UBS Group AG

Ladies and gentlemen, good morning. Welcome to the UBS first quarter 2026 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 is my pleasure to hand over to Sarah McKee, UBS Investor Relations. Please go ahead, madam.

Good morning and welcome, everyone. Before we start, I'd 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 included in our annual report together with additional disclosures in our SEC filings. Throughout our remarks, we will refer to underlying results in U.S. dollars and make year-over-year comparisons unless stated otherwise. On slide two, you can see our agenda for today. It's now my pleasure to hand over to Sergio Amotti, who today reaches a notable milestone with his 50th earning call as Group CEO.

Thank you, Sarah, and good morning, everyone. In an increasingly complex environment, we delivered excellent first quarter results with a 17% return on CT1 capital and a 70% cost-income ratio, keeping us on track to achieve our 2026 financial objectives. Our performance this quarter reflects our leadership positions in the world's largest and fastest growing markets, with broad-based strength across all of our core businesses and regions. The quarter began against a backdrop of steady global growth and easing inflation. However, conditions quickly shifted, with markets becoming more volatile amid rising uncertainty, driven by concerns over AI-driven disruption and the conflict in the Middle East. As the environment became more fragile, our engagement with clients intensified as they turned to UBS to protect their assets and identify opportunities. Asia-Pacific was a standout performer as our unrivaled client franchises and one bank approach in the region generated around a third of the group's profit before tax and drove robust net new asset growth in global wealth management. The investment bank also delivered exceptional performance, supported by increased collaboration with wealth management and a favorable environment for our business mix and leading franchises in effects, including precious metals, cash equities, financing, and equity capital markets. And we achieved this without changing our approach towards disciplined resource allocation. More broadly, we saw strong inflows across our asset gathering platform while facilitating elevated private, corporate, and institutional client activity and sustaining lending momentum. In Switzerland, we granted or renewed around 40 billion Swiss francs of loans to businesses and households as clients continue to rely on our local and global expertise. Despite the ongoing uncertainties around private credit, we continue to see strong demand for alternatives. Led by our private market and hedge funds offering unified global alternatives, so record quarterly new client commitments. As we move through the second quarter, markets have remained broadly resilient, reflecting expectations that a durable diplomatic solution to the Middle East conflict is achievable. That said, while clients remain engaged and active, risks are still elevated, and conditions could shift rapidly, impacting sentiment and activity levels. In this environment, our focus remains on supporting clients through disciplined execution as well as a prudent and selective investment approach focus on diversification and principle protection. Turning to the integration. In March, we successfully delivered one of the most critical and complex undertakings in our integration journey, the migration of Swissbook clients. As a result, I'm happy to say that the migration of former Credit Suisse clients onto UBS platforms is now complete. client activation and feedback is positive and retention rates have far exceeded our expectations. For this, I'd like to thank our clients for their continued trust and patience, and my colleagues for maintaining the highest standards of service and client focus. We now turn our efforts towards substantially completing the integration by year-end and restoring the levels of profitability we had prior to the acquisition. This is necessary to make our business even more resilient and ready for the future. Part of this will include continuing with the most painful part of the integration, reducing our workforce in line with our previously communicated plans. Finalizing the integration, including the decommissioning of the legacy infrastructure, allow us to intensify our focus on growing our businesses. We continue to invest across the group to deliver the breadth and depth of UBS to clients through a full one bank approach, front to back. This will support enhancements to the client experience and prepare us to drive further efficiencies. The latest example is the conversion of UBS Bank USA to a national bank charter. We are also encouraged to see that our AI capabilities are being recognized. We were recently named the best wealth management firm for use of AI in the U.S. at the Financial Times Wealth Tech Awards. At the heart of this award is our flagship AI platform, which delivers timely and personalized client insights for our financial advisors. Nearly 90% of FA teams use the platform, powering millions of AI-driven client interactions. In this environment, the benefits of our balance sheet for all seasons were evident once again, with strong profitability and disciplined resource usage further bolstering our capital position. This, alongside our integration progress, allow us to continue executing on our capital return objectives for dividend and buybacks while maintaining our investments for the future. We now expect to complete our current $3 billion share repurchase program by the time we report Q2 results in July. Then, we expect to provide more detail on our capital returns for the second half of the year. Our intentions will be calibrated based on our financial performance and outlook, maintaining a CT1 capital ratio of around 14% at year-end and further visibility on the parliamentary deliberation on the capitalization of foreign subsidiaries. Before I hand over to Todd, I want to address last week's announcement on bank capital regulation and what happens next. We have been very clear and transparent about our views on the proposed measures since they were first presented last June. We continue to strongly disagree with the proposed package because it is not proportionate or aligned with international standards and, as importantly, does not reflect the root causes and the key lessons learned from the Credit Suisse crisis. While there are some points that would deserve further clarification, let me just focus on what is still by far the most important one. Regardless on how the figures are presented or which assumptions are applied, there is a broad agreement, including among the authorities, that the announced measures would require UBS to hold around $22 billion in additional capital in CT1 terms. And this is on top of the $15 billion that we already need to hold as a result of the Credit Suisse acquisition under existing regulations. If the package were to be finalized as currently drafted, that $22 billion of capital would be trapped and unproductive. And at such scale, it would impact our competitive position in supporting clients, investing for growth, and delivering sustainable returns that keep UBS as an attractive investment case for shareholders. This is particularly relevant for any bank where shareholders are the first line of defense in turbulent times by providing, if needed, additional capital. As the proposed treatment of foreign participation now moves to Parliament, we hope that a total deliberation will fully consider the rather clear concerns raised in the democratic process by a wide range of stakeholders. We will continue to engage constructively and contribute to fact-based deliberations. Let me be very clear. These developments do not and will not change who we are as a firm. We remain committed to our diversified business model and our global and regional footprint. We are also fully committed to protecting our shareholders while mitigating the impact of these increased requirements, if possible, on our clients and employees and the communities where we live and work. I'm proud of all what we have achieved this quarter, and I remain extremely thankful to all of my colleagues for their dedication in this demanding environment. With that, let me hand over to Todd.

