Julius Baer Gruppe Namen

Ladies and gentlemen, welcome to the Julius Baer 2025 full year results presentation for media and analysts. I am Sandra, the course co-operator. I would like to remind you that all participants have been listened to and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Alexander van Leeuwen, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. Welcome to the Julius Baer Full Year Results Call. I am Alex van Leeuwen, Head of Investor Relations. We are joined today by our CEO Stefan Bollinger and CFO Evi Kostakis. Today, in addition to the financial results presented by Evi, Stefan will also provide an update on the execution of our strategy as promised back in June. Before starting, I would like to flag the important information provided on slide two of the presentation. It's now my pleasure to hand over to Stefan for his introductory remarks.

Thank you, Alex, and good morning, everyone. Thank you for dialing in for this full year results call and update on our strategy execution. Let me start by giving you my take on our 2025 results. Overall, 2025 was a good year with a strong underlying financial performance. It was also an important transition year for us as we redefined our strategy and started our transformation journey. And with all our efforts so far, I am pleased that we are back to solid foundations with a positive execution momentum to deliver our mid-term targets. First, a few comments on business performance. We're happy to report record high assets under management of more than 520 billion Swiss francs, underpinned by solid net new money of 14.4 billion, and that despite our ongoing de-risking efforts. This further solidifies our position as the largest independent wealth manager internationally. On an underlying basis, operating income was up 6%, while costs were up only 1%, resulting in a 17% increase in pre-tax profit. Our underlying cost-income ratio improved by a full 3 percentage points to 67.6%. This resulted in positive operating leverage for the first time since 2021. We also further bolstered our capital position with a CET1 capital ratio of 17.4%. Second, in 2025, we decisively addressed legacy issues and strengthened our foundations. We completed the credit review, upgraded our governance and renewed our leadership team. We also significantly simplified the organization, enhanced accountabilities, and promoted disciplined entrepreneurship. And third, we successfully launched our new strategy and created great momentum in executing it. We empowered the organization front to back to fully focus on profitable growth. And we continued to improve operational efficiencies and advanced on our technology priorities. We achieved what we planned for the year and we are ready for the transformation ahead. I'll give you more color on the key milestones and the way forward a little later. And now I'd like to hand over to Evi for more details on the financials.

