Vontobel Holding AG

Today, Georg, Thomas and I will provide you with an update on our 2023 results and key decisions that we will implement to accelerate the execution of our strategy. Let me first share our observations on the market backdrop in 2023 and how this shaped our results. Entering 2023, the questions on every investor's mind were how high will interest rates go and how much damage will these do to the growth outlook? In addition, it was clear that after a disastrous 2022, the priority of investors, and in particular the more tactical ones, was to protect capital at all costs. This starting point, coupled with the highest cash rate since before the global financial crisis, led investors to either wait and see or flee towards safe products and money markets. Emerging market equities were particularly hit due to the geopolitical tensions and a China that has been viewed less and less market friendly. The last quarter of the year has given a glimpse of what is probably now in store. As major central banks indicated that they reached the peak in the tightening cycle, equity and fixed income assets enjoy a significant rebound and the dollar was hurt. With growth data remaining relatively robust globally, the end of the tightening cycle reached, and yields in fixed income historically elevated, this should induce investors to start dipping their investment tools again in 2024. Turning to our key messages for 2023. Our operating profitability is robust at 263 million before tax, with good momentum in our private clients' business. Our assets under management are stable at 207 billion on inflows from private clients and market performance. We retain a very strong capital position with a CT1 ratio of 18.7% that enables us to propose a non-change dividend of 3 Swiss francs per share at the upcoming 2024 Annual General Meeting. 2024 will be about sharpening and accelerating our strategic execution, and it will be about continuing to anticipate our clients' needs. Today, we are sharpening our delivery model by organizing around two client segments only, private clients and institutional clients. To these clients we will offer all of Fontobel's investment solutions and digital capabilities. Anticipating the future demand for infrastructure and the benefits for our clients to get access to this segment, we are entering the highly attracting sector of private infrastructure equity by taking a significant minority stake in Ankala, a successful independent investment manager focusing on critical mid-market infrastructure. We also recognize that we must free up resources for growth. This is why we are launching an additional cost program targeting 100 million in cost savings by the end of 2026. Let me now hand over to Georg.

Good morning and a very warm welcome also from my side. As Crystal just said, we are announcing today that we will operate with two client segments going forward. private clients and institutional clients. Both will continue to benefit from all of Fontobo's investment products and of course be powered by a robust digital platform. Digital investing, our hub for innovation and digitalization, will be integrated into the organization. This segment has been instrumental in incubating the technology for serving clients who prefer a digital interaction. Now it's time to leverage these skills across the organization. In other words, with this integration, we accelerate our firm-wide digital transformation. Now let's turn to our private client business, combining former wealth management and former digital investing. Overall, we had a good momentum with operating income up by 8%. This business has four key success factors. Firstly, we are investment-led, not credit-led. This allows us to maintain a conservative risk profile and to grow in a highly capital-efficient manner. Secondly, more than 90% of assets under management are from developed markets, where we have demonstrated capability to grow. This footprint also reduces our exposure to geopolitical risks. Thirdly, we have a very successful approach for hiring and developing new relationship managers. This enabled us to seize further opportunities last year. We successfully increased the number of relationship managers to almost 360. That is a net increase of 42. For this, over 700 candidates were interviewed and evaluated. Finally, our industry-leading digital distribution model for structured solutions will continue to play a crucial role in servicing our clients. Now let me turn to our institutional client business. During the past year, we saw investors increasing their allocations to cash and money market products. They also adopted the risk-off stance, increasing their allocations to benchmarks and indices, while reducing their exposure to emerging markets. We could not escape these industry dynamics. Still, Assets under management were fairly stable, based on a positive market performance and a moderate recovery in flows. After two consecutive years of negative industry fund flows, we do believe that central banks might be reaching the end of the tightening cycle. The last quarter of 2023 showed some first encouraging signs with increasing forward visibility and a more constructive sentiment. We are well placed to benefit from such an industry recovery. Fixed income is likely to lead and in this space we have a strong product offering. In addition, the large majority of our flagship funds are well ranked. We do recognize that we have more work to do on our emerging market franchises. And finally, we see new opportunities for growth with our entrance in the private infrastructure market. Now back to you, Crystal.