Thank you, Sergio, and good morning, everyone. In the first quarter, we delivered reported net profit of $3 billion and earnings per share of $0.94. On an underlying basis, our pre-tax profit was $4 billion, up 54% year on year, and our return on C21 capital was 17%. Revenues increased to $13.6 billion and were up 18% across our core franchises. Operating expenses were higher on stronger revenue performance. and we're down 7% when excluding variable compensation, litigation, and currency effects. Our cost-income ratio was 70.2%, with strong year-on-year improvement resulting from 11 percentage points of positive operating leverage. Moving to slide six, our profit growth this quarter reflects broad-based momentum across the franchise, the breadth of our geographically diversified platform, and the value of discipline execution. On a reported basis, our pre-tax profit of $3.8 billion included $600 million of revenue adjustments and $750 million of integration expenses. We expect integration costs in 2Q to be around $700 million and to meaningfully taper throughout the rest of the year. The effective tax rate in the quarter was 20.5%. The lower rate was driven by the gain from the sale of our interest in SwissCard, completed in one queue, which resulted in a limited tax charge. We continue to expect our 2026 tax rate to be around 23%, with some quarterly volatility consistent with prior years. Turning to our cost update on slide seven, During the first quarter, we delivered an additional $800 million of gross cost reductions, bringing cumulative savings since the end of 2022 to $11.5 billion. This represents 85% of our total gross cost save ambition and keeps us firmly on track to achieve our $13.5 billion target by the end of 2026. The total headcount at the end of March was 117,000. 2% lower sequentially, and approximately 25% below our 2022 baseline. Over the same period, we've reduced the group's operating expenses by 27% when excluding litigation, variable compensation, and currency effects. Since we've started, we've incurred cost to achieve of around $13.7 billion at constant FX and remain on track to deliver on our gross cost-save ambition at an efficient 1.1 times multiple. Turning to slide eight, as of the end of March, our balance sheet for all seasons consisted of 1.7 trillion in total assets. Within that, we saw a 1% sequential increase in our loan book, 85% of which consisted of mortgages with an average LTB of around 50% and fully collateralized Lombard loans. Private credit exposures at quarter end comprised a very modest portion of our total balance sheet and were predominantly senior, secured positions with prudent LTVs supported by diversified collateral pools and conservative borrowing-based structures. Credit-impaired exposures in our lending book stood at 90 basis points, and the cost of risk declined sequentially. Group credit loss expense totaled $70 million. largely as a result of a build in allowances on performing loans in light of the uncertain macro backdrop. Stage three in the quarter reflected a small net release after we recorded a repayment across both the investment bank and non-core and legacy. Our tangible book value per share grew sequentially by 2% to $27.50, primarily from our net profit, which was partly offset by share repurchases. Overall, we continue to operate with a highly fortified and resilient balance sheet, with total loss-absorbing capacity of $198 billion, a net stable funding ratio of 117%, and an LCR of 178%. We also made strong progress on funding during the quarter, completing our 2026 AT1 issuance plan by mid-February. As a result, our additional Tier 1 capital increased to 4.7% of RWA, aligned with our goal to optimize our AT1 levels within the broader Tier 1 capital stack. Turning to capital on slide 9, our CET1 capital ratio at the end of March was 14.7%, and our CET1 leverage ratio was 4.4%, both up sequentially. Our common equity Tier 1 capital in the quarter increased by $2 billion, principally due to earnings accretion that was partly offset by dividend accruals of $0.9 billion and currency translation effects of $0.2 billion. RWA and LRD both increased sequentially by low single-digit percentages, demonstrating disciplined balance sheet deployment despite elevated client activity. Turning to UBS AG... As of the end of March, the parent bank's standalone CET1 capital ratio on a fully applied basis stood at 13.9%, broadly reflecting its first quarter operating results and a $1.8 billion accrual for the dividend intended to be upstream to group in 2027. Turning to our business divisions and starting on slide 10 with global wealth management. GWM delivered a pre-tax profit of almost $2 billion, up 28% year-over-year, with double-digit growth across all regions. This performance once again highlights the breadth and diversification of the franchise, underpinned by a well-balanced regional mix. Supported by the seventh consecutive quarter of positive operating jaws of at least four points, GWM achieved a cost-income ratio of 72%. Net new assets totaled $37 billion, representing a 3% annualized growth rate. In a more uncertain environment, clients increasingly turned to our advisors for guidance and CIO-led solutions. This drove 7% growth in net new fee-generating assets, which came in at $38 billion. Strong demand for our discretionary mandates, including SMA and MyWay, our flagship modular offering. resulted in record mandate penetration, underscoring the value clients place on trusted expert advice. Turning to wealth's balance sheet flows, the re-leveraging trend seen in recent quarters continued in the first quarter with net new loans of $5 billion, while net new deposits of negative $2 billion largely reflect outflows from fixed-term deposits, partially offset by inflows into current and savings accounts. From a regional perspective, Asia Pacific delivered another quarter of standout performance, generating a pre-tax profit of $600 million, up 40% year-on-year. The region recorded double-digit growth across all revenue lines and achieved a pre-tax margin of 49%. Together with net new asset inflows of $19 billion, representing a 9% growth rate, these results underscore the competitive advantages of our Asian franchise. Looking ahead, we'll continue to invest in our talent and capabilities across key growth markets, such as Australia, Taiwan, and Japan, while leveraging our strongholds in Greater China, Singapore, and Southeast Asia. In the Americas, broad-based revenue momentum drove profit growth of 26% and a pre-tax margin of 13.7%, reflecting our continued focus on structural improvements in profitability, and stronger outcomes for clients, advisors, and the wealth franchise overall. Net new loans were $2 billion, the eighth consecutive quarter of lending growth, demonstrating continued progress in enhancing our banking capabilities in the region. Supported by strong same-store performance, net new assets were positive at $5 billion. For the second quarter, we expect NNA to be impacted by seasonal U.S. tax-related outflows in the low double-digit billions. For the full year, we continue to expect net new assets in the Americas to be positive, supported by both same-store growth and a healthy recruiting pipeline. EMEA also performed very well, with profit growth of 44% and an 8 percentage point improvement in the cost-income ratio to 62%. Switzerland increased its pre-tax profit by 20%. Looking ahead, we expect our EMEA and Swiss franchises to see continued profitability growth underpinned by sustained client momentum and supported by cost efficiencies as the Credit Suisse wealth platform in Switzerland is decommissioned over the coming months. Turning to divisional