Thank you, Stefan, and good morning, everyone. As usual, before discussing the results, I'll start on page six with an overview of some of the key market developments in 2025 that provide the backdrop and context to our results. In Swiss franc terms, despite the tariff shock in April, stock and bond markets were up by mid single digit percentages with the Swiss market outperforming global indices. And in terms of FX moves, I would highlight that the dollar weakened by 13% versus the Swiss franc. We saw further rate cuts across the board, with the Swiss National Bank reducing rates in the first half by another 50 basis points to zero, and the European Central Bank reducing the main refi rate by a further 100 basis points. The US Fed kept its rates steadfastly unchanged in the first half, before reducing in three 25 basis point steps in the second half. The third set of graphs on the bottom left of the page shows that the shape of the key yield curves continued to normalize for European and Swiss rates throughout the year, and the one to five year belly of the US yield curve started to flatten again in the second half. Finally, stock market volatility saw a massive spike in early April after Liberation Day in the United States, but then swiftly normalized down to lower levels again during most of the rest of the year. Moving on to slide seven, which shows assets under management up 5% to 521 billion after having been down 3% in the first half. As the positive effects of the 14.4 billion haul in net new money and the 57 billion uplift in markets were partly offset by the steep weakening of the dollar to the tune of 38 billion, as well as the sale and deconsolidation of our onshore Brazilian business in H1. Monthly average AUM, important for the margin calculations, grew by 7% year-on-year to $499 billion, and total client assets, including assets under custody, were up 4% to $614. Proceeding to net new money on slide 8. Against the backdrop of continued de-risking of the client book, the net new money reached $14.4 billion by year-end, or just shy of 3% annualized, essentially in line with our guidance at the start of the year. In terms of regional contributions from key markets based on client domicile, I would highlight Asia, especially our key markets, Hong Kong, India, Singapore, and Thailand. Western Europe, with a strong contribution from the UK and Ireland, Germany and Iberia, and the Middle East, particularly the UAE. After deleveraging came to a halt in the first half, there was an initial amount of releveraging in H2, adding 0.6 percentage points to the net new money pace in H2 and 0.3% for the full year. This marks the first year of client leverage coming back in earnest after 2021 and is consistent with the normalization of the shape of the yield curves we saw in the market backdrop slide. So now let's go to revenues on slide nine. As a reminder, as of 2025, adjusted operating income now excludes M&A related impacts the same way we adjust on the expense side. On that adjusted basis, operating income was unchanged year on year at 3.861 billion. However, as the comprehensive credit review led to a significant increase in loan loss allowances in 2025, excluding the resulting net credit losses from operating income would result in a more meaningful overview of the underlying revenue development. As a reminder, we announced a $130 million increase in gross loan loss allowances in May, a further $149 million in November for a total of $279 million, which after taking into account net recoveries at the end of the year, was reduced to net credit losses for the year of $213 million. If we strip out those 213 million negative revenues in 2025, then the underlying operating income showed a year-on-year increase of 6% to almost 4.073 billion. Looking at the revenue composition and starting from the largest contributor to our revenue base, we see that net commission and fee income was up 5% year-on-year to 2.314 billion, largely driven by the year-on-year increase in average AUM. Moving beyond commission fee income, we saw a $252 million decline in net interest income being more than compensated for by a $326 million increase in net income from financial instruments or trading income. NII was strongly impacted by the year-on-year decrease in interest rates, by a mixed shift to lower interest rate Swiss franc denominated loans, a slightly smaller treasury bond portfolio, a weaker US dollar, and to a lesser extent, the further shrinking of the private debt portfolio, which is now virtually completely wound down. As a result, while deposit expense fell substantially by 23%, on the asset side, interest income on the loan portfolio decreased by 29%, and interest income from the Treasury portfolio fell by 11%, resulting in NII of $125 million. Against that, net income for financial instruments at fair value through profit and loss improved by 25% to $1.608 billion, essentially all on the back of a 51% rise in treasury swap income, or quasi-NII as we like to refer to it. This was the result of a 28% year-on-year increase in average swap volumes to $27 billion, as well as higher average spreads. While income related to structured products and FX trading initially grew in the first four months of 2025, especially during the market volatility spike following the Liberation Day announcement in early April, it then normalized to lower levels in the remainder of the year. On slide 10, we regroup the IFRS revenue lines in an alternative way with the aim to better reflect the three key business drivers, i.e., recurring income, interest-driven income, and activity-driven income. For the definitions and how we derive this alternative split from the IFRS view, please refer to the appendix, and I note that the Treasury swap income figures we use are based on management accounts. What this alternative view shows clearly is how the $252 million year-on-year decline in NII has indeed been more than compensated by $358 million higher Treasury swap income. In other words, what we call interest-driven income, which is the sum of accounting NII and Treasury swap income, actually increased year-on-year by $106 million, or 10%, to almost $1.2 billion. Recurring income grew by 5% to over 1.8 billion, while activity-driven income was unchanged at just over a billion. On slide 11, we show the same, but in gross margin terms. The slight one basis point decrease in underlying gross margin to 82 basis points is essentially the result of a small, almost one basis point increase in the interest-driven gross margin to 24 basis points. This was more than offset by a small, slightly more than one basis point decrease in the activity driven gross margin to 21 basis points. The recurring gross margin remained at 37 basis points on a rounded basis. The exit gross margin in the last two months was 77 basis points, of which just over 37 basis points from recurring, slightly over 24 basis points from interest-driven income, and around 15 basis points from activity-driven income, as client activity slowed down towards the end of the year from the more elevated levels seen in September and October. By the way, in the appendix, you can find an overview of the half-year gross margin development, including on the basis of the IFRS revenue split. Now let's move on to operating expenses on slide 12. Well, as I showed earlier, underlying revenues were up 6% year on year. Costs were up only 1% to 2.808 billion, mainly driven by somewhat higher