Fontobol is by choice and conviction a resolutely active investment manager. To be successful, it relies on highly experienced teams of specialists focused on the segment of expertise. All these teams, independent of the target client segment, whether private or institutional, are part of investments and receive the exact same mission, to deliver institutional investment quality. We have an offering that spans all asset classes, in particular as we are now entering private markets as well. While performance of active asset managers always fluctuates through the cycle, Let us look at the important three year time horizon and the percentage of our assets ranked in the top best 25 or 50% of the categories, or in other words, ranked first or second quartile. We see that 56% of our equity funds, 70% of our fixed income funds and 93% of our multi-asset products are ranked in the first or second quartile. Our multi-asset products are primarily mandates and so not immediately accessible to analysts, yet they represent a substantial and growing share of our assets under management and one that is strongly performing as can be seen. Our equity ranking is currently penalized by our emerging markets franchise, where we are working with the teams to improve on performance. On the other hand, our impact equity fund and our developed market equity franchises are well positioned versus their peers. Now let's turn to our announced investment in Ankala. This marks an important milestone in delivering on our strategic priority to enter private markets. Encala is a highly experienced, London-based, independent private infrastructure manager with strong growth prospects. Private infrastructure has seen strong demand in the past 10 years and is expected to be one of the fastest growing segments of private markets in the years ahead, with an expected compounded annual growth rate of around 16% over the next 3 to 5 years. a growth that is strongly supported by favourable structural macro tailwinds. Through this acquisition, our clients will be able to access the stable cash flows, the inflation protection and the low correlation to the overall economic cycle that this asset class offers. Their returns will be further enhanced by the long-term value creation brought by Encala's active management of the underlying assets. Ancala is a firm founded in 2010 with more than 4 billion euros in assets under management. It has a solid performance track record and a demonstrated ability to source unique investment opportunities. It focuses on critical mid-market infrastructure and has proven to add long-term value by proactively managing its assets. Ancala recently closed its third flagship fund, which raised 1.4 billion euros in commitment, surpassing its target. Frontobo is today acquiring a significant minority stake. We are fully aligned for future growth and success and have agreed with Ancala, our associate, about acquiring remaining stakes over time. The transaction is conducted out of fundable excess capital and as a consequence is earnings accretive from day one. The transaction structure ensures that we are fully aligned with Ankala to generate long-term growth and that when we do increase our investment in the future, we will buy locked-in revenues. Now let me turn to costs. Despite good operational performance and savings of 65 million at an exit rate last year, our cost-income ratio is above our target. This is in part due to our strategic long-term investments through the hiring of relationship managers and the acquisition of SFA. Today, we recognise the need to do more and are initiating an efficiency programme targeting cost savings of 100 million by end 2026. We strongly believe that we can further sharpen our organization and become leaner in how we operate. This is how we will reach our 72% target. Beyond this target, we view this program as critical to retain our full strategic flexibility and being able to release the necessary resources for future growth and improvement opportunities. We will share details on how we progress over the course of the year. Back to Georg.

As Crystal introduced in the beginning, we are sharpening and accelerating the implementation of our strategic initiatives, while anticipating future developments. This will enable us to reach our ambitious through-the-cycle targets. They remain unchanged. With that, let me hand over to Thomas, who will cover the financials.

