me take the first. So, I think, in terms of the way you’re thinking about it, I’d say, the key is to think about a cost income ratio below 70% is really the driver as we exit 2026. The revenue picture that we gave, as I commented, is not based on blue sky scenarios. You see that for two of the core business divisions, we effectively priced in flat revenue growth. NCL, we priced in flat revenue growth. We talked quite, I think, appropriately about what we would expect from GWM as it improves its asset base. And of course, on the IB, coming from a low 2023 and given the onboarding of the Credit Suisse bankers we’ve discussed and getting them productive over the next 12 months to 18 months, one could see that our revenue picture is appropriate in that respect and not toppy.
That said, when you look at, say, the return on RWA, which is, I think, what you used as a basis, that is certainly our ambition is to do the financial resource optimization to improve the ratio of revenues over RWA and that’s clearly something we know we need to do. You saw in the depiction of how dilutive the CS revenues have been on that metric. So, clearly, we’re going to keep working on that. But the key, really, the takeaway here is that, as both Sergio and I said, we have the flexibility to pace the reinvestments of the $13 billion in gross cost saves depending on how that revenue trajectory develops. So for us, that’s really the key. Maintaining less than a 70% cost income ratio, that’s where the discipline comes in. And as I said, pricing in what is an appropriate revenue picture and just ensuring we keep to the gross cost saves and then we could pace the reinvestment as appropriate.
Sergio Ermotti: Kian, vis-à-vis your second question on the IB, I think, of course, we do expect the onboarded resources, particularly in the banking part of the business to start to ramp up to average productivity of the incumbent UBS bankers and that will happen and is already happening, to be honest, because we have been observing good mandates winning. Of course, now what we need is the second condition, how do I? First one is, do we win mandates? Do we get tractions? And the answer is clearly, yes. So I’m very pleased with that outcome. Now, the most difficult question to answer is, is the market going to be there to support monetizing those mandates? And what’s going on, it’s very difficult to predict the near future.
So post a very, very hard 2023, but the momentum is very good. So I do think that it’s important to measure that. The other observation I try to take on executed transaction will be, are we gaining market shares? How do we do relatively to our competitors? A third element, which is very important for me, how is the IB contributing to the value creation in our Wealth Management and P&C businesses? Because it’s very, very important, it’s a pillar, it’s a very important driver, and particularly now in the U.S., but also, for example, in Australia, but also in APAC. In general, we can drive this real value creation by working closer together. But lastly, it will be over the cycle, can they deliver return on allocated equity, as we said, as a target?
So it’s a set of short-term and medium-term and long-term measures that we will use. But I’m confident that the trajectory we had in the last seven years, eight years, which has volatility elements will continue, but in a way that accrue value to our shareholders and clients.
Kian Abouhossein: Thank you.
Sarah Mackey: Thanks, Kian. And we now have our next caller, which is Chris Hallam from Goldman Sachs. Good morning, Chris, and we can see you on screen.
Chris Hallam: Thanks, Sarah. So first, on slide 28, if I zoom in on 2026, you’ve guided to an exit run rate of 15% return on quarter one, but for the year as a whole, you flagged double-digit, which I guess is sort of 10% to 12%. So I was just wondering if there’s something specific happening later towards the end of 2026 that’s causing a sort of big jump up in profitability, or perhaps, whether I’m just being a bit too pessimistic on assuming that double-digit means 10% to 12%? And then second, on distribution, we have the details in terms of what you want to do on the dividend this year, also the comments you’ve made on buybacks for 2024 and for 2025. But I was just thinking about how you’d think about the overall payout ratio longer term 2026 onwards and the split in that between dividends and buybacks.
Sergio Ermotti: You take the first.
Todd Tuckner: Thanks. Hey, Chris. So on the first, I think, what’s that dynamic is effectively the benefit of having the full year of 2026 absorb all the savings that we’re working super hard to achieve over the next two years to three years. So during the course of 2026, we’re still going to be taking significant costs out. In particular, the expectation is more in the middle and back office, whereas I mentioned things are sequenced a bit. We have to get the client, tech decommissioning done and you’ll start to see sort of a lot of the middle and back office functions, including, say, my own, where we’ll see more of the cost takeout in the latter part of the journey. And so what you’re seeing really priced in at the end of 2026 is the full harvesting, effectively the complete cost income story, whereas in 2026 in-year, of course, you’re just having the averaging effect over the course of the year.
Sergio Ermotti: Yes. Chris, on payback, of course, in 2026, we’re going to have to factor in different considerations. But, generally speaking, I would say that, we want to continue to have a good mix. I think that our progressive dividend policies are extremely unlikely to change over the long-term. So I think that we want to continue to deliver a cash dividend growth every year. The pace will be a function as well of where the stock trades, right? So at the end of the day, there is an element of balancing cash versus stock depending on where the stock trades. Having said that, I do recognize that also from a prudential and capital management standpoint, share buybacks offers more flexibility, right? So what we want to always make sure that our cash dividend is sacrosanct and our progressive policy is also very, very important.
Therefore, we’re always going to measure this in two ways. Our dividend will be then benchmarked also in respect of making sure that we have an attractive story for more yield-focused equity investors.
Sarah Mackey: Thank you, Chris. And now moving on to Jeremy Sigee, who’s calling from BNP Paribas Exane.
Jeremy Sigee: Thank you and apologies my video is not working actually. So I’m audio only. So sorry for that. Two questions, if I could. So I think what you said about RWA reductions is very welcome, in the target of $510 billion in the medium-term and that frees up a lot of capital, which is really great to hear. You’ve talked about optimization outside non-core, so within the core divisions. And I just wonder if you could sort of talk about that a bit more, just give us some examples of the kind of lazy assets that you think you can cut. So that’s my first question. The second one is back on the capital returns. You’ve talked about 2024 and you’ve talked about 2026 on the buybacks. And I just wondered, in terms of how we think about what you might be able to do in 2025, is 14% CET1 the relative — the relevant thresholds?
Are there other constraints that will constrain you in terms of what buybacks you can do in 2025? So does it have to wait for the Swiss integrations to be done? Does it have to wait for non-core milestones? If you just talk about the constraints that would affect that, that would be great.
Todd Tuckner: So I’ll take it at first, okay.
Sergio Ermotti: Okay.
Todd Tuckner: Hi, Jeremy. So on the first, in terms of RWA reduction, you were looking for examples in terms of optimization in the core. So I’d say, the classic example would be where on — say, on the Credit Suisse side, in Wealth Management, to give an example, we are inheriting a situation where there was just, say, a loan relationship between the bank and a client, and perhaps, we weren’t bringing to bear the holistic client array of services that is our expectation to sort of do now. It’s been the blueprint for us in UBS, GWM, and so that’s just an example where you have kind of a monoline, is a simple example of that. Another example could be pricing. So you might not be getting the pricing for the risks that you’re effectively taking with respect to that financing.
