UBS Group AG

Ladies and gentlemen, good morning. Welcome to the UBS second quarter 2022 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 Sarah Mackey, UBS Investor Relations. Please go ahead, madam.

Good morning and welcome everyone. Before we start, I would like to draw your attention to our cautionary statement slide at the back of today's results presentation. Please also refer to the risk factors in our 2021 annual report, together with disclosures in our SEC filings. So, on slide two, you can see our agenda for today, and it's now my pleasure to hand over to Ralph Hamers, Group CEO.

Ralph Hamers, Group CEO Thank you, Sarah. Good morning, everyone. I think going through you will see that the second quarter has been one of the most challenging periods for investors in the last 10 years. There's not been an asset class that has been immune to the effects of the challenging global macroeconomic environment. In these uncertain times, our clients rely on our powerful ecosystem to navigate markets and invest for the long term. And our headline numbers for the quarter were strong. And the return on CTE1 capital was 19%. And those numbers included a gain from the sale of our stake in a joint venture in Japan. This gain aside, our underlying performance reflected a good result in a more challenging environment with lower asset levels, higher volatility, and increasing rates. And we're navigating this environment, staying close to our clients, keeping strong risk and credit discipline, and a continued focus on cost. Go to the next slide. Basically, you see that the market sell-off accelerated in the second quarter, and that was the case in both equities as well as fixed income. Inflation continues to be high. The war in Ukraine is ongoing. Strict COVID policies are still part of the life in Asia, and all of these have led to further declines in economic growth outlook. And with significant drop in markets, our client portfolios lost value, resulting in lower client assets across our franchise. Just to put a couple of numbers to that, the MSCI world index was down 17%. Investment grade bonds were down 5% on average. High yield bonds were down 12%. So it's no wonder that our private clients stayed on the sidelines. This quarter, net new fee generating assets were flat for the group, but positive for Asia Pacific and also positive for Switzerland. Transaction-based revenues with these clients declined by 17%. We also saw 12 billion of net outflows in asset management, mostly out of equities. In times of turmoil, liquidity is important. We continue to support our clients through lending with growth, particularly in the Americas. We also focus on deposit offering and optimize our net interest income, where we saw 15% growth across our deposit-taking businesses, and deposits were flat against last year. Client activity was robust on the institutional side, so that's a completely different picture. They remained very active on the back of high volatility. Global markets revenues for that reason were up 10% year on year. Our markets business had another good quarter, traded well on increased activity. We benefited from prudent risk management here, from resilience of our technology platform to basically handle the very high equity volumes coming through the system. And it's clear that it was a challenging quarter for our clients. and for our businesses, but in times like these, it's where our clients need us most and need our advice most as well, and that's what we're focused on. Then looking at some of the particular performances that we showed, our investment ecosystem, Continue to allow our clients with unique insights, opportunities to get through this volatility. This slide, slide five I am right now, highlights some areas of growth in our ecosystem for the last quarter. We're working with our partners to offer our unique, our clients unique investment opportunities. For example, private markets where we saw net new commitments at 3.9 billion for the quarter, or 5 billion on a growth basis. And we see also more potential for this category, private market category. Our CIO recommends that clients with a balanced risk portfolio, risk profile, allocate up to 10% of their portfolios to private markets. At this moment, the average allocation is 3%, so a real upside there. Our offering for separately managed accounts in the U.S. continues to attract inflows as well, $4 billion this quarter, with overall asset under management in the SMAs currently at $115 billion. So that's quite remarkable in terms of performance since we started that in 2020. Sustainable investing is embedded in our purpose and our strategy, as you know, and that's why we report on this as well. We already managed $239 billion of sustainable investments on behalf of our clients. So we're more than halfway to our 400 billion of aspiration for 2025. But we need common standards here to maximize the impact. And that's why we're partnering to create these in many different platforms and subscribing to many different methodologies, but also by contributing to the newly developed Swiss climate scores. MyWay, as you know, it's a module where we actually deliver digital mandates. We saw inflows of half a billion here. We expanded our product offering in line with our CIO views, including an actively managed commodities module here as well now. So that offering to really have your mandate digitally is increasing every quarter as well. And lastly, momentum stayed positive for investment product inflows in Switzerland. These contributed to 8% year-on-year growth in recurring fees. Last quarter, we saw half a billion of positive inflows in investment products, and that's also representing 8% annualized growth. So as you can see, we're delivering on our promise to offer our clients the right opportunities at the right time. Clearly, when times change, The opportunity has to be changed as well and we are literally staying very close to our clients to get a sense for what works for them in their investment portfolios and also in the way we deliver to them in a more digital way. On that note, let me turn to the next slide where we basically give you an update as to how we are leveraging technology as a differentiator while improving our So technology we use