Thank you, Georg. Good morning and welcome. Let me begin with a look at the net income development. When starting with the 230 million net income from 2022, Fontobel's underlying operating performance increased by 39 million. This means adjusted for headwinds and the announced investments in wealth management, the organization has improved the result by more than 10%. So what headwinds did we have to deal with in detail? First, the strength of the Swiss franc had a negative P&L impact of 25 million Swiss francs, 16 million of which was driven by the US dollar exchange rate alone. As a Swiss-based firm, we have 78% of our costs in Swiss francs, but only 45% of our revenues. We're therefore structurally exposed to a strengthening Swiss franc. Taxes increased by 11 million as our success in wealth management shifted more profits into our Zurich-based entities. Last but not least, we decided to seize opportunities to invest in the future growth of our wealth management business. The net hiring of 42 relationship managers and of course selected support functions contributed 16 million to our cost base. In addition, we had to deal with the same headwinds that many other active asset managers felt, a muted demand for investments in actively managed investment solutions. So all in all, this resulted in a 7% lower IFRS group net profit of 215 million Swiss francs. We believe it is a solid result, given the challenging environment. Assets under management increased by 1% to 206.8 billion CHF. Net new money, which I will refer to without the outflows from our market focus initiative, overall stood at minus 1.4 billion. FX headwinds cost 8.2 billion and the performance of our assets contributed a positive 15.3 billion. Last year, we have decided to focus our wealth management offering by exiting the Russian market and closing our Hong Kong Wealth Management Office. This led to a total reduction of 3.3 billion in assets under management, of which 2.1 were incurred in 2023. Looking at net new money, the overall outflows have improved year over year by almost 4 billion to a negative 1.4 billion. While wealth management remained constant on a high level of positive inflows, asset management was able to reduce the outflows to 6.7 billion. Let's be clear, it is an improvement, but it is not what we aspire to achieve. For the operating income, The operating income increased by 2% on higher net interest income and inflows in wealth management. Net interest income increased by 78% to 180 million. We saw a slight slowdown in the second half to 85 million. This was caused by dividend income that occurs only in the first half, but we also saw a slow increase of refinancing costs as more and more clients are looking for higher yielding deposits. Net fee and commission income is down by 6%, which is a consequence of the revenue decline in asset management. On client units, wealth management saw a 16% increase of revenues driven by interest income and inflows. Digital investing posted a decline of 16%. Client demand for structured products through digital channels was slow, in particular in the second half of the year. In total, the overall structure product business has remained stable, which compares fairly favorably to the industry. On the gross margin, the margin picture across asset management and wealth management was mixed. The asset management margin declined year over year by one basis point. This decline is a result of the business mix. In particular, the higher margin emerging market business has seen outflows across multiple boutiques which could only be partly compensated by the rest of the business. As mentioned already by Crystal, we have seen slow demand for emerging markets products due to continued geopolitical tensions and a generally lower risk appetite of our clients. This change in the business mix not only explains the margin decline, by the way, but most of the development in asset management. Wealth management margin increased by 7%. Commission income remained stable. Recurring income makes up now more than 50% of the margin. Turning to costs. Year over year, our operating expenses increased by 25 million to 1 billion and 42 million for 2023. This is largely explained by an increase in personnel costs. To explain this increase, we have to look a little bit closer. First, we have targeted a cost reduction effort one year ago. The objective was to deliver 65 million exit rate cost reduction with a cost to achieve of 15 million. We can say that we have overachieved this target. We have been faster to implement and the costs to achieve were lower than planned. This means that the overall in-year impact from cost reduction activities was a positive 30 million. Our investments in the future growth of wealth management have increased our costs by $16 million and SFA by another $18 million. 2023 was the first year when SFA was consolidated for the full year. The closing of the SFA acquisition took place on August 1, 2022. Hence, the costs of SFA only accrued for five months in the previous year. That explains the additional $18 million. Finally, we have a 21 million year over year variance in accounting items related to personnel costs, which we have already reported in the half year results. Nevertheless, and despite all the explanations, net-net, the cost-income ratio increased to 79.5%, which is not where we want it to be. Hence, we are going to step up our cost reduction efforts to reduce our cost base by 100 million. This is a 10% reduction of the cost base after we have already realized roughly 6% in 2023. The cost program will be delivered by the end of 2026 and at current P&L levels will bring us to a cost income ratio of around 72. Of course, this effort will affect employees, but we aim to realize as many savings as possible through natural fluctuation. Over the course of the year, we have further strengthened our balance sheet and our capital position. Our total capital ratio remained flat at 23.8%, the liquidity coverage ratio at year-end stood at 264% and the leverage ratio at 5.4%. All very comfortable numbers. The CT1 ratio has improved significantly over the course of the year to 18.7% on our continued tight capital management. In this context, we have successfully refinanced the AT1 end of September from 450 million Swiss francs to 400 million US dollars at attractive spreads. This was the first larger AT1 issuance in Switzerland since the events in March. The performance AT1 ratio after the Jankala participation is at 16% and the Tier 1 ratio at 21%. Also, from a financial point of view, Ankala is an attractive investment. First, the infrastructure business is expected to grow significantly. And with Ankala, we have a credible and scalable stronghold to participate in this trend. Second, since we pay for the participation with excess capital, the acquisition is per se earnings-accretive. And third, we buy a stream of revenues which are locked in for 10 to 15 years. Even when we increase our investments in the future, we will always buy in sync with locked in revenues. So the transaction offers downside protection while the underlying asset has significant upside potential. Finally, It is important to mention that we continue to be conservative on our overall risk profile. We have reduced our risk position across the board at the end of 2021 and have remained careful since. This means we're also careful in our lending approach. We are investment-led, not credit-led. We do not do any corporate lending. We do not do any complex structured lending. Generally, we do Swiss mortgages and we lend against liquid assets in diversified portfolio. So as a consequence, we did not suffer any write-offs or provisions in connection with the latest events in the real estate sector. due to the high public interest in that topic, we would have disclosed it otherwise. And with that, let me move on to the long-term perspective. So why do we always show a more than 10-year history? The answer is because that is what we manage against. long-term value creation and capital accretion. We believe that this is the core to be successful in financial services, create value and generate capital over the medium to long-term. Fontobel continuously creates value to shareholders since 2014. Our ROE stands at 10.5% versus a cost of equity of roughly 9%. The return on CET1 capital is 18.7%. Dividends over the whole time horizon have also increased almost threefold and we propose a dividend of 3 CHF per share. Now let's look at capital accretion. The tangible book value per share plus dividends paid out has increased by more than 140% since 2011. And except for 2018, where we have made the large Notenstein La Roche acquisition, so we didn't reduce capital, we invested into Goodwill, the tangible capital accretion was positive every year. The capital-light business model we pursue and our conservative risk profile allows us to compound steadily. So let me repeat this. We believe that the key to long-term success is to create value, to generate tangible capital and to compound. And this we have achieved again in 2023. So, to summarize the year from a financial point of view, we have shown good underlying operating performance and a solid IFRS group net profit of 215 million CHF, despite the headwinds that we mentioned. Yet, we are going to step up our cost reduction efforts to reduce our cost base by 100 million CHF. Our balance sheet and our capital position is strong, even pro forma after taking a participation in Ankala, which is strategically and financially an attractive acquisition. And finally, we have continued our long track record of value and capital creation. And with that, I'm finished and give back to Georg.