revenues, which increased in the quarter by 12%. Recurring net fee income grew by 10% to 3.6 billion, supported by positive market performance and more than $60 billion of net new fee-generating assets over the 12 months. Transaction-based income rose 17% to $1.7 billion, with APAC, EMEA, and the Americas delivering double-digit growth, reflecting strong momentum in structured products and precious metals. This underscores our continued outperformance in transaction revenues, driven by strong client engagement and differentiated investment bank collaboration. as clients actively rebalanced portfolios. Net interest income of $1.7 billion rose by 12% year over year and 2% sequentially, with the quarter-on-quarter trend reflecting favorable deposit mix shifts. Looking ahead to 2Q, we expect GWM net interest income to remain broadly flat, as higher loan volumes are offset by lower deposit reinvestment yields. Operating expenses in GWM rose by 6%. When excluding variable compensation, litigation, and currency effects, costs declined by 2%. Turning to personal and corporate banking on slide 11. P&C delivered a first-quarter pre-tax profit of 710 million Swiss francs, up 19%, with revenue growth and disciplined cost management combining to generate positive operating leverage of 10 percentage points. Having largely completed the client account migration in P&C as we entered the year, freed up capacity is now supporting even deeper client engagement. This resulted in net new deposits of $3.5 billion, net new loans of $2.4 billion, and net new investment product growth of 11%. Total revenues were 3% higher, with 10% growth in non-net interest income, more than offsetting NII headwinds. Across personal banking and corporate and institutional clients, non-NII growth was broad-based, with similar contributions from both franchises. In our retail business, positive momentum in net new investment flows, together with supportive market trends, continue to drive custody and mandate fee growth. While in CNIC, revenue expansion largely reflected strong activity in structured and syndicated finance. The quarter also included a credit of $27 million related to the completed Swiss card transaction. Net interest income declined by 3% year-on-year, reflecting the ongoing impact of the zero-rate environment in place since last June. As highlighted previously, changes in Swiss franc interest rates in either direction would benefit P&C's revenues. On a sequential basis, NII was stable, with this trend expected to continue in the second quarter. Credit loss expense totaled 55 million Swiss francs. While the quarter reflected the lowest net stage three charges since the Credit Suisse acquisition, we continue to expect CLE to average around 75 million Swiss francs per quarter given ongoing macroeconomic uncertainty. Operating expenses declined by 7%, demonstrating continued effective cost management. We expect further efficiencies as the legacy Credit Suisse platform is progressively decommissioned over the course of 2026. Turning to asset management on slide 12. Pre-tax profit increased by 21% to $252 million, driven by revenue growth alongside ongoing tight cost management. Total revenues rose 4%. Net management fees were up 6%, driven primarily by higher average invested assets, despite secular margin pressure. Performance fees decline year on year, primarily due to lower contributions from SIG and the absence of O'Connor following the completion of its sale during the quarter. This was partly offset by higher performance fees in unified global alternatives. By the end of March, we delivered $14 billion of net new money, representing 3% annualized growth, as we continue to benefit from our strategic focus on scalable, differentiated capabilities. Flows were led by $13 billion into ETFs, reflecting sustained demand for our core product range launched last year, alongside robust net inflows of $5 billion into our SMA offering in the U.S. UGA continued to build momentum, ending the quarter with $344 billion of invested assets and attracting new commitments of $12 billion, split three and nine between asset management and global wealth management. Inflows were broad-based across the platform, with notably strong demand for private equity and hedge funds. Operating expenses were 2% lower, as we maintained cost rigor while continuing to invest in the platform to support operational efficiency. On to slide 13 in the investment bank. The IB delivered its most profitable first quarter on record, with pre-tax profit of $1.2 billion, up 75%, and a pre-tax ROE of 25%. The performance this quarter reflected a market environment that played directly to our strengths, as the business successfully captured opportunities while maintaining a disciplined approach to resource deployment. Revenues climbed 31% to $4 billion, with both global banking and global markets contributing proportionately to top-line growth. Global banking revenues rose by 30% to $733 million. Advisory revenues were 8% higher, driven by our strongest first quarter in M&A, with notable performances in the Americas and EMEA. Capital markets grew 45%, with growth across products and geographies. We continue to benefit from our strategic investments in ECM, where revenues more than doubled year-on-year, outperforming fee pools across all regions, supported by higher IPO, follow-on, and convertible issuance. In DCM, we delivered double-digit growth, while LCM increased modestly against the lower fee pool. Turning to global markets, the business posted its best quarterly performance on record. Revenues reached $3.3 billion, as each of the Americas, APAC, and EMEA, including Switzerland, generated more than $1 billion in revenues. Equities revenues increased by 28%. driven by strength across cash equities, prime brokerage, and equity derivatives, while FRC revenues rose 38%, led by a strong performance in FX, including precious metals. Sustained investment in technology, our globally diversified footprint, and close integration with global wealth management continue to support high levels of client engagement and momentum across the platform. Consistent with the strong revenue growth in the quarter, operating expenses increased by 17%. On slide 14, non-core and legacies pre-tax loss was $97 million, as negative revenues of $11 million and operating expenses of $160 million were partly offset by the credit loss release referenced earlier. Within revenues, funding costs of around $70 million were largely compensated by gains in the credit and securitized products portfolio. Excluding litigation, expenses in the quarter declined 70% year on year and 26% sequentially, bringing cumulative cost reductions versus the 2022 baseline to 84%. Looking ahead, we continue to expect to exit 2026 with annualized operating expenses excluding litigation of approximately 500 million and annualized net funding costs of less than 200 million. In addition to strong cost management, NCL has continued to successfully reduce and de-risk its balance sheet since being established shortly after the Credit Suisse acquisition. Including an $800 million reduction in the first quarter, the team has exited around 93% of its credit and market risk RWA, bringing the March end balance substantially in line with its full year 2026 ambition. To sum up, our 1Q performance demonstrates the progress we're making across the group, We delivered strong financial results, completed client account migrations on the Swiss platform, and continue to execute with discipline. As we move on to the final phases of integration, we are increasingly focused on positioning the firm for sustainable growth beyond 2026. With that, let's open for questions.

