UBS Group AG

Ladies and gentlemen, good morning. Welcome to the UBS second quarter 2020 presentation. The conference must not be recorded for publication or broadcast. You can register for questions at any time by pressing star and one on your telephone. Should you need operator assistance, please press star and zero. At this time, it's my pleasure to hand over to Mr. Martin Ozinga, UBS Investor Relations. Please go ahead, sir.

Good morning and welcome to our second quarter 2020 earnings call. Before we start, I should draw your attention to our slide regarding forward-looking statements at the end of our presentation. For more information, please refer to the risk factors in our LILES annual reports, together with the additional disclosures included in our quarterly reports and related SEC filings. Now over to Sergio.

Thank you, good morning, and thank you for joining us. The strengths, resilience, and diversification of our integrated model have once again been confirmed by the strong second quarter results. As we continue to face challenging environments, we are adapting and accelerating the pace of change, supporting our clients, employees, and the economies in which we operate. while remaining focused on our strategic priorities. The second quarter net profit of 1.2 billion was driven by strong results across our asset gathering and institutional businesses. This led to strong returns, substantial capital generation, and a CT1 capital ratio of 13.3%. These strong results and the first quarter made for an outstanding first half performance. And importantly, these were achieved without the help of any exceptional items in revenues or costs. Net profit for the first half increased 12% year-on-year to $2.8 billion, while TBT was up 9%. or 24% ex-CLEs. Operating income was up 4% with top line growth more than offsetting higher CLEs. NENU money was over 70 billion. My thanks go to all our colleagues who made this possible by showing professionalism and dedication and who have been instrumental in delivering for our clients. I'm very proud of how everybody at UBS is responding to these challenging times. The last few months have brought very volatile and fluctuating market conditions. While measures to contain the COVID-19 pandemic have had initial success in some countries, There has been material disruption to many businesses, as well as increased unemployment. The timing and path of recovery is likely to vary widely. Geopolitical tensions and political uncertainties also increase. Therefore, the range of possible outcomes remains very wide. All this is reflected in our updated macroeconomic scenarios and led us to model increase expected credit loss expenses. Given the continued uncertainty related to the pandemic, it is reasonable to expect elevated group credit loss expenses in the second half of 2020, but below those seen in the first half of the year. In this context, our strong balance sheet, which has been a pillar of our strategy and a source of our competitive advantage for many years is of critical importance. Regarding capital returns, with a CT1 ratio of 13.3% and above 11% post-stress, we are well positioned to pay the second tranche of the 2019 dividend in November as planned. As you may remember, FINMA has expressed its support for our plans for the 2019 dividend. For 2020, regulators around the world have made it clear that they want banks to be prudent and flexible in their capital return policies. Considering the ongoing elevated uncertainties about the size and depth of the crisis, we understand and share this view. As a consequence, while it is too early to be definitive about capital returns for 2020, we are taking a fresh look at our mix between cash dividends and buybacks going forward, having a dividend payout ratio more in line with our most relevant U.S. peers. Our dividend accruals so far this year reflect this thinking. Depending on business development and the outlook in the second half, we don't rule out the possibility for some share buybacks in the fourth quarter. 2020 will most likely be a year in which our capital returns will be affected by the uncertainties around COVID. Beyond 2020, our intention is to continue to pay out excess capital and deliver total capital returns consistent with our previous levels, while rebalancing the mix between cash dividends and buybacks. With return on regulatory capital well in excess of 15% for the first half of the year, we compare very well to our most relevant US peers. This is an impressive achievement, especially when one takes into account we added 2.6 billion to our CT1 capital during that time. As you know, we measure ourselves on return on regulatory capital. For every bank, CT1 capital is the metric which best reflects the equity it controls and deploys in the business, and it is a binding constraint for capital returns. For us, there is a fairly big gap between tangible equity and CT1. with DTAs and dividend accruals accounting for the majority of this. Our integrated business model with diversified revenue streams and broad geographic mix continues to serve as well as do our past investment in the technology space. Our infrastructure investments in digital platforms have been tested and thoroughly validated. over the last few months, placing us among the leaders in the industry and allowing us to reap benefits across all our businesses. This is confirmed by our client growth and their feedback, benchmarking, and the awards we win. The pandemic has accelerated client shift to digital, and our smart solutions in this area are gaining in popularity. For example, in the second quarter, the CIO arranged for more than 50 live streams reaching close to 45,000 clients and prospects. We also introduced new interactive functionality to the live streams, allowing clients to indicate their investment interests and preferences, and providing client advisors with valuable