Thank you, Thomas. Let me reiterate. In 2023, we achieved a robust profit before tax, stable assets under management and a very strong capital position. For 2024, we will sharpen, accelerate and anticipate on our journey to reach our strategic priorities. This includes sharpening distribution to two client segments, anticipating future growth by entering the attractive private infrastructure market business and accelerating operating performance by launching additional cost measures. We believe Fontobl is exceptionally well positioned for the future. We have a long-term oriented business model, a strong culture, outstanding talent and the right leadership team. Today we started the journey to drive our strategic execution guided by our framework Sharpen, Accelerate and Anticipate. Now let's open for questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and 2. Anyone with a question may press star and 1 at this time. The first question comes from Daniel from ZKB. Please go ahead.

Good morning, everybody. Thanks for the presentation and for taking my questions. Actually, I have quite a lot of questions. I may start with three and eventually come back with more questions if there is no other questions. So, first on the cost savings of this 100 million, can you maybe talk us a little bit more through where exactly you see the potential for cost savings and how shall we see this cost savings, will this kind of be some gross cost savings and mostly kind of reinvested into the business or will we also see really a net reduction in the cost base by 2024? Then the second question is about this hiring of 40 new relationship managers. Can you maybe give us some more color from where these relationship managers are coming and which kind of regions they cover or segments or areas in the wealth management space they are responsible for. And then maybe third on your acquisition in the private market space, as I understand Ancala is a kind of private infrastructure player in private markets. So can you talk us a little bit through how you kind of cover the rest of the private market space? Do you have partnerships in private equity? you are working with or do you plan further acquisitions in the space also in other sectors of the private markets industry? And then just one last one, sorry, then it's four. The trends in net new money and wealth management, we've seen kind of a slowdown in net new money generation into Q4. Can you talk a bit about seasonal effects and the leveraging and what has driven this kind of trends we've seen there? Thank you.

