Julius Baer Gruppe Namen

Ladies and gentlemen, welcome to the Julius Baer 2026 half-year results presentation for analysts and investors. I am Sandra, the course co-operator. I would like to remind you that all participants have been listened only mode 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. Please go ahead, sir.

Good morning, everyone. Welcome to the Julius Baer half-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. Before starting, I would like to flag the important information provided on slide two of the presentation. It is now my pleasure to hand over to Stefan for his introductory remarks.

Thank you, Alex. Good morning, everyone. And thank you for dialing in today. Let me start by giving you my take on our half year results. It has been an intense but highly productive first half for Julius Baer. Overall, we delivered a very strong operating performance, which was driven by exceptional client activity, especially in the first quarter. The results also reflect the depth and breadth of our capabilities and the ability of our team to help clients navigate complex markets and capture opportunities. Now, let's have a look at the figures. Asset under management reached 547 billion Swiss francs, up 5% year to date, the highest level in our history. Net new money amounted to a solid 5.7 billion, which we achieved despite the ongoing implementation of our revised risk and compliance framework. We generated a record half-year net profit of 673 million, a like-for-like increase of 32% year-on-year. Our gross margin expanded to 87 basis points and our cost-income ratio improved to 62.6%. as we delivered further positive operating leverage. Capital generation remained strong with the CET1 ratio increasing to 18.5%, underscoring our solid capital position and financial resilience. Regarding capital distribution, I would like to reaffirm that any further share buybacks remain subject to approval by FINMA. We continue to have an active and constructive dialogue with FINMO, but the timeline is ultimately theirs. In short, we have no further update at this point. As you know, the first half also marks the start of our new 2026-2028 strategic cycle. We continued to progress steadily on our strategic priorities and are in execution mode on all five pillars. Growth, efficiency, risk and compliance, technology, and last but not least, our people agenda. First, we launched our growth program in February and we are pushing to unlock organic growth. Front to back, everyone is involved. At the same time, we continue to progress on the implementation of our revised risk and compliance framework. On the operational side, our focus is on simplifying end-to-end processes, taking a risk-based approach and leveraging technology, including AI. One example of how we apply a risk-based approach is the work we did on streamlining the client onboarding process in Switzerland. Among many use cases, an example of how we leverage AI is the work we did on materially improving name and media screening. And on the fifth pillar, we progressed on the culture transformation agenda with emphasis on performance and ownership. Overall, I'm proud of what the team achieved and where we stand. Of course, there's still a lot of work ahead and it's crucial we all remain focused on executing with discipline. With that, I hand over to Evi to walk you through the financials.