We will now begin the question and answer session. Participants are requested to use only handouts while asking a question. Anyone who has a question may press star and 1 at this time. Our first question comes from Flora Bokaou from Barclays. Please go ahead.

Yes, good morning and thank you for taking my question. So the first question I have is on the buyback. Obviously, you've changed the wording today on the buyback plan. you now intend to complete the $3 billion by the end of July, so by Q2 results. So the question is, what exactly drove the change? And can you maybe help us understand what are the key catalysts that you're going to watch into Q2 results to decide and what kind of magnitude should we have in mind should you be able to top up the bivalve with Q2 results? The second question is on GWM, specifically on APAC, because the quarter was quite strong, both in terms of net new money, but also in terms of the loan re-leveraging that we saw this quarter, the second in a row. So can you maybe talk a little more about the strengths in APAC, what's driving it, and how sustainable do you think it is?

Thank you.

So thank you for the question. Yeah, I mean, you know, of course, we changed the language and it's basically the reflection of two of the three, four conditions that we set or we described for the capital return plans for 2026, i.e. the successful progress in the integration, which was a major milestone was achieved and with the migration of the Credit Suisse clients onto the EOPS platform. And this is now allowing us to basically decommission and realize the full synergies that we have envisaged. And second is the very strong business performance, which, as you saw, is allowing us to generate further capital. I think that's... These two conditions are making us comfortable that we can accelerate the current share buyback program by the execution of that by the end of July when we report Q2 results, while still keeping open the other two conditions. We want to continue to operate by year-end at around 14% CP1 capital. And, of course, we are also watching the developments around the capital requirements. So these two conditions are still out there. And, you know, I say that it's premature to talk about the magnitude of what we're going to do in the second half of the year.

Hi, Florian. The second question regarding oil. GWM and APAC, so clearly the power of the integrated franchises is clearly contributing to growth and profitability, and you can just see that in the numbers that we have been printing quarter on quarter. Our focus, as you know, has been on growing assets across the region by deepening share of wallet, by accelerating strategic partnerships, and also by strengthening high net worth feeder channels. particularly through investments in digital, and also by ramping up the impact hiring of select advisors. So we think the evidence of this is apparent in the 1Q26 results, double-digit NNA and NFGA growth with very strong mandate penetration, while also continuing to drive its bellwether, which is transactional revenues growth. in an environment where our advice and structuring expertise are clearly differentiated. I would also say that on your question regarding lending, lower U.S.

dollar rates are also supportive of the lending growth that we've seen.

The next question comes from Kian Abu Hussein from J.P.

Morgan. Please go ahead.