thanks daniel for your questions i start pick up with the cost savings so the cost savings will be in the areas that you would probably expect it it is around the business model focusing our business model align the staffing with the demands automating processes, restructuring our IT, our infrastructure, reviewing where we invest and so on and so on. So this is the areas where we go. The objective is clearly to get the cost income ratio to 72. If you take the current P&L and you just subtract 100 million from the costs, you get to roughly 72, 72.2 or whatever the number is. um so the objective is not to immediately reinvest and if we reinvest so if we do this we would do this with only very short with rep very have very short time period of where the revenues would return basically the investments so very short that's the idea of it We have laid out a high-level plan. We are ready for execution. The reason why we don't give all the details over time and so on is FontDouble, as you know, and as we have discussed here a couple of times, does not have this aggressive culture where you go in and just beat people and out with the cost and all these things. What we want to do is we want to be careful enough with this cost program that we do not hurt the revenue lines and the net new money coming into the firm. So we want to take this step by step and very carefully, but we will keep you updated, of course, very closely on how this is going and what the numbers will be. So that's all for the costs.

Yes, and thank you, Thomas. Let me talk a bit about the relationship managers. You know, where do they come from was one of the questions. They come from many different institutions here in Switzerland. We don't focus on one specifically. I've said before that we have interviewed over 700 actually relationship managers. The reason for that is that we want to make sure that one you know the people fit our culture they fit our risk appetite very importantly their portfolios fit our strategy you know as we mentioned we have for 90% in developed markets so that is the overall picture we don't you know we don't publish individual persons and what markets they are from but I basically It's an add-on to the current strategy that we're driving in wealth management. Should I quickly take the net new money and then we go to Ankara? So net new money seasonal fourth quarter. Fourth quarter is always a bit seasonal in the sense that it's the most difficult quarter to foresee what is happening because a lot of adjustments were made at the end of the year. However, we have published that we have a strategic review of some of the markets and as you see also in the annual report we have due to market exits reclassified some of the clients that are being, yeah, are being asked to leave because we do not follow those markets anymore. That's in this seasonal figures.

I will take the question on Kala and our strategy to enter private markets. We had presented back in November 2022 how we intend to enter private markets. And there were three steps or three lanes, if you wish. Number one, to offer private markets to our private clients through a partnership with an institutionally recognized player. So this we announced back in August. We have entered a partnership with portfolio advisors and are looking to launch vintage products with them. Secondly, we're looking to expand wherever it is sensible on our own in-house capabilities. The obvious place is with 24 asset management which has been one of the best known and most successful manager in particular on collateralized credit assets and you should hear more about that during the course of this year. And last we had said that we wish to acquire own capabilities in private markets through acquisition and this is now the third leg of the strategy that we have announced today with the significant minority stake in Ankara. We can turn to the next questions. Thank you for your questions, Daniel. Thank you.

The next question comes from Adam Terolac from Mediobanca. Please go ahead.

Morning, thank you for the questions. First, just a big picture question. Clearly, the environment of higher rates has been a little bit damaging to some of your businesses. We're looking at maybe a turn in the rate environment in the next 12 months. But you're talking about cost cutting on steady state revenues. So you guys don't seem too excited about the potential for revenue upside if we get into a bit of a more normalized rate environment. So just a bit of a talk to the outlook and the impact that rates have had on your business and what the forward look on the rates curve could do. Secondly, I just wanted to think about your balance sheet a little bit. Deposits are down again, H on H. It sounds like competition for liquidity is very high. Obviously, you're very liquid. So what's going on in your balance sheet and on deposits? what's happened on pricing and what that means for the NII outlook would be helpful. And then finally, the fee margin in asset management has come down materially H on H. Clearly, we're flagging a bit of mix effect in there, but a bit more color behind that would be helpful. And then how we should be thinking about the outlook on fee margin, given that mix effect through the second half of the year. Thank you.