Thank you Stefan and good morning everyone. As usual, before turning to the results, I'd like to begin on page 7 with an overview of the key market developments during the first half of the year, as these will help frame the context for our performance. Despite the shock in March, global stock market indices were up meaningfully, albeit with quite a wide dispersion of returns. For example, while the Nasdaq was up 20%, the SMI was up just 7%, and Hong Kong and India were actually down more than 10%. Bond markets were little changed, and while the Swiss franc strengthened slightly versus the euro, the franc saw some modest weakening versus the dollar. The prices for precious metals showed significant swings, especially at the end of January, when both gold and silver, following record peaks, experienced their sharpest one-day sell-offs and most extreme intraday swings in decades. In terms of central bank interest rates, we saw the ECB hike by 25 basis points in June, the first time they raised rates since September 2023, whereas the US Federal Reserve kept rates unchanged for now after three consecutive 25 basis point cuts in quick succession in the second half of 2025. The Swiss National Bank kept rates at zero. The third set of graphs on the bottom left of the page shows that the shape of the key yield curves continued to normalize. Finally, stock market volatility as measured by the VIX increased in the first quarter with a spike in March before normalizing in the second quarter. Moving on to slide eight, which shows assets under management up 5% to an all time high 547 billion on the back of positive market performance, continued net new money and the stronger dollar. Monthly average AUM important for the margin calculations grew by 7% year on year to 526 billion and with assets under custody up 10%, this brings total client assets to just shy of 650 billion. Proceeding to net new money on slide nine. A bit similar to what happened in H2, we started the period slowly, but picked up some momentum in the last two months, ending with net new money of 5.7 billion, and that's a 2.2% annualized run rate. Growth continues to be weighed down by the ongoing rollout of our revised risk and compliance framework. That said, every region added inflows with Western Europe, including Switzerland, delivering particularly strong results. Most of the inflows came from RM still delivering on their agreed business cases, typically over a three to four year horizon, and on average, they're performing right in line with our expectations. And on the topic of client leverage, after pausing in the first four months, we saw clients starting to take on some leverage again in May and June. So now let's go to revenues on slide 10. Compared to the underlying result a year ago, thanks to the record high AUM and the exceptionally strong client activity in the first quarter, operating income grew by 12% to 2.276 billion. Net commission and fee income grew 12% year-on-year to 1.279 billion, largely driven by the 7% year-on-year increase in average AUM and a rise in brokerage commissions. Net interest income rose 80% to 130 million, driven largely by lower deposit rates, resulting in total interest expense dropping 21% to 714 million. Despite higher average loan volumes, interest income from lending fell 16% to 529 million, impacted by lower rates. In contrast, income from the Treasury portfolio edged up 2% to 270 million, supported by slightly higher balances. Net income from financial instruments at fair value through profit and loss grew 9% to $876 million. The boost came mainly from strong performance in FX and metals trading, as well as structured products, especially in the first quarter, before moderating in Q2 as conditions settled. On treasury swaps, income dipped slightly despite higher average volumes as the yield spread between US and Swiss rates compressed compared to last year. On slide 11, 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 12% year-on-year revenue increase was driven mainly by higher activity-driven income, which grew by 30% to $710 million, and by recurring income, which rose by 10% to $984 million, while the jump in accounting net interest income was tempered by lower treasury swap income, thereby limiting the growth in interest-driven income to 2% or $593 million. On slide 12, we show the same in gross margin terms. The year-on-year increase in gross margin from just over 83 basis points to almost 87 basis points is essentially the result of a five basis point increase in the activity-driven gross margin to 27 basis points and a one basis point decrease in the interest-driven gross margin to 23 basis points with the recurring gross margin holding stable at 37 basis points. The exit gross margin in the last two months, i.e. May and June, was 80 basis points, of which somewhat more than 37 basis points from recurring income, well over 21 basis points from interest-driven income, and slightly less than 23 basis points from activity-driven income. By the way, in the appendix you can find an overview of the gross margin development on the basis of the IFRS revenue split. Now let's move on to operating expenses on slide 13. The increase was driven by personnel costs, which were up 37 million or 4% to 974 million, driven by 1% year-on-year rise in average headcount and higher incentive in performance-related compensation. The rise in headcount was largely driven by further internalizations as part of our cost improvement focus, as well as a one-off technical FTE true-up in H1 related to the treatment of long-term absentees. General expenses held steady at 371 million. This included provisions and losses of 37 million, up by 1 million or 3% year on year. When excluding provisions and losses in both periods, we saw a 1% year on year decrease to 333 million. This reflects a balance between higher spending on technology investments, which rose as part of our platform modernization initiative in Switzerland, and significant cost savings achieved through efficiency measures and internalizations. The sum total of depreciation and amortization was unchanged at 117 million. The costs in H1 included 7 million costs to achieve related to the new efficiency improvement program with fiscal year savings of 11 million already benefiting the P&L in the first half of the year. Gross run rate savings of 60 million have already been implemented by the end of June. As a result, the expense margin improved by three basis points year on year to 54 basis points. Thanks to the cost management and of course the elevated gross margin, the cost-to-income ratio came down by almost 6 percentage points to 62.6. However, it is important to note that this outcome benefited from an exceptionally favourable revenue environment, one that we do not expect to repeat regularly in our planning. Additionally, we are continuing to roll out significant investments over the next few years. For these reasons, I would caution against extrapolating the year to date strong cost to income performance into the near future. Slide 14 summarizes the profit development. Thanks to the all-time high in AUM, the pronounced client activity, and the improved operating leverage, net profit reached a record high half-yearly level of $673 million. In terms of IFRS net profit, that meant profits more than doubled year on year. But considering the large items impacting the results a year ago, the like-for-like increase was 32%. The pre-tax margin improved by 6 basis points to 31 basis points, while the return on CT1 capital increased from 28% to 32%, despite a very significant build-up in capital, as we will see in a few slides. Our forward tax guidance for the current 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. On to the balance sheet on slide 15. Our balance sheet remains highly liquid with a loan to deposit ratio of 61% and one of the highest liquidity coverage ratios in Europe at 344%. Year to date, the balance sheet grew 8% to nearly 117 billion. The main driver was client deposits up 8% to 72 billion. On the asset side, loans rose 5% to $44 billion, with Lombard lending up 7% to $36 billion, while mortgages edged slightly down 2% to $8 billion. The Treasury book also expanded, up 15% to $18 billion, supported by growth in both fair value through OCI assets, up 13% to $10 billion, and bonds at amortized cost, which rose 17% to $8 billion. As there was relatively little change in the Swiss franc exchange rate versus the key currencies, the FX neutral changes were not meaningfully different. Turning to the capital development on slide 16. Julius Baer finished the first half of 2026 with a significantly stronger capital base. CET1 capital rose by 0.4 billion to 4.3 billion, a 9% increase since year end. During the same period, risk-weighted assets grew to $23.3 billion, an increase of 3% driven by increases in credit risk positions and market risk positions. Overall, this translated into a CT1 capital ratio of 18.5%, a 1.1 percentage point increase over the past six months, reflecting the highly capital generative nature of our business model. The risk density was 20% at the end of June, and we've slightly reduced our guidance for the cycle to 21 to 23%. Finally, on slide 17, a quick review of the development in the Tier 1 leverage ratio. As a result of the CT1 capital development and the impact of the US$350 million A Tier 1 redemption in April, Tier 1 capital increased by 2% to 5.6 billion. The leverage exposure increased by 7% to 120 billion, basically in line with the growth of the balance sheet. As a result, the tier one leverage ratio declined somewhat to 4.7%, but clearly remains very comfortably above the regulatory floor of 3%. With that, it is my pleasure to hand back to Stefan.