Yes, thank you very much for taking my question. First of all, a shout out to Sergio. Thanks for answering all our questions for, if by my math is right, 12 and a half years and hopefully longer to go. Now, my two questions are, first of all, in relation to U.S. wealth management. We have positive net new assets in America. You talked prior about potential outflows in the first half, and you indicated in the second quarter clearly due to tax situation that could happen, but I just tried to understand how we should think about what happened in the first quarter relative to your earlier guidance in particular. And secondly, in that context, also, advisory departures. Are we done with that? As you mentioned, acceleration of hiring. So should we expect net new hires to come soon, second half? And then the second question is coming back to parent-bank capital. You mentioned the $1.8 billion accrual. I'm interested in the cumulative reserves, cumulative reserves in the parent bank at the moment, and how much have you actually upstreamed in the first quarter? Thank you.

Thanks for the questions. On the second one, just quickly, so we, if you recall, we had accrued $9 billion last year, and we have paid up the first half of that in the first half of the year, the $4.5 billion, actually just earlier this month. And the $1.8 is an accrual, as I mentioned, that we would distribute in 2027. On the question regarding U.S. wealth and flows, so first let me just back up a little bit and mention that, importantly, the U.S. business is continuing to work on the various levers to drive profitability growth, with pre-tax margin improving now for six consecutive quarters. That momentum is being driven by stronger banking capabilities, which is evidenced in, by the way, continued growth in net new lending eight consecutive quarters, and by the strength in transaction revenues, including through greater collaboration with the investment bank in delivering the full breadth of our capabilities to clients. Now, on to flows this quarter. We're encouraged by the outcome, particularly because flows were driven by same-store production. So that tells me the strategy is working. At the same time, in terms of sales, guidance. At the same time, it's one quarter. I guided on second quarter tax outflows. So we're staying focused on continuing to invest in our advisor workforce, in our platform, and our capabilities to drive sustainable profitability improvement.

Sorry.

Should we think about net advisors increasing as of second half?

So I'm That, Keenan, I just say we're comfortable with the steps we're taking to drive positive full year NNA, you know, while recognizing there's a lag effect from previously announced FAA movement that will continue to show up in flows for a few quarters. That said, we're actively recruiting and investing in teams aligned with our profitability ambitions. I'd also point out that rotation among FAs remains elevated across the industry. given record valuations, but, you know, we continue to expect these dynamics to normalize in our own book over the course of 2026. Okay.

And just on reserves, can you just remind me what the cumulative reserve is in the parent bank now?

So we have 10.8 billion of capital in reserve, less than 4.5 paid up in April that I mentioned.

Thank you.

The next question comes from Stefan Stalman from Autonomous Research. Please go ahead.

Good morning. Thank you very much for taking my questions. I wanted to ask please whether you have actually seen or whether you expect to see any benefits from wealthy clients in the Middle East potentially shifting their assets into Swiss or maybe even booking centers. And also on your Unified Global Returns platform, there's obviously been quite a lot of news flow during the quarter and maybe already starting last year, private markets, in particular private credit. Are you seeing any impact of all of that market talk in your clients' behavior and your clients' preferences in that area?

Thank you very much. So I think it's fair to say in respect of the Middle East conflict that, you know, safety and balance sheet trust remain decisive factors. in wealth management, as you know, and the Gulf conflict is reinforcing these priorities. And while it's very early to see any meaningful movement, you know, we believe it's leading some clients at least to reassess booking center options. And we believe that, you know, our deep and longstanding relationships with Middle Eastern clients position us well were there to be movement to benefit from any shifting dynamics over time. But at this stage, clearly too early to see anything coming through the numbers. On your question regarding private credit, I think it's fair to say that interest in private credit among our wealthy clients has been more measured in the current environment that are clearly reflecting macro uncertainty and a preference for liquidity and capital preservation. We have seen, as I think you're pointing out, elevated redemption requests that are driven by either profit-taking or residual gating or even liquidity alignment considerations. That being said, engagement does still remain high, and we continue to see demand building for well-structured strategies in private credit as part of this income sleeve, albeit with more caution and selectivity. It is also worth pointing out that, you know, when you look at the level of exposure our clients have in private credit in their portfolios, it's quite minor. So while you may have sort of mid-single-digit percentage in alternatives more broadly in It's a fraction of that in private credit. But that said, we still see that there is demand for that type of investment when structured properly.

Thank you very much.

The next question comes from Anke Reingen from RBC. Please go ahead.

Good morning and thank you for taking my questions. The first is just on the ordinance impact. And I was wondering when you assess your capital ratio, do you look on a phased in or on a fully loaded basis? There's a two billion already coming in as of January 2027 and then 2029. So if you can just tell us fully loaded or phased in what the assessment is. And then with Q4 with us, you gave us some net interest income guidance for the full year for global wealth management and P&C. And I just wonder if this has changed given the interest rate outlook.

Thank you very much.

Thank you. Thanks, Ankit.

So on the ordinance impact, so let me just unpack it. So the changes to prudential valuation adjustments come in on 1 January 2027. So there is no phase-in. So, you know, when we get there, we'll be reflecting that in our capital as the expectation immediately. On software, there is a transition period permitted to 1 Jan 2029, which at this point is our intention. to fully utilize, but that's subject to seeing the full package develop in the intervening period. But we are considering that and at this point that the intention is to use the transition period and therefore have the impact of capitalized software hit through our capital ratio on 1 January, 2029. On And I would just say that in 2Q, my outlook for the second quarter really reflects in global wealth management, in any case, lower U.S. dollar rates that, as I mentioned in my comments, that have some downward pressure on deposit margin. Why is that? Because... you know, asset yields, as reflected in our replicating portfolios, repriced down faster than deposits, you know, when rates are lower. Now, any further upside in the quarter can come from favorable deposit nick shifts, as we saw in 1Q, and even stronger net new lending growth. So there is that upside. But again, because of the impact on rates, That's what informed my guide at Flat Quarter on Quarter. Now, the longer-term prospects for any pickup in GWM would be based on continued loan growth and greater U.S. dollar rate stability. And that would lead to higher swap rates that would start to help ease the reinvestment headwinds from the replicating portfolio and that is reflected in the current sequential outlook. So, you know, that coupled with expected deposit growth without any meaningful dilution in our sweep and current account balances could offer some longer-term upside for NII in GWM.