Thank you very much. I will take the first question. This is well spotted. It is only a conservative and the easiest assumption that one can take is everything else equal. The hundred millions are not random. It is the number that brings us back to 72. It is also a number that we believe to be achievable. The second part of your first question is about how we see the outlook and the fact that the higher rates have been damaging. I think it's indeed been the transition to the higher rates, the uncertainty that it's created. How high will it be? Will it break the camel's back? And in the meantime, while you visually and nominally got very high cash rates on your money market funds, then most clients have thought, you know what, after such a difficult 2022, let's wait. there. But it is actually not per se damaging to our business. And we are indeed cautiously optimistic about the outlook in the sense that the central banks have indicated that they should be through with the tightening cycle. That means that basically the hurdle to come back and increase rates again is fairly high. And investors will therefore be looking at yields in particular that are at historically high level, a growth outlook or growth situation that against all odds is remaining very robust. And so that is very likely to get them to engaged again. This is how we see it. And for that, we are very well positioned. Our fixed income products rank well. They answer the needs of our clients. We have also other places. I'm starting with fixed income as we are on rates, but obviously on the developed equity franchises, impacts, and then the multi-assets. We do expect renewed engagements from our clients. And for the next question, I will pass on to Thomas.

Thank you. You've asked for the balance sheet and the development of deposits and pricing and net interest income and what this all means. Indeed, if you look at the balance sheet, our customer deposits have gone down. I look at it year over year, 3.2 billion. But don't forget, and we've mentioned this a couple of times, a significant chunk of this got caught under the structured notes, which are other financial liabilities at fair value. So structured notes are, in essence, structure products, which are nothing but a deposit, but they're tradable and they have an icing and so on and so on. But they really have the feature of a deposit. On the pricing and what we're doing here, I think there is a bit of a competition for deposits, which has emerged over the course of the year, start the beginning of the year when Credit Suisse, when it got a bit difficult around Credit Suisse. We do see this, but so far we have abstained from going strongly into the pricing. I told you earlier we have 265% liquidity coverage ratio. We have very liquid balance sheets. We don't need to do this. We do this in case of if we want to have a client, if we do it for franchise reasons, but we don't need to do it for financing reasons. Now, what we saw in the second half of the year, you can see it also in the wealth management margin, we saw that the refinancing costs have been grinding up just a bit every month as clients started to switch into higher fee-yielding deposits. And I think that trend, we're assuming this is going to continue. What we're doing exactly with pricing, I cannot say now. We will look at this on an ongoing basis. But we believe in general the refinancing costs are starting to catch up with the rising interest rates. That's it for the balance sheet.

And that you had the margins as well on the asset management in particular?

On the margins? On the margins, this is driven by business mix. And then we had some catch-up bookings in the second half of the year. So I would not look at first half as a second half. I would look at the whole year because there was some booking shifted back and forth. But it is the business mix. The one basis point, margin decline is explainable by assets that we lost on emerging market products in various boutiques. These were the outflow and they explain why the margin is down. And Crystal mentioned it earlier, or Georg, we're looking towards, we believe that the whole hiking cycle slowly comes to an end. And as the risk appetite returns of clients, we would certainly benefit from this development going forward. And then also the margin should recover again.

Thank you Adam for your questions.

The next question comes from Nicholas Herman from Citigroup. Please go ahead.

Yes, good morning. First of all, I just want to congratulate both Crystal and Georg on your new positions. I know you were appointed in October, but I guess this is the first time since we're speaking, so best wishes from my side. There's a lot to unpack here, so I also have a few questions as well. Firstly, on the acquisition, could you give us a sense, please, of the targets needed for you to upsize your stake and the timing of those options? I guess in the sense that Ancala has just closed its third fund, so presumably won't be growing AUM much in the short to medium term. So that's the first one. On top of that, on the acquisition, I also would like to revisit the rationale for this deal, please. I appreciate that private infrastructure is a high-growth space, but growth at Ancala hasn't been – Super, super strong, I guess, considering in the context that they launched in 2010. So what is it that gives you confidence that together you can accelerate that growth? And I guess strategically, I was also under the impression that you were looking for value-add private markets, whereas it looks like with a 12% to 13% IRR, Ancara is a bit more core, core plus. So just thoughts there would be helpful. And then just finally on the acquisition, what is the expected EPS accretion from this deal? Apologies if I missed that. That was the first bucket of questions. On cost savings, can I just clarify, please, how much of your $100 million is front office, and can you confirm that you don't expect any revenue attrition? And then finally... On margins and class and flows, can I just please confirm the exit rate in asset management? Clearly the H2 was a fair bit lower, and I appreciate that it is mixed related, but presumably the exit rate was a fair bit lower. And then on the wealth side on margin, am I right also that new assets are coming on at a lower margin as well? Is that right? And then just finally, I apologize, I appreciate there's a lot of questions here. Just can you talk about on what you're seeing with your clients on the asset management side, pipeline, RFPs across asset classes, et cetera, and what you've seen year to date? Thank you very much.