personnel expenses being largely offset by decline in general expenses, partly as a result of internalizations of 184 formerly external staff. Costs include $40 million cost to achieve related to this year's cost-saving program, of which $31 million in personnel restructuring costs compared to $24 million included a year ago. Personnel costs increased by 4% to $1.848 billion in part due to a rise in incentive and performance-related costs, a small increase in pension fund-related expenses and the slightly higher severance payments. General expenses came down by 7% to $714 million, while legal provisions and losses increased by $12 million to $56 million. Excluding provisions and losses, general expenses decreased by 9% to $658 million, mainly on the back of stringent vendor management, leading to a reduction in consulting and legal fees and lower spend on external staff. Depreciation and amortization went up by 4%, 246 million, following the rise in capitalized IT-related investments in recent years. As a result, the expense margin improved by four basis points, year-on-year to 55 basis points, and the underlying cost-to-income ratio by three percentage points to 68. In other words, a satisfactory return to driving operating leverage in the business. As usual, we also show the approximate split of expenses by currency, and it is encouraging to see that despite the significant year-on-year strengthening of the Swiss franc, the share of Swiss franc denominated costs has actually come down year over year. The share is now 55%, whereas a year ago it was 56%. The sensitivity to changes in the key FX rates is largely unchanged to what we showed last June. A 10% weakening of the dollar with ceteris paribus and not including any potential mitigating actions impact our cost-to-income ratio by approximately 2 percentage points. On slide 13, we provide some statistics on our now completed 2025 cost-saving program. As you may recall, last February we announced we would extend the pre-existing program and aim to save another $110 million gross in 2025. In the end, we overachieved on this by 20 million and delivered 130 million of gross cost savings on a run rate basis by the end of 2025, of which 60 million were already reflected in the full year results. Furthermore, initially we had budgeted around 65 million of costs to achieve, whereas ultimately we were able to limit that number down to 40 million. And as a reminder, the main measures applied. the simplification of the organizational structure the optimization of the front operating model as well as a significant reduction of non-personnel spend and finally just to reconfirm that in the strategy update we also announced further structural efficiency improvements also for 130 million with a phased implementation by 2028 and against estimated costs to achieve of around 65 million The incremental P&L benefit of these further measures will be back-end loaded as the cost to achieve will mostly be booked in 26 and 27 and the improvements realized mostly in 28. Slide 14 summarizes the profit development. IFRS net profit was impacted by the non-recurring release of tax provisions in 2024. the increase in loan loss allowances following the completion of the credit review in 25, and the mostly non-cash impact from the sale of Julius Baer Brazil earlier in 2025. But on an underlying basis, i.e. excluding M&A related items and the net credit losses, it is pleasing to see meaningfully positive operating jaws, with operating income up 6% and expenses up 1%, resulting in a 17% year-on-year increase in underlying pre-tax profit to $1.27 billion and the underlying pre-tax margin improving by two basis points to 25 basis points. As the tax rate normalized from 2.9 percentage points in 2024 to 17.2, underlying net profit was just $1 million higher at $1.05 billion. Due to a very significant buildup in capital, as we will see a few slides later, return on CT1 on this basis was 28% compared to 32% a year ago. Our forward tax guidance for the new strategic cycle is unchanged at between 18 and 20% and takes into account the currently expected impact of the implementation of the OECD minimum tax rate in different jurisdictions. Onto the balance sheet on the next slide. Our balance sheet remains highly liquid with a loan to deposit ratio of 63% and one of the highest liquidity coverage ratios in Europe at 261%. As large portions of the balance sheet are denominated in dollars, the year-to-date weakening of the dollar against the Swiss franc had a meaningful impact on how those balance sheet items developed in Swiss franc terms. For example, the loan book increased by 1% or 0.5 billion to 42.1 billion, but on an FX neutral basis, the increase in loans was 5% or plus 2.3 billion. And deposits declined by 3%, minus 1.9 billion to 66.8 billion. But on an FX neutral basis, deposits actually increased by 3%, or plus 2 billion. Turning to the capital development on slide 16. The Basel III final standard was fully implemented in Switzerland as of the 2025 financial year. And with this full implementation, the Swiss framework went significantly further than the ones currently applicable in, for example, the Eurozone, the United Kingdom and the United States. In the graph on this slide, we show for end of 2024, the CET1 capital ratio pro forma for Basel III final at 14.2%, and then the development from there to the 17.4% print at the end of 2025. CET1 capital grew by 10% to 3.9 billion as the combined benefits of net profit generation and the continued OCI pull to power effect more than offset the impact of the dividend accrual. At the same time, risk-weighted assets decreased by 10% to $22.7 billion, mainly on lower operational risk positions as the 2015 US case dropped out of the calculation, as well as lower credit risk positions, partly due to a decrease of the Treasury portfolio and partly as a result of the further wind-down of the private debt loan book, which typically carries a risk weighting of 100%. So as a result, the CET1 capital ratio improved on a like-for-like basis by around 320 basis points to 17.4%, almost fully restoring capital levels to pre-Basel III final levels in the space of just 12 months. The risk density was 21% at the end of 2025. However, our risk density guidance for the new cycle is unchanged from the 22% to 24% range we gave in the June strategy update. In line with our dividend policy, where the dividend is the higher 50% of adjusted net profit or last year's dividend per share, the proposed dividend is unchanged at 2.6 francs per share. And as we also discussed extensively last year, any additional capital distribution in the form of future buybacks remain subject to regulatory approvals from our home regulator, FINMA. We continue to have an active and constructive dialogue with them, but it is ultimately the regulator's timeline. Finally, on slide 17, a quick review of the development in the Tier 1 leverage ratio. As a result of the CET1 capital development and the net impact of the 350 million Swiss franc A Tier 1 call in June and the $400 million A Tier 1 issuance in February, Tier 1 capital increased by 4% to 5.5 billion. The leverage exposure increased by 3% to 111 billion, basically in line with balance sheet growth. As a result, the Tier 1 leverage ratio was essentially unchanged at 4.9%, comfortably above the regulatory floor of 3%. With that, it is my pleasure to hand the microphone back to Stefan for an update on the strategy execution.