The next question comes from Joseph Dickinson from Jefferies. Please go ahead.

Hi, thank you for taking my question. Just on the parliamentary process that is obviously quite key to the shape of prospective buybacks this year and beyond, I guess what is the outcome that you're looking for from this process? Many thanks.

Thank you. Well, we keep that. We fully understand that all the lessons learned from the Great Swiss Crisis have to be reflected in how we adopt the regulatory framework in Switzerland. But we continue to believe that the guiding principle should be to have something that is internationally aligned and has allowed us to continue to be competitive as a bank based in Switzerland. So I think that the framework are quite clear. So we are not asking for anything, you know, that I would say is exceptional. I think that's, you know, and the most important issue is that when we go through this process, as I reiterated, it's not only to address, you know, the quality of capital and how we look at improving that part. It's to fully reflect the lessons learned of the Credit Suisse crisis, the root causes We all know that huge concessions were given to Credit Suisse. And this is the reason why, at the end, they had a problem with their foreign subsidiaries. And this element is actually never mentioned in the public debate. So we need to make sure that, you know, the people that will make decisions fully understand how strong the current regulatory framework is And which, by the way, is the one that allowed a G-SIP to absorb a G-SIP. We pay all guarantees and emergency liquidity provisions granted to Credit Suisse within five months. And while keeping you investors, you know, fairly confident about our ability to manage our business. So one has to reflect this kind of true lessons learned from the crisis. rather than just looking at absolute level of capital and go to extreme solutions that are not helping, at the end of the day, not only the bank, but most importantly, our clients, because at the end of the day, it's going to make the bank less competitive in serving households, corporates, clients, and it's not very good for the country as well, I believe.

Great. Thank you.

The next question comes from Chris Holman from Goldman Sachs. Please go ahead.

Good morning. Two questions. First, on capital, so I guess I agree on the $22 billion number on slide 25 is cleaner to look at than the $9 billion and also that CT1 versus peer requirements is probably more logical than versus peer reported ratios. But when it comes to contingency planning and the decisions that need to be taken, the foreign participation process should stretch well into the first half of next year. Given the transition period on those potential changes, can you wait for full clarity on the outcome of that process before making any decisions on how to adjust your operating footprints or your focus areas? Or are you going to have to start making real-world business decisions earlier than the point at which you get full and final clarity on foreign funds? That's the first question. And secondly, a broader one, on cyber risk, it's sort of against the backdrop of the recent acceleration we've seen in AI-enabled threat detection and attack sophistication. Could you talk a little bit about how you're managing cyber resilience, both on your own platforms as well as through the integration, through the CS integration? Have those sort of AI-driven threat models changed how you assess residual risks in your legacy systems? And should we expect any incremental investment or operational constraints as a result of that evolving threat landscape? Thank you.

Well, thank you, Chris. I guess for, you know, To be fair, we have been going through two years of uncertainty around this topic, and by now it's something that is almost embedded in the way we have to operate and accept it as a modus operandi. It's not ideal because, of course, the environment out there is quite challenging, but I think that we are pleased that we at least completed the integration and we are It created the resilience in terms of profitability that allow us to basically accept the fact that a democratic process has now to go through. This is a very complex matter, and it's not reasonable now to expect that the Parliament will take decision in a very short period of time on such a situation, considering also the extreme different views on how this is playing out. I think that one thing is clear. We're not going to jump into conclusions or taking decisions that have a strategic impact in any sense before having the final outcome. It's not ideal, I know, but we have to really think about what is the best things for the bank for the next 5, 10, 20 years, not what is good for the next few quarters. And that uncertainty, unfortunately, It's something that we have to live with. We are not in control of that, but we are hopeful that the situation can resolve very quickly. In terms of cyber, well, look, you know, of course, cyber is not something that we, it has been on the, you know, the center of the radar screen for the last few years for all of us in the industry, but not only in the financial services industry. And we are investing a lot of resources, technology, but also human resources to really identify the best way to protect our assets, our clients' assets and the data. And we continue to do so as we see also these recent developments. Believe me, we are staying very close, talking to our technology partners. As you can imagine, we are a client of the major companies. technology providers, also the one that are very deep involved in this recent discovery. And so we get indirectly also the benefits of being able to implement all the necessary steps to protect our assets. So this is going to continue to be a big, big issue and one that we'll continue to work necessitate a lot of investments and resources, both in technology but also in people. So, you know, you look through, you know, cyber risk is as important as credit and market risk nowadays.

Thanks very much.

The next question comes from Andrew Coombs from Citi. Please go ahead.