Yes, I'll start. Thank you for your congratulations and kind messages. Let me start therefore with Ankala. So the rationale for the deal is the following. Firstly, that as an active investment manager, we have sought to enter private markets. We were intent on going to infrastructure, of course, this was very, very dependent on the partners that we would find. So infrastructure being the top segment that we considered. But of course, that wouldn't have meant acquiring any partners. The rationale for infrastructure, I think, has been well laid out over the last few few weeks. Coincidentally, it has been one of the fastest growing sector. It is expected to be one of the fastest growing sector for structural macro tailwind that we obviously all understand whether it's from digitization, aging society and the rest of that. Oncala actually has on this last two funds, fund one and fund two, is in the top quartile of PitchBook when you look at the rankings. So we have not looked At size, as a matter of fact, we have looked at the solidity of the track record, the solidity of the approach. Is it a firm that goes through financial leverage, which would be a lot less interesting given where rates are going? And we found in Ankala, and that is the explanation maybe for why you look at the growth as being more muted. It's a firm that goes deeply into its asset, that looks to bring value added to its asset. This has two strong advantages. A low financial leverage and they are now at a 33% financial leverage and it has a very positive side effect which is the reputational side is well protected because they truly engage and have continued to provide follow-up financing to the assets that they've engaged with. So this is the rationale for the deal, the rationale for Ankala. Beyond that, as you will imagine, this is a process that takes a long time and so we had plenty of opportunities to test the cultural feet to make sure that we align interest it is absolutely key and probably even more key than with public markets that they can retain the independence in their call it investment process which is not the adequate term obviously for a private market segment but that they retain what is making them successful while at the same time growing together with us. In terms of the transaction structure we won't be able to outline much more than what we have said but we will acquire the remaining stakes over time and as Thomas has said indeed you can relate it to the future funds in terms of timing. And for the EPS accretion, which was the last part, if I'm not mistaken, of your question on Cala, I would pass on to Thomas, which in any case has the follow up questions as well on costs.

The EPS accretion, we have agreed with the seller to not disclose any details of the transaction. So we haven't given the EPS secretion. If you want to make an estimate, take the assets and the management slightly above 4 billion euros. And then I would go with average industry assumptions of the profitability. And that helps you there. Then I wanted to come to the cost question. Your first question was front office versus back office. That's a difficult question in the sense of what is front office. Do we let relationship managers go in waste management? No and yes. Yes, we do this all the time. Georg can talk about this. We have constant churn, we get people in, they have to deliver to their business case. So this is a constant revolving thing. But the focus is clearly not on front office if we mean client facing. What we will do, though, is we will align the staffing with the demand. I mean, areas where we don't see demand, we will have to look into the staffing. And if it's on the front side, then it's on the front side. The whole program is designed to minimize revenue attrition, and it is designed to minimize negative impact on net new money. So that's very important. So there will be more focus on the back office, but it will also affect front office units. Then your next question was asset management exit rate. The asset management exit rate, I told you that we had shifted some bookings between the first and the second half of the year, and that is why it was lower than the average rate, but it was not substantially lower. And as I said, it is all driven by business mix. It is not that on the individual product, we lost pricing power. We see outflows in emerging markets, which tend to have a higher margin. And we see inflows in other products. And that is eroding the overall margin. But that's a matter of it's not, as I said, that we lose pricing or we give in huge amounts or discount or all these kinds of things. So we still stay. disciplined in pricing um i will call it smartly disciplined of course we also give from time to time a fee holiday if you want to keep a client but we we call it smart disciplined on the pricing and then the last question was the pipeline across essay classes um the i can't talk about the pipeline really well what we can say is about how the year has started

Yeah, absolutely. I think that relates to the question about the outlook, how we see it. And I mentioned that we are cautiously optimistic given what we see with the macro outlooks, the fact that we have in all likelihood reached the end of the tightening cycles, that the clients look to be re-engaging. What are they sniffing around? They're sniffing around fixed income, very clearly. They're sniffing around equities, I would say more on the quality side. Of course, it speaks to our book, but this is also where we would see the flows. And multi-asset is something that has been probably under your radar, but where we see continued interest. So while it is a bit too early to speak about flows for the year, certainly the environment makes us cautiously optimistic that this is one where the flows will indeed turn around. And on the wealth management flows, Georg, maybe you want to take that outlook?