Thank you, Evi. Our financial performance in the first half of 2026 reflects good progress against our mid-term targets, which we reconfirmed today. There's still work to be done and we remain fully focused on delivery. Now, let me summarize the key takeaways. We achieved a strong operating performance in the first half of 2026. The implementation of our revised risk and compliance framework continues. We are making steady progress on all our strategic priorities with a particular focus on reigniting organic growth and on driving cultural change. Before we go into Q&A, I would like to take a moment to thank Evy, given today marks our last results call together. Evy, you have been instrumental in repositioning Julius Baer for long-term success. And on a personal note, I'm deeply grateful for your support since I joined the bank. This isn't quite goodbye, given the upcoming handover to Pete, but I want to sincerely thank you and to wish you every success in the next chapter of your career. 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 Anke Reingen from RBC Capital. Please go ahead.

Thank you very much for taking my questions. The first one is just on the IM target. I think for the IMS stage, you told us that the number you expected to be higher by year end. Can you just give us an update on where you think the relationship manager could end at the end of the year and if you still target the 150 And then just on the guidance on net new money, continued the commentary about net new headwinds to 2027 flows. Given you already can give us that comment now, is there like a target AUM base you think that's at risk from your review to get a sense of how much of a headwind we still should expect in 2027? And do you still expect net new money to be higher in 2027 than 2026 or is that too early to say? Thank you very much.

Good morning, Anken. Thank you very much for the questions. Let me take the first one. So we ended the first half of the year with 1,247 RMs. On a gross basis, we have onboarded 47 RMs with further 14 hires already signed and expected to start in 2026 and advanced recruitment discussions ongoing with more than 50 candidates. So we're very pleased about the pipeline. Thank you very much. Hi Anke, good morning. On your question about the 2027 net new money guidance, in order to frame this, let me take you back to our strategy update in June last year.