Thank you, Evi. Let me start with a few comments on our financial results in the context of our 2026-28 mid-term targets. First, on net new money. Overall, there was positive momentum last year across all our regions and client segments. We aim to gradually improve the pace to 4-5% per annum by 2028. Second, on cost-income ratio. We have made excellent progress last year, with an improvement of over 300 basis points to 67.6%. We are starting our new strategic cycle with front-loaded investments for back-loaded returns and remain committed to achieving a cost-income ratio of below 67% by 2028. And third, on capital. We significantly improved our CET1 ratio to 17.4%. And given the capital generative nature of our business model, we reiterate our midterm target of a return on CET1 of above 30%, with a 14% underpin. Overall, last year's results are a testament to the resilience of our franchise, the trust of our clients, and the commitment of our people. This sets us well on course to achieve our midterm targets. Let's now look at 2025 in the context of our overall transformation journey. It was a crucial transition year for us. The focus was twofold. On one hand, to address pressure points and strengthen our foundations. And on the other hand, to define and start executing our new strategy. As I said in my introduction, we delivered on both of those objectives. To give you a few highlights. First on strengthening foundations. We made significant progress in de-risking. As part of that, we defined a new group risk appetite framework. We also upgraded our risk organization and carved out separate compliance function. And last but not least, we completed our credit book review, which allows us to turn the page and fully focus on our business. We enhanced our leadership structure with a smaller executive board and the newly introduced Global Wealth Management Committee, including key leadership appointments. We also reinforced accountability and ownership across the bank by enhancing the first and second line of defense, introducing a new front operating model and a new compensation framework. Now on to strategy execution. We sharpened our high net worth and ultra high net worth client proposition and we are launching a comprehensive growth agenda. More to come in a minute. On the cost and efficiency front, we implemented our cost program and overachieved the targets for 2025. And on technology, we launched the IT infrastructure renewal project in Switzerland and delivered on time our new global finance platform. Now, looking ahead, let's talk about our new strategic cycle. This is what I believe matters most. It comes down to a few simple transformational imperatives. First, on profitable growth, it's about reviving our organic growth engine to our full potential. Second, on cost, the imperative is to instill everyday cost consciousness in everything we do. Third, on risk and compliance, it comes down to disciplined entrepreneurship fully in line with our core wealth management lane. On the technology front, it's about scaling and harmonizing our infrastructure to deliver the best digital experiences. And finally, it is critical to drive our culture transformation and promote performance and ownership. Over the last few months, we've been talking a lot about cost and risk. Today, I want to talk about growth. We have a comprehensive agenda which covers all the relevant dimensions, productivity, client propositions, product access, and geographic footprint. And everyone has a role to play, regions, products, and group functions. With everything we did last year, we have set the stage to execute on it. There are three main components driving that execution as we enter our new strategic cycle. First, it's about front productivity and growth mindset. We continue to operationalize our new front operating model, including processes and incentives. Under the umbrella of ease of doing business, we are streamlining processes supported by digital tools for relationship managers. A good example is the rollout of our new Valve Navigator. And on the talent front, we're doubling down on internal mobility and career development programs. We're scaling up our associate relationship manager program and completed our first ever summer internship program. Second, on regional and product priorities, starting with our home market Switzerland. we see significant further potential. It comes down to leveraging all the great capabilities and expertise we have on the ground and developing new client solutions tailored to local needs. Since the beginning of the year, we have strong leadership in place with Marc Plunier and Alain Kruger. On Region Asia, our second home market, This year marks the 20th anniversary of our local presence. We have a very strong position there and continue to grow, especially with ultra high net worth clients through our hubs in Singapore and Hong Kong. We are well positioned to also capture opportunities arising from a changing geopolitical landscape by leveraging our global scale, independence and Swiss heritage. An example is our LATAM business, which delivered positive net new money for the first time in several years. And with the arrival of Antonia Murga to lead LATAM, we're looking forward to further grow this franchise. And now on products. Our new global products and solutions unit, as well as our independent CIO office, are now fully operational and already creating tangible impact. We see strong traction on structured products with a significant increase in volumes. We are also expanding alternative investments and high-end advisory and discretionary mandates. Third, to deliver on our growth agenda, we need the regions, products and group functions to come together. To do so, we're launching a three-year dedicated revenue and growth program to support execution and ensure focus on organic growth. We can't talk about growth without talking about clients. What we see is renewed energy, strong momentum and continuous engagement with our clients. It is clear when the regions, products and functions come together, we unlock the power of our franchise. I've seen this firsthand, having personally met with more than a thousand clients since I joined. In summary, our transformation is about striking the right balance across growth, cost and risk. On cost, we'll further optimize our front to back operating model and simplify our processes and IT landscape. we'll also continue embedding cost consciousness and ownership in the day-to-day business. I'm convinced that our designated Chief Operating Officer, Sean Abba, with his track record in driving operational excellence, will bring additional momentum to our efforts. On risk. We're just about to complete the rollout of our bank-wide culture and conduct awareness program. And our designated Chief Compliance Officer, Victoria McLean, will focus on operationalizing our new compliance function. Before we go into Q&A, let me reiterate my key takeaways. We have delivered a strong underlying performance, a testament to the strength of our franchise and overall transformation momentum. 2025 was a crucial transition year for us. We addressed legacy issues, strengthened our foundations, and mobilized the organization around the execution of our strategy. We have a clear growth agenda focused on reviving our organic growth engine. We have a plan, we have momentum, and we are on track to achieving our midterm targets. With that, let's transition to Q&A.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Amit Ranjan from JP Morgan. Please go ahead.