Morning. One on the investment banking and one coming back on Asian world management, please. Firstly, on the investment bank, just putting the legislation to one side, we've had the Bazaar Endgame proposal in the U.S. So, intrigued what you think that means in terms of the level of competition that you're going to see from the U.S. investment banks in that space. And also, if I go back all the way to 2018 investor day, I recall you had this ambition of having 40% of the division's profits from the advisory and execution and 60% from financing and structured derivatives, obviously more capital intensive. A lot's moved on since then, but is that 40-60% split still a fair assumption or is it very different now? And then my second question on APAC, GWM, and you specifically called out Australia, Taiwan, Japan as some of the regions where you're making select buyers. Can you just talk a bit more about onshore versus offshore trends you're seeing and how that's influencing your investment decision process?

Thank you.

Andy, so in terms of Basel III and the endgame on capital in the U.S., at least the proposals, look, I think it's fair to say that the U.S. banks have a fair bit of dry powder when it comes to capital deployment. That seems pretty apparent to anyone watching. And we're obviously competing in that area. globally. Our global footprint, you know, we think differentiates us. Our capital light approach differentiates us. And, you know, we're competing really well in the environment, in the investment bank sectors in which we're choosing to play. So, you know, for us, we recognize what's We recognize the fierce competition, but we like our chances. In terms of the split from years ago on your question, I think I'd go back and check myself and do the math, but I don't think that that's massively off. I'd probably flip the ratios a bit if I had to offer a guess, but I think it's probably not terribly off. It's also important to mentioned a lot of the financing also could be done in quite resource efficient ways and so because you had mentioned that the latter is much more resource intense and doesn't have to be that way in some of the activities vis-a-vis prime so but my instinct is I flip the ratio the other way. In terms of APAC Yeah, I mean, I've been pretty clear that investing already to build out on our strongholds, I touched on already in a prior response to things that we're doing to drive further performance and growth in the region where we're looking to leverage our leadership position into these jurisdictions where we're doing the parts of Asia Pacific where we can even grow faster and further, and that's why we call out some of these growth markets within Asia Pacific on top of our own stronghold. And we see the onshore-offshore dynamic still for sure exists, but we're also so well positioned in greater China that we're able to leverage both sides of that.

The next question comes from Jeremy Seagy from BNP Paribas.

Please go ahead.

Good morning. Thank you. Just a couple of follow-ups on continuing wealth management, please. Firstly, on the U.S. business, you touched on you had another 50 advisor reduction in the quarter. Is that a lag effect from the sort of exits you were seeing last year, or is it fresh departures, fresh poaching that you're suffering this year? That's my first question. And the second question is just continuing the strength that is phenomenal in Asia and in EMEA in wealth management. I just wonder what client conversations you're having and to what extent that's driven by fear factors, you know, such as macro risks or whether it's more, you know, a pickup in wealth creation and animal spirits and investment appetite coming from that.

Hey, Jeremy.

So on the U.S. business side, yeah, the headcount metrics you see are actual. So what that means is there's a lag effect built in, i.e., when advisors leave the roles. So there's also – it's very similar to flows themselves, which was the point I mentioned earlier, I think, in response to Kenan's question. So there is a lag effect in some of the measures we print around headcount and flows, and that's why, you know, I've been also giving a broader picture on the topic so that there's also an outlook and people can understand the broader dynamic. So across the wealth management business, You know, look, you asked about the environment and the sentiment. So clearly what we've been seeing is the backdrop, if I characterize the first quarter, especially the latter part, you know, once the Gulf conflict got underway. You know, that has led clients to remain invested while actively rebalancing and hedging their portfolios. And that's supporting strong demand for structured products, FX solutions, and equity derivatives with healthy volumes and disciplined risk usage. It's important to also add that our advisors are following the CIO blueprint, and so the conversations are often reflecting CIO views, direction, and that's informing transactional preferences and also as you see a lot of people entrusting us to manage on an advisory or discretionary basis their wealth and we see mandate penetration at a record high. In that sense the discussions that we're having with clients are resonating.

That's really helpful. Thank you very much.

The next question comes from Goel Amit from Mediobanca. Please go ahead.

Hi. Yeah, thank you. So two questions for me on capital. The first one is just on actually the CET1 leverage ratio and buffer. So I'm just wondering what kind of buffer would you be looking to run at versus end state requirements, you know, it looks to me like that's going to about 3.9%. Post the ordinances as being kind of written pro forma, the current or the kind of the buffer looks like it won't be particularly big. So just curious what kind of level you're thinking about there. And then secondly, just in terms of share buyback capacity this year, I appreciate it's subject to parliamentary debate in terms of what may or may not happen. But it looks like there's about five billion left of the standalone AG reserve after dividends and employee share repurchase. So just curious whether you're then happy to continue to run an equity double leverage at the group 104% handle, if you'd be happy to increase that, you know, to give yourself capacity to pay more, or are you still looking to bring that closer to the 100% mark? Thank you.

Yeah, so first on the leverage ratio, I think it's fair to say that at the moment the Tier 1 leverage ratio at the group and UBS AG Consolidated is marginally, you know, the most marginally constraining metric that we have when you look at buffers relative to minimum requirements. So, you know, while if you think about it, the risk density is, under the Swiss systemically relevant bank capital rules, would suggest about a third of density. You know, we're running around 30%. Why is that? Just given that, you know, FX sensitivity, so dollar weakness, is more pronounced vis-a-vis leverage. And And we're obviously able to run the bank with significant RWA efficiency in the business despite Basel III and op risk. So that's where we are at this point. So we're managing – my expectation and hope is always to manage both of those ratios where possible as no more marginally constraining than the other. the FX movements over the last year. That's made leverage ratio more constraining, and so we're very focused on ensuring we manage that well. You see that in how we pace into company dividends from AG to group, how we're building our AT1 stack, and also how we are transforming deposit liabilities wherever possible to maximize funding value. Listed on the share buyback capacity and ultimately equity double leverage, it's premature to talk about where we would go on this. We have to wait and see where, as Sergio just mentioned in response to Chris's question, we have to take those few quarters and see where this plays out. And then once we have that visibility, that clarity, then we can come back and talk about things like the equity double leverage ratio. For now, our expectation is still to have that, you know, move towards pre-Credit Suisse acquisition level that remains the base case for us.