in order to improve our user experience, but we also use it for efficiency. And I think this slide shows you that we are accelerating the use of technology to our clients so that they can interact with us through their preferred channels in a seamless way. In Switzerland, Key4 banking, which is a digital-only banking offering, is fast, intuitive. It's competitively priced. We target the mobile-only retail segment here, which grows at 30% year-on-year. So it's a very fast-growing segment that we want to be a player in. Of course, Key4 clients also have access to the classic UBS offering for more specific services. and the platform will be a feeder to those. In Asia Pacific, our Circle One ecosystem is now live. The app connects clients to experts, thought leaders, actual trade ideas through engaging content and videos. So basically an app with very snackable content where people can watch videos, get educated on specific trends, investment opportunities, and as a next step, also executing those. So far, also in Circle 1, the user base is growing fast, and with time, we will add new features, and thanks to the agile development that we actually apply here, and we will have continuous feedback from our clients to ensure that we stay ahead in our development, both in terms of the offering as well as the user experience. As an example, in the next phase, clients will be able to connect with each other and to experts in interest groups that focus on very specific topics, and that could be investing, could be wealth planning, family advisory, sustainability, art philanthropy, and much more. Our strategy to transform how we manage, change, and develop technology is also on track. And you can see that also in this slide where we are executing our cloud strategy to gain further flexibility, to gain further efficiency as well. And we now have around 60% of our computing power fully delivered on cloud, half on the public cloud, half on the private cloud. We're transforming our agile workforce to agile way of working. We're currently having 13,000 employees working that way. This is the second wave we're in. Within these teams now, we see that technology teams are consisting of 65% of engineers. So basically, we're changing the composition in terms of non-engineers to engineers. and that has changed by 10 percentage points, so a real productivity increase coming through if you compare it to the pre-Agile composition of our technology teams. We developed AI technology to help identify and remediate service interruptions in over 500 applications as well, and we've commissioned around 300 applications this year to simplify our tech estate. These are just a couple of proof points how we're making technology differentiator both in user experience as well as in how we manage technology flexibly and efficiently. Turning to slide seven, I'd like to give you a couple of examples of how we are executing our strategy and capabilities in the regions because that's where our strategy comes together. And we're organized in divisions, but where the rubber hits the road is truly with the clients, and the clients are in the regions. So let's talk about the Americas here. The recent dollar interest rate hikes are a primary focus of how we manage our deposit offering. We expanded our deposit offering for that reason. We saw also a continued demand for loans. And as a result of the combination, our net interest income was up 37% versus last year. In Switzerland, we're building a strong foundation on the technology side, which contributes to being named best bank in Switzerland for the eighth time since 2012. In EMEA, as you know, our strategy is very much to improve profitability with a very selective investment in our areas of focus. more towards the entrepreneurial wealth creation, families with large companies, and the build out of our banking proposition to that segment. This strategy we see is delivering results already, specifically on the cost side where costs were down 9% against last year. Lastly, Asia Pacific. And that's also as a result of our continued focus and discussion with clients to show them our mandate offerings. We saw 3.3 billion of net new fee generating assets in the quarter alone. And overall, you see basically, given the fact that we're talking about four regions with a selective update here, you see that regional diversification is really a competitive advantage for us. It's a source for stability. It's a source for resilience. And I think this quarter proved it once again. Now then to a summary on the numbers, and then Sarah will take you through more specific numbers as well, and thereafter we'll have the Q&A. But just ending on the diversification, both regionally and by business. You see the resilience in our financials here on this slide. Our revenues have started to benefit from higher interest rates, and that helped offset the lower recurring fees and the lower client activity levels on the private side. Again, on the institutional side, we saw quite the opposite with good results in global markets. Meanwhile, we remained very disciplined in cost as we executed our efficiency plans. Operating expenses were down a percent. compared to last year. And together with the gain on the sale of the joint venture in Japan, which we already updated you on, this resulted in 2.1 billion in net profit, 18.9% return on CT1, and a 70.6% of cost-income ratio, all within target levels. In the second quarter, we bought back another 1.6 billion of shares, while maintaining capital ratios well above the requirements. So we are well on our own track to buy back around $5 billion of shares by the end of the year. Now heading into the second half of the year, we're well positioned for an operating environment which remains uncertain, certainly the next couple of months, I see that so. But we're very well positioned to work through that, that thanks to our strategy, Thanks to our business model, that values global diversification, operation and financial resilience, strict risk management, capital efficiency, and a strong capital base. So strong reported results, and I think this is also the moment for me to hand over to Sarah Youngwood, our CFO, and she will take you through the underlying performance. Sarah, the floor is yours.