Yes, hi, good morning and thank you for taking my questions. The first one is on the dedicated three-year revenue and growth program that you talk about. What are some of the key metrics that you are looking here to measure progress? And if you could also talk about the phasing of this, is it mostly a 2028 measurement or there are some guideposts in between. And in that context, if you could please also talk about your net new money expectations for 2026 and the advisor hiring expectations after the decline that we have seen in 2025. Thank you.

Good morning, Amit.

Thank you for the questions. Let me start with the second batch of questions on net new money and RM hiring. So first on net new money, last year, despite de-risking and the year of, I would call it transition, We were able to bring in 14.4 billion of net money or 2.9% on an annualized basis, pretty close to what we thought we would do and what we said we would do at the beginning of the year at 3%. When I look at 2026, we aim to do a bit better than that. But please do not forget that our midterm targets stipulate that we will gradually improve to the level of more than 4% by 2028. And then on the RM hiring front last year, we hired 120 RMs on a gross basis. We intentionally shifted some of the hiring into early 2026 to align with both bonus cycles and onboarding readiness. You're right in that we did have a decrease in the net number of RMs. That's due to the sale of Brazil, the intensification of low-performer management you know, natural attrition. So the net number ended up lower. However, we are planning to hire more than 150 RMs this year and hiring momentum has picked up. In January, we saw 16 new RMs joined with another eight hires already signed. And as I said, we have the ambition to hire 150 plus this year, focus on our key strategic markets and always subject to strict quality criteria. I think we're quite confident in our ability to attract top talent. We've shown it again and again. We have a strong employer brand. We're dedicated to our RM enablement. And I think people appreciate the performance driven culture.

The next question comes from Benjamin Cave and Robert from Goldman Sachs. Please go ahead.

Good morning, both. Thank you very much for the presentation and for taking the questions. Just actually one from me, please, on the cost income. If you could talk a little about how you expect the cost income to develop into 2026. You mentioned the fact that there is 130 million of savings targeted with cost to achieve mostly front-loaded and savings largely back-end loaded. But I just wanted to check, how should we think about progress on cost and efficiency there? Thank you.

Your question, Ben, thank you and good morning for the question. In a second, I think we didn't answer Amit's second question. So, Stefan, over to you.

Yes, the revenue and growth program specifically addresses the organic growth dimension and provides a structural central framework for systematic sales management, pricing and product adoption, think discretionary mandates, high end advisory mandates, structure products, alternatives, funds, lending, and so forth. If you think about how this then going to play out, an obvious example is our existing seasoned RMs and giving them the tools to deliver growth. This will be a combination with the things I mentioned around products, but also ease of doing business is an important component of that.

And Ben, going back to your question, what I would say is that based on an 80 basis point gross margin as an input factor and assuming the other key input factors provided at the strategy update in June, including reasonably normal market performance AUM and no big change to the initial input factor of a dollar exchange rate at spot eight, we would, from today's perspective, expect to land at levels slightly higher than 2025 underlying, on track towards our target of less than 67% by 2028. The non-steerable cost growth, as shown in the cost-to-income ratio walk for the 26 to 28 cycle in the strategy update, is more front-loaded. You might recall that was around six percentage points. The benefits of the further efficiency improvement program will be more back-ended in 2028, Plus, the cost to achieve needed to realize those improvements will be booked mostly in 26 and 27 and then fall away in 28. And therefore, the resulting net benefits will normally only start to come through in 27 and more fully, I would say, in 28. So, in short, in the near term, overall, a slight upward pressure on the cost-to-income ratio and then a clear drop towards 67% or lower in 2028. And as a reminder, again, this is based on an input factor of 80 basis points gross margin and an 80 cents US dollar exchange rate against the Swiss franc. And we're already about 4% weaker than that right now.

Very clear. Thank you.

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

Yeah, thank you very much for taking my questions. Just on the buyback, basically your commentary says it's for FINMA to decide on your share buyback. Sorry to be wanting to be precise on the words, but does that basically mean you requested a buyback and you're just waiting for FINMA to confirm? And then secondly, on client re-leveraging, so you saw a bit more pickup in Do you think that's something that's going to continue to the start of the year, obviously a function of markets, or is it not something we can extrapolate? Thank you very much.