input for more targeted dialogue with them. Last but not least, our staff remain totally dedicated in serving our clients, successfully dealing with the challenging conditions. As the healthcare aspect of the pandemic developments are far from being resolved, a large number of our colleagues continue to work remotely. We plan to gradually increase staffing of our offices while keeping their safety and well-being remain a top priority. In my view, to be a global leader, you also need to have a strong position in a strong home market. Of course, Switzerland is not the biggest country with a population of 8.7 million, but we punch well above our weight in economic terms. Being the number one bank in the country brings us stable and strong revenue streams, but also comes with responsibilities towards the economy, and the wider community, both in good and bad times. Switzerland is considered a safe port during financial crisis, and for good reason. The country has the fiscal strength and resources to deploy when needed. The response to this crisis from the authorities has been effective, and the banking system has played a vital role in supporting the government's efforts. As the country's largest lender, we have been providing funding to clients throughout the crisis, well beyond the 3.2 billion Swiss francs in credit lines we committed to through the government-backed program. We provided over 6 billion in additional NANU loans and commitments to corporate and private individuals. In relation to the government-backed SME loan program, Less than half of our commitments have been drawn by clients so far, with a fairly consistent picture across sectors. We have also seen a number of clients already repaying their loans. In addition, we have seen no particular signs of stress in our mortgage book and credit card exposures so far. All this speaks to the strength and resilience of the Swiss economy and the quality of our credit portfolio. We are well aware that difficult times are still ahead of us. A deep recession is expected in Switzerland this year and the full impact of the economic disruption on the corporate sector has yet to be seen. However, the forecast contraction is less severe than across most of the other developed countries. On a positive note, our latest CIO survey showed robust sentiment among Swiss firms. Over 70% of them expect 2022 revenues to match or increase from last year's levels, and nearly 9 out of 10 expect by then to employ at least the number of people they did in 2019. This further underpins that Switzerland is in a comparatively good position to withstand and recover from this crisis. Now let me give you a glimpse of our most recent investor survey that will be published tomorrow. Global investor sentiment has slightly improved, lifted by the market rebound, but overall, it is not surprising that investors remain cautious. Further developments of the pandemic are top of their list of most immediate concerns, as is uncertainty regarding the forthcoming U.S. presidential election, as 61% plan to rebalance their portfolio regardless of the outcome. Staying close to clients and helping them to navigate the difficult markets continues to be the top priority for us. Recent months have shown quality of advice is just as critical as wants, technology and platforms. The pandemic is also sharpening the market's understanding of the importance of climate transition and certain social issues for investment risk and opportunities driving further acceleration in interest in sustainable finance. So it's not surprising that nowadays everyone talks about sustainable investments and their capabilities. At UBS, sustainable finance has been a critical component of our client offering and strategic growth opportunity for many years. And that's why we are a clear market leader today. In the first half of 2020 alone, we had net sales of 2 billion for global wealth management, 100% SI multi-asset mandate, with assets now exceeding 10 billion. At the same time, clients were also adding funds to asset management SI-focused products, increasing assets under-managed by 10 billion to an all-time high of 48 billion. We will continue to support the increasing client demand in this space, delivering the best of UBS content and capabilities to them. That's the reason why we are creating the UBS Hub for Sustainable Finance, in order to facilitate the sharing of insights from experts across our firm and across our extensive network. The last few quarters showed that UBS is one of the most front-to-back tech, safety, and agile financial companies. Having said that, the lessons from the crisis is clear. There is no room for complacency, and you cannot afford to slow down investments that are necessary to be competitive. Therefore, we are already thinking ahead and reviewing areas where we can accelerate our plans to build on our momentum. For example, we are enhancing our clients' digital experience through new interfaces and functionalities. We are doing so by leveraging our resources and creativity. We are also open to cooperation with others who have interesting ideas and high-quality solutions. Automation and technology enablement is also more relevant than ever. We plan to roll out more robots and accelerate our migration to cloud. Lastly, with over 95% of our workforce able to work remotely and with the majority of doing so for an extended period of time now, we are reassessing the way we will be working going forward and the impact on our real estate footprint. As we speak, we are working on plans regarding our offices and branch networks. However, any change would be gradual. We have to ensure the most appropriate working arrangement for our staff. For our branches, we have to balance both revenue and savings aspects of any changes and serving our clients to our high standards. remains critical. With that, let me now hand over to Kurt for our Q2 results.