The next question comes from Julia Aurora Mioto from Morgan Stanley.

Please go ahead.

Yes, hi. Good morning. Thank you for taking my questions. I have two, both on the TBT. margins in GWM, one on the U.S., one on Asia. So in the U.S., the CUBS got the final approval on the banking license late in the quarter, 20th of March, and yet we saw good progress on loans and deposits, and GDP margins already close to 14%. So I'm wondering, how does this last approval change the pace of improvement in the your profitability metrics in the U.S. So can we see now a step up in depositing loan growth and ultimately profitability, or will that be gradual? First question. Second question, the PBT target excluding the U.S. in terms of margin is to be about 40%, and Asia is a standout, close to 49% in the quarter. And if you say that there is still room to improve or at least maintain this level of margins, or perhaps it was an extraordinary quarter and we would go back to close to 46 going forward. Thank you.

Thanks, Julia.

Just maybe on the second one, first, we're obviously quite encouraged by our OneQ performance across the board, including in APAC Wealth, and it demonstrates the capacity in the franchises I've mentioned. At the same time, the overall performance for the group is one quarter. The quarter was exceptionally strong, and the macro environment remains uncertain. If the environment is supportive, there's potential upside for some of these but generally I wouldn't be extrapolating one Q per se for a full year, and it's just premature to reflect any of that in our guidance at this stage. On the banking license point, I think, well, first, we're pleased that you see the progress that we're making also in the pre-tax margins. We're delighted that we have the license now. Those have always been in our plan. The team has been very effective in being able to land it, but it has been in our plan and our outlook, and it's what helps to drive the pre-tax margin improvement over time. You know, what I would say about it is we're already doing the things. We're building out the capabilities, but also more The focus across the advisor group in the U.S. around the banking capabilities that we have, I think, has been an eye-opener for a lot of advisors who haven't leaned into our ability to support them on that side of the business. And it really has helped. And that's, you know, been driving some of the results that we keep seeing quarter on quarter in banking. Having a license will only, you know, accelerate that. It will also help to shape the deposit side of the balance sheet even better because it will create the opportunity to have more operational deposits and reshape the loan-to-deposit ratio in a way that will help to create pre-tax margin accretion.

Thank you.

The last question comes from Benjamin Goy from Deutsche Bank. Please go ahead.

Maybe just two follow-up questions. The first is on geopolitical uncertainty. Not only that it was negatively correlated to the transaction activity of clients, but it seems like there's more of a buy-debit mentality or just holding on to risk assets. It's interesting how it might have changed over the last couple of years. you touched on your capitalized focus on investment banks, but is it possible for someone to give a flavor and look at the leverage exposure expansion in the double digits? How much was the market underlying opportunities, so call it typical, and how much is just more competition from those players?

Thank you. I did not get the first question. Sorry.

It may have been me. Um, Sorry, but let me answer the second one I was able, I think, to glean. The increase in leverage at the investment bank, simple. It was just the activity levels in the quarter that informed sort of traditional liquidity needs vis-a-vis clients. And so that's what drove – The balance sheet higher was the very active levels that we saw with clients over the course of the quarter. Do you mind repeating the first? Sorry.

Thank you for that. And then the first one is your political uncertainty is probably at higher than decades. Nevertheless, the transaction activity remains very positive. So wondering whether there's fundamental negative correlation between the two has changed and your clients are more engaged in risk efforts sustainably. or maybe too confusing with the data offline.

No worries. Yeah, thanks, Ben. We just forgot the question. Sorry. I think it may be the audio.

So, yeah, so in respect of geopolitical uncertainty, look, I mean, in the near term, and we've seen this just in recent times, you know, when there are sort of events happening that create volatility in the markets. We saw that a year ago when the U.S. tariffs were announced in early April, you know, when this conflict started, and you could probably go back on a timeline and see, you know, there is volatility, and the question really comes down, it really boils down to whether the volatility remains constructive or it is a front-running issue what is going to be quite a difficult market environment and risk off. And so I think you'll have your own views on this as well, but I think as the market is priced in a nearer term diplomatic solution to the conflict, I think people have stayed invested, albeit there's been some caution, investing strategies have changed, more protecting principle, more from looking at things from a hedging transaction perspective. But by and large, people are staying invested despite all the geopolitical uncertainty. As we say, even in our outlook, things could change quickly. And we recognize that when you look at the outlook, when you look at the environment, for example, if a diplomatic solution was not seen as something that can be enduring and achievable in the near term, you know, that can change. And then at that point, you know, we'd have to see. But certainly near-term volatility, you know, created opportunities as long as clients remained engaged in seeking the advice we provide.

Thanks a lot.

Thank you. I think that ends all the questions. I just thank you very much for joining, and we look forward to updating you with our second quarter results at the end of July. Thank you.