Thanks Anke. On the share buyback question, you may recall that in November we talked about some conditions still to have to be in place and we pointed out things like the chief compliance officer only arriving at the end of this month. So we're not yet in a position to ask for a share buyback.

And on the second question, Anke, we were pleased to see re-leveraging come back in earnest to the tune of 1.7 billion in 2025. We saw some re-leveraging, particularly in the low yielding Swiss franc, including from clients in emerging markets and Asia, but also on the Euro side as well. Less on the dollar where rates remain still quite high. We don't know now with the appointment of the new governor of the Federal Reserve whether rates will come down faster on the US dollar than we have expected. But if we continue to see yield curves normalize and if we continue to see relatively benign market action, then I don't see any reason why we shouldn't see a continuation of re-leveraging. But just as a reminder, in terms of our midterm planning, we have factored in stable loan penetration at current levels of around 8%.

Thank you. The next question comes on Hubert Lam from Bank of America. Please go ahead.

Hi, good morning. I've got three questions. Firstly, on RMs, I saw that you gave the guidance on the gross RM hires. Can you talk about RM attrition? Are you seeing more turnover there? or have there been any unwanted departures, and should you expect more to come this year once bonuses are paid and new incentive schemes are put in place? Second question is, can you give us also an update on the timing of the Swiss IT project, the timeline, implementation, and the costs around that? And lastly, a question around flows and de-risking. I know you gave guidance for this year around flows, but does that imply also some further client de-risking or is that process largely over last year? Thank you.

Good morning, Hubert. Thanks for the questions. Let me start with the RMs. I mean, we did have a net decrease in RMs, as I mentioned to Ahmed's question earlier on. That was, to some extent, a result of the intensification of low-perform management that was part of the cost program. We also had some regular attrition as we do on a yearly basis. We had the sale of Brazil as well, where 28 RMs left the platform. So I would say that last year was indeed a year of decline in RMs, but in our planning, we are factoring in a slight increase of RMs year on year from 26 to 28 going forward, including hiring about 150 plus RMs every year. On the IT project timeline implementation and costs, as Stefan mentioned, we've embarked on this journey to replace our core infrastructure in Switzerland. We hope to do this in a time-boxed approach, so in the next three years, recognizing that there's always risks to delays and all the costs associated with that core infrastructure renewal are embedded in our cost-to-income ratio targets for 2028. And then I think your other question was on de-risking. I mean, client risk management, as we have said in the past, is an ongoing exercise in wealth management, particularly as the geopolitical landscape evolves. So there will always be some client risk management that we do. And indeed, in the last couple of years, we've done more than you would do on a usual basis. As I said, we aim to do better than last year in terms of net new money this year and to gradually improve our net new money growth potential to 4% to 5% by 2028. Great.

Thank you.

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

Good morning. Two questions, please, from my side. First, on Asia, trends look actually very positive, so maybe I can comment a bit specifically on this important region for you. And then secondly, a cost-income ratio, as you mentioned, made significant progress in 2025, and it was also better than expected. Here, there were some headwinds, like currency. Nevertheless, just trying to understand where did you overperform versus your initial expectations. Thank you.

Good morning, Ben.

I'll take the cost-income ratio question. So I think we had said at the November IMS that we expected to land the year at less than 69% on an underlying basis. We ended up doing a little bit better than that. We ended at 67.6%. There was a pickup, though, in costs. so in i think november to december the cost to income ratio was around 75 there were some seasonal costs that came in that came in they were just a little bit less than what we expected so i would say that it was mostly a cost driven beat compared to that initial guidance then stephanie you want to take the asia question

Sure. Look, in Asia, we had a strong year and I think there's a very positive momentum. As you know, there was a flurry of IPO activity, particularly in Hong Kong with over 100 IPOs last year. And in these IPOs, there's always a lockup period until clients actually get the liquidity, which will happen in the coming months and years. And this will bode extremely well for our business. And I feel we're very well positioned to capture those opportunities.

Thank you. And do you see trading activity from clients improving as well?

I think, I guess your question is what we've seen so far in January, right? With all the turmoil we've seen in the precious metals markets.

Yes, yes.

Well, indeed, we have seen a notable pickup in activity in January, as you would expect given the turmoil in the markets.

Thank you very much. The next question is from Jeremy Seagy from BNP Paribas. Please go ahead.

Morning. Thank you. These are both follow-ups, actually. So the first one links to your last comment about transaction income. I just wanted to check. You mentioned the 80-bit sort of gross margin guideline or plan assumption. Are you still happy with that versus the exit rate that you mentioned, which was lower? Is 80-bit still a reasonable expectation? And then second clarification, again, on the advisor numbers, you said that On a net basis, you're expecting slight increases in RMs year on year in 26 onwards versus quite meaningful growth hires. So by implication, you're assuming quite chunky attrition or performance management of advisors. I just wanted to check that's the right understanding.