Yes. As mentioned before, we had a very good momentum in 2023. And as we have communicated, we have made a significant investment into acquiring relationship managers. So we are optimistic that we can continue that momentum also in 2024.

Thank you for your question, Niklas.

The next question comes from from UBS.

Good morning from my side as well, and congrats to Crystal and then Georg for the new role. I have two questions, please. The first one is on asset management. It's more of a longer-term question, I guess. Given your earlier comments, I was wondering if you could elaborate a little bit more on the work that is needed to be done on the emerging market franchises in asset management, and if you could expand this a little bit. Are you generally now satisfied with the fund portfolio? Do you have an asset management, any gaps that you would address, and any perhaps issues areas where you would address performance, any improvement potential. We would love to hear your views of that. And the second question would be on wealth management, which is broadly on the interest-driven revenue margin in the business. Could you give us perhaps a sense what the upcoming potential rate hikes would mean for that component of the margin? Thank you.

Thank you, Mathieu, also for your kind wishes. Let me take the first question, which I will refer to investments and not to the client segments, institutional clients. But to investments, yes, we have mentioned more work needed to be done on the emerging market, equities in particular. So what did we mean by that? I guess the environment has become more difficult to navigate or slightly different. There's always been the perennial geopolitical risk, which you can never entirely, obviously, or in fact, never predict. But there's also been a lot of macro drivers. And if you think the hint was a little bit the mention about China having been seen as less and less market friendly, you could turn it around and say, more and more interventionist well that has a very much of a top-down consequence and our franchises are deep bottom-up disciplined investment processes which will be very well complemented if you want by taking into account those more macro trends. So this is exactly what we are working on with the teams and that is really the only spot where the performance needs a clear improvement and these are the measures that we are taking with those teams. Are we satisfied with our funds portfolio? I think one should never be satisfied with oneself to start with and always keep looking. We don't have any glaring gaps. We are not looking to enter passive nor are we looking to enter money markets. So that was harmful last year given that these are the segments that have seen the most flows. But we remain on our active segments. We were looking to enter private market. We have taken quite decisive actions now. But looking forward, yes, we will continue to review our portfolio of offering. And the idea is to go to complementary capabilities, stick to areas where active management can add value. And this will be the guidelines, in a sense, on how we approach complementary to our existing book and a space where you have opportunities for an active manager, so not a US Govi's bond funds, if I may say like that. The areas to address performance, I have answered, and these are really on the EM equities specifically. And for the next question, Thomas, I think you'll take it, right?

um the net interest income we have we have presented this a couple of times our sensitivity to interest rates moving is roughly 60 to 70 million per one percent so this is across all currencies across all across the whole term structure interest rates go up and down one percent up delivers us roughly 60 to 70 million fully phased in, I should say. So, what we mean with that is, of course, you see some movements left and right. Clients will react to this. Also, that I have explained or we discussed extensively the last time around in this call. But so, fully phased in, we should make 60 to 70 million more. We're giving a bit less info than our competitors here. We're aware of this. But the point is our net interest income is 14%. So for us, this is a smaller part of the business. For others, it's much, much bigger. And you can approximate this by thinking about the currency. I think also that I mentioned a couple of times on our deposits. Swiss franc and US dollar are the top, Swiss franc a bit more than US dollar, and they make up 70 to 80% of the deposits, deposit currencies. So with that, you can make an estimate of how that will go or make your own assumption on where you believe this is going. I also said earlier what we saw in the second half is slowly grinding down net interest income as on the deposit side, clients move to more yield-bearing deposits, either fixed-term deposits, structured notes, all these things. And on the asset side, you may have seen that we have reduced our credit book quite a bit, particularly on the Lombard side. And this, of course, we also see in the net interest income.

It's very helpful. Thank you very much.

Thank you.

Madame, gentlemen, so far there are no more questions.

Thank you very much. Thank you for listening in. Any more questions?

Not so far, sir. Good.

So thank you so much. Have a very good day. Thank you for your question. And speak to you all soon.

Thank you.