UBS Group AG

Ladies and gentlemen, good morning. Welcome to the UBS third quarter 2020 results 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 third 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 latest annual report, together with the additional disclosures included in our quarterly reports and related SEC filings. And now, over to Sergio.

Thank you, Martin, and good morning, everyone. We were all hoping to be in a better place on COVID by now. The state board is still facing a difficult situation with Europe confronted with a wave of infections. I hope you and your families remain safe. On our side, we remain committed to supporting our employees, clients, and the communities in which we operate. In this context, the clients continue to turn to UBS as a stable and trustworthy custodian of their financial assets for advice, the quality and breadth of our products, and for our capacity to continue to lend. Our operational resilience and financial strength are critical to enable us to deliver for them while we continue to execute against our strategic priorities. As for the third quarter, I think the numbers speak for themselves. Pre-tax profit was the highest in a decade, net profit doubled from last year, and PBT adjusted for items of a one-off nature rose by over 40% compared to the third quarter of 2019. Our balance sheet remains strong with capital ratios above our guidance even after establishing a capital reserve for potential future buybacks worth 50 basis points on our CT1 ratio. We have had good momentum all year with strong performance across the first two months as well as since the pandemic began to dislocate markets in March. For the three quarters to date, the return on CT1 reached 17.6%, helped by increased client activity, intense client engagement, and our readiness and capacity to deploy balance sheet. This was achieved despite having to absorb COVID-related headwinds, such as lower credit card revenues in Switzerland, higher credit provisions, and lower dollar interest rates. Positive operating leverage was supported by disciplined cost management, which contributed to a six percentage point decrease in the cost income ratio to 73%, the lowest level since 2006. The way we have been able to manage in this environment highlights our strength and is a testament to our winning strategy and business model and the quality of our people and infrastructure. It demonstrates once again our ability to deliver in all market conditions and is the result of sustained front-to-back investments over the years. Our revenues are well diversified across segments and regions, providing earnings stability and enabling us to capture opportunities where they arise. Our business mix is highly capital accretive, also thanks to our industry-leading returns on risk-weighted assets. All of this reinforces our balance sheet for all season and our ability to build out our loss-absorbing capacity. The pandemic and its economic consequences are leading many people to fundamentally rethink their financial plans and positions. This has translated into higher client activity, as you can see on this slide. The continued progress in bringing together the whole firm with an increasingly integrated offering is also enabling us to develop deeper relationships, which helps to support these results. Our approach is rewarded by our clients. They are choosing to invest more with us, to transact more through us, and borrow more from us. UBS's commitment to APAC and its client has spanned more than half a century, and building out our competitive advantage has been a strategic priority. We continue to be a premium brand for clients and for talent, with a market-leading integrated offering spanning wealth and asset management, as well as investment banking. We have shown we know how to build and grow a successful franchise in Asia, even when, as we anticipated, growth has become more volatile. In this new paradigm, we continue to balance profitable growth with investments for the future. This year's performance in APEC is a validation of our strategy with PBT nearly doubling and with APEC being the largest contributor to the group's earnings so far this year. You cannot be the leading wealth manager without a meaningful presence in the world's largest market. the Americas. There, across our three businesses, we generated 1.7 billion in profits through the first nine months of the year, up 42% year on year. In addition, the deferred tax assets we have in the U.S. mean that pre-tax profits accrete into CT1 capital one for one, a unique feature for UBS. In the third quarter, the Americas was the largest contributor to the group earnings, generating three-quarters of a billion in PBT, double its three-quarter performance from a year ago. Much of this success can be attributed to collaborative efforts across the divisions, including in capital markets for middle market institutional clients led by DIB and Wealth Management, and the successful partnership between Asset Management and Wealth Management to expand their separately managed account offerings. Our full commitment to the Americas is paying off, and we expect cross-division collaboration for the benefits of our clients to continue to be a distinguishing factor for us in the region. are not only strong in absolute levels, but as you can see on this slide, also relative to the best of our peer group. In particular, when you include the full cost of credit that has to be factor in when comparing performance over any cycle. Since 2011, without raising new equity, we have generated 33 billion in capital. of which we delivered or accrued $22 billion for shareholder returns, including $18 billion in cash dividends. The remaining $11 billion was retained to meet higher regulatory requirements and underpin growth. Today, we reconfirm our plans to pay out the second installment of the 2019 cash dividend with an EGM scheduled for next month. Going forward, we remain committed to paying out any excess capital. And as communicated in July, for 2020 and beyond, we plan to adjust the mix between cash dividends and buybacks. In line with this, we have been accruing at about half the rate of the 2019 full-year dividend. We have also built a $1.5 billion reserve for potential future buybacks on which our regulator has been informed and raised no objections. This amount has been carved out of CT1 capital to reflect what we would otherwise have used to buy back share this year. We may make further accruals for buybacks in the fourth quarter, and we are hopeful to be allowed to resume buybacks in 2021. Turning to investor sentiment, our most recent survey, which we will publish tomorrow, tell us short-term optimists improved slightly this quarter. Unsurprisingly, COVID continues to be the number one concern globally, followed by politics. U.S. election remains a key catalyst in the short term. With respect to clients and our potential and our operating model, COVID has accelerated a number of pre-existing trends and we are responding and adapting to the new environment. We are seeing increased digital usage among clients and we are accelerating to meet their needs today and tomorrow. Sustainable investing remains top of our clients' minds, boosted by our performance year to date and a growing emphasis on tailored investments. It's an area where UBS has been a leader for years, and we continue to set the pace. In the quarter, we become the first major global financial institution to prefer sustainable over traditional investments for wealth management clients investing globally. We also rolled out climate-aware asset management strategies across additional asset classes. And lastly, with interest rates across developed markets likely to stay low or negative for longer, our clients need our advice on investing in an environment where regular savings return less than the rate of inflation. To support our clients in their search for sustainable risk-adjusted returns, private markets offer interesting opportunities, and we are investing to further enhance our capabilities. In addition, the smart users of leverage can help to enhance returns. Again, the banking industry is changing rapidly, and there is no room for complacency. we have to make further strides to become more efficient and effective. Adapting is something we are good at. For example, we are constantly reassessing our front to back processes and what the bank and the workplace of the future will look like, along with the implications for our real estate footprint. In addition, we are reaping the benefits from being ahead of the curve on cloud migration, which is propelling us forward on our digital journey. To summarize, UBS is stronger than ever, strategically, financially, and operationally. We remain vigilant in the face of risk in the market and potential weaknesses in the broader economy. In the face of these uncertainties, we are focused on delivering for clients, executing on our strategic priorities, and building on our momentum to prepare the firm for the future. With this, I'll hand over to Kurt to take you through the third quarter results.