Good morning, Jeremy. Thanks for the question. Let me start with the second one. In 2025, we did indeed have higher overall attrition than we usually have on a year-on-year basis. And that was a result of all the factors that I discussed before. Of course, every year we higher on a gross basis. but we also have some natural attrition and that natural attrition is in the single digits percentage wise on a normal basis. Then on the 80 basis points input factor. What I can say is that our recurring margin at 37 basis points is, I think, a pretty good starting point. It's going to be, of course, we want to get that up, but it's going to be a slow grind towards 2028. Then assuming on interest-driven income, assuming Stable balance sheet structure and stable AUM. We think 24 basis points is a reasonable assumption for interest-driven income. And then the hardest one to forecast always is activity-driven income. It was 15 basis points in November and December. For the half year, it was 19 basis points. For the full year, it was 21 basis points. In January, we've seen a strong start to the year. So I think that's kind of the piece that's the hardest one to forecast.

Okay, thank you.

The next question comes from Mate Nemes from UBS. Please go ahead. Yes, good morning, and thanks for the presentation.

I have two questions, please. The first one would be on net inflows. So it looks like in November, December, we've seen some acceleration from the July, October period. And given the de-risking of client base, given the performance management in the RM side, it seemed to be well set up actually for some acceleration in net new money in 26. I was just wondering, based on recent trends, where do you expect net new money to drive mainly the group numbers. I very, very expect really good momentum and influence. That's the first question. The second question would be just a follow-up on the Sphere SwissCorp booking platform replacement for modernization. Could you give us a sense what part of the overall spending will be flowing through the P&L and what could be capitalized? Thank you.

Good morning, Mate. Thank you for the question. Let me start with the second one. Typically, we capitalize around 70% of our change, the bank and expense, the remainder on net inflows. Indeed, we did see an acceleration in November and December. In that two-month period, we annualized that new money. 3.2%. As I've said, I think quite often in the past, the net new money is a very volatile time series. So you should not extrapolate any two-month, four-month or one-month number. We do plan to do better than what we did in 2025 and 2026 and reiterate that we target a 4% to 5% increase by 2028.

The next question comes from Stefan Stallman from Autonomous. Please go ahead.

Morning. Thank you very much for taking my questions. I have two, please. The first one on your new compensation framework. Could you maybe outline in general terms what has changed compared to the previous one? And maybe also if you had applied hypothetically this new compensation framework in 2025, Would that have resulted in higher or lower compensation expenses? And the second question on a regulatory topic. There's obviously quite a lot of debate in Switzerland, among others, on the treatment of software assets in CEQ1 capital. And it now looks as if maybe the government is going to a potential outcome where there's only partial deduction as opposed to full deduction. Would you expect that to actually have a benefit for you going forward? Thank you.

Thank you, Stefan, and good morning. I would say on the compensation framework, the main purpose was twofold. First, to create accountability and ownership of the first line of defense. then make sure that they do the right thing from a risk point of view. Think about how we think about compensation for clients with higher reputational risk, more credit intensity and other things. And on the other hand, the revision of the compensation framework was done to incentivize our ORMs to deliver organic growth. As you say, We are now going through this compensation cycle and of course time will tell what the result will be, but the early indications are very positive.

And good morning, Stefan, also from my side. I guess you're referring to the proposed amendment of the too big to fail regime. But let me remind you that that's mainly directed to SIBs. As we aren't one, we do not expect any substantial impact on our regulatory capital and liquidity. We already treat software as an intangible asset and consequently we deduct it from CET1 capital, as you know. Regarding DTAs, there's no tax loss carry forwards that we have remaining on the books as of today, which were previously deducted from capital. I would say our CET1 is therefore already of high quality.

Thank you very much.

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

Good morning, Stefan. Good morning, Nevi. I have three questions left, please. Just firstly, on your targets, you said that you are firmly on track to achieve the 2028 or medium-term targets. Just curious, is that a reference to the much higher revenue power of the business on the back of high AUM and strong markets last year, or is it also a reference to the fact that you are ahead of your transformation process? Secondly, on risk density, other than re-leveraging and maybe perhaps some increased investment into the treasury portfolio, Are there any other factors expected to drive the risk density higher from here from 21% to the guidance of 22 to 24? And then finally, on your swap volumes, I think you said there's 27 billion. Just curious how you expect that to trend from here, please. Thank you.

Morning, Nick. Thanks a lot for the questions. Let me start with the swap volume. So it was around 27 billion in 2025, up from roughly around 21 billion in 2024. That's primarily driven by our excess funding position, primarily in dollar deposits. Sometimes there's some seasonality in that. If we issue, for example, term deposit notes from our markets business. So I think you can sort of model how we think about that based on the 24 basis points interest driven income guidance we've given and the interest rate sensitivity we show in the appendix of the presentation. On risk density, we do stick to our guidance of 22 to 24%. It's on the credit side of things, Again, we're assuming stable lending penetration, so loan growth pretty much tracking AUM growth. Operational RWAs, we've had the big US case drop out of the operational loss database at the end of 2025, and we don't see any other large cases dropping out before 2029. And then, of course, you have the markets RWA, which is more seasonally driven. So I think we stick to 22 to 24%. I would say that it's more likely to be closer to 22 than to 24, particularly if you take into account the fact that we're also managing down the 0.7 billion portfolio that we announced in the IMS, which carries a higher risk density.

And Nick, to your comment that we're firmly on track in terms of the mid-term targets. What I was referring to is that when we announced our strategy last year in June, we still had a lot of voodoo job. We had to complete the credit review. We had to hire a new chief compliance officer, implement a new risk appetite framework, a new compensation framework and so forth. What I meant is that having made all these changes and entering our 2026-2028 strategic cycle, we feel very confident that we have made the changes necessary to have the right conditions to reach those targets.

Very helpful.

Thank you. As a reminder, if you wish to register for a question, please press star followed by one. The next question comes from Giulia Aurora Miotto from Morgan Stanley. Please go ahead. Hi, good morning.

Thank you for taking my questions. I have two. The first one, going back to the core banking system change in Switzerland, when is the bulk of this project happening? So is it in 26 or 27? I'm referring to basically the migration of clients. When do you expect migration? that to start. And then, secondly, on the FINMA discussion, any color that you can share with us in terms of what FINMA is waiting for, essentially? What are the next deliverables? And is there any timeline? Would it be realistic to expect the second half of this year to see the end of this enforcement action?

Thank you. Good morning, Julia.

On the second question, there's no migration of clients happening in 26 or 27, probably 28 if everything is on track.

Hello. And on FINMO, look, we are just waiting for the enforcement proceeding to be completed. And this thing can take time. I would say that our interaction with FINMO and all our other regulators is very active, proactive, transparent, and we feel we're making good progress. We'll take a little bit more time.

The next question comes from Nicolas Payen from Kepler Chevreux. Please, go ahead.

Yes. Yes, morning. I have two questions, please. The first one would be on the credit recovery that we saw in H2. Just wondering if it's that final or we could expect something more going forward. And then a follow-up on the net inflows contribution. Could we have the split between seasoned RM and newly hired RM, please? Thank you very much.

Sorry, your second question was how many seasoned RMs versus RMs on business case?

Well, let me answer the whole thing. The split regarding NetInfo's contribution between seasoned RMs and newly hired RMs, please.

Super, thank you. So roughly about 70% of the net new money haul came from RMs on business case with 30% coming from the seasoned RMs and RMs on business case represent roughly 31% of the population of RMs, which is the highest proportion of RMs on business case we've had in six years so i think that bodes well at least for that portion of net new money generation in the coming quarters and then on your question on credit recoveries yes the bulk of the credit recovery was from the 2023 largest private debt case however there were a few others i would say that the vast majority of the 2023 case is already in the books thank you very much

The last question comes from Tom Hallett from KBW. Please go ahead.

Hi, thanks for taking my question. Can you just remind us what your exposure to China is in terms of AUM and revenues, please? And then secondly, I'm just trying to reconcile the kind of strong performance in cost with your relatively downbeat assessment of the cost-income ratio. So I was wondering if you could kind of bucket the moving parts in cost into kind of the underlying inflation rate, the cost saves and the investment rates, and those related to comps.

Hi Tom, thanks a lot for the questions. Let me start with China first. So it's Chinese domicile clients are roughly more than a quarter of our total AUM base. So you can make your assumptions on gross margin and work out revenues. This is something we don't disclose, obviously. The second point on cost to income ratio, You characterize it as downbeat. I would not characterize it as downbeat. I would characterize it as realistic. So we said that some of the investments, the non-serable investments that we talked about in the June strategy update will be front loaded. And that was roughly 6% in cost of income ratio terms across the 26 to 28 cycle. Then we have non-serable investments that will power the growth in terms of the revenue and growth program that were around 3.5 percentage points, leading to an uptick of 6 percentage points in terms of additional revenue and cost of income ratio terms for 26 to 28. what we said is that some of these non-serial investments will be front loaded in 26 and therefore that's why we're giving realistic guidance on where we will land up on the cost to income ratio in 26. just to clarify our asian assets are over a quarter not just china yeah okay thank you

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to the management for any closing remarks.

Thank you all very much for your engagement and your questions. Julius Baer is now stronger, simpler and fully focused on the future. We'll be back with our next update at the IMS in May. The IR team is available offline in case of further questions. Thank you all and have a great day.