We are very focused on repositioning our business for the future. Focus on quality core wealth management, which can yield predictable, repeatable and sustainable performance for our shareholders. On the back of the new strategy that we announced in June, the board approved a new risk and compliance framework last October. And since we have been working on implementing it. As it stands, we indeed anticipate that the impact from the implementation of the revised risk and compliance framework will carry over into 2027. As you know, we're in the wealth management business and de-risking takes time, especially if you think about clients that have a complex setup, illiquid investments and other circumstances that mean that it takes time to exit that. And ultimately, of course, we want to do these exits in an appropriate manner for the impacted clients. Therefore, we should expect some continued headwind into 2027. At the same time, the situation will normalize in 2028. This exercise obviously doesn't help flows in the short term, but it will lead to an improvement of the quality and long-term sustainability of our book. So my view is short-term pain for long-term gain. I'd also mention that at the same time, we are ramping up our growth initiatives and while this takes some time, we expect some positive impact in 27 already. So all in all, de-risking will be normalizing on one hand and our growth initiative will be bearing some fruit on the other hand, which is why we're very confident about our 2028 target. And in terms of how to quantify this, at this point, we retrade the guidance we have given in May that net new money for 2026 will be below 2025. and we told you this morning we expect this to speed over into 27th, but it's too early to quantify the impact. It's impacting predominantly existing clients, but of course also prospects.

Okay, and thank you very much, Evie. Thank you for everything and all the best.

Thank you so much, Anke.

The next question comes from Kevin Roberts from Goldman Sachs. Please go ahead.

Morning both. Thank you very much for the presentation and taking the questions. Two from me, please. First, just on personnel expenses and the cost income dynamic. So, if we look at the adjusted operating income, I think that was up 12% year-on-year and then personnel expenses were up 4% year-on-year. So would you see that as the right balance? If we think net relationship managers are down slightly, as mentioned, I know that's largely a function of ongoing performance management measures. But if you're looking at the pay for performance culture and how it currently stands and within that personal expense line, if there's more moving beneath the surface and between different cohorts of the business. And then secondly, just on net new money, is there any other color you'd give on the regional split? Particularly interested in how you see dynamics in Asia following some recent policy measures in Hong Kong and mainland China. Thank you.

Hey Ben, good morning. Thanks a lot for the questions. So on the personnel expenses side, obviously we had a fantastic development in our top line in the first half, which we are super pleased about. And in that respect, we've also reflected that in performance incentive programs. In terms of the cost to income ratio dynamics, of course, the 62.6% print is a very good print. And I note that in May and June, we had an exit cost to income ratio of 63%. However, if you were to ask me about the outlook for the year, as I mentioned in my opening remarks, I would not extrapolate Thank you very much. Thank you very much. Thank you very much. And third, of course, we're going to be stepping up our spending related to the hiring of new RMs as part of our targeted growth strategy. So these investments, coupled with our ongoing focus on cost discipline, are expected to drive long term operating leverage and support the achievement of our target of a cost to income ratio sustainably below 67% by 2028. But as I've always said, it's not going to be a straight line.

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

Yes, hi, good morning. Two questions, please. First, coming back on the question on the regional split. And not only this half year, but consistently over the last year, Europe, Western Europe is very strong, which should be seen as a more mature market. On the other hand, Asia is solid, but not the outstanding performer. So maybe you can comment on those two regions. What is Europe doing particularly well and where Asia could accelerate? and then um secondly 23 million of credit losses um obviously grand scheme of things in small number in particular compared to the last two or three years but still it's above the call it run rate we had previously so just wondering with less risk taking on the lending side um whether you can comment whether there are this is the new normal or whether there are still some smaller cases apart of the cleanup pushing up the number thank you

Thanks a lot, Ben. I will also answer Ben's question from before on net new money development by region. So as we outlined in the opening remarks, all regions contribute to net flows with particularly quite strong contributions from Western European markets, including obviously our home market, Switzerland. If I look ahead, we continue Thank you very much. Thank you very much. So that's the commentary on the net new money regional developments. We are very, very bullish in Asia and the longer run, the pace of wealth creation there is just astounding. And our franchise is very strong and we're there to capture the opportunities. Now, in terms of the credit losses, we had 23 million worth of credit losses in the first half of the year. These are primarily associated with the income producing real estate portfolio that we earmarked for managing down as we announced in the November IMS conference. Last year, I wouldn't say that there's any unusual development there. In fact, exposure has come down by 20%, which is a pleasing development. And then the other thing I'd note is the market has stress tested our Lombard book twice this year, once in January with extreme volatility in the precious metals space. And then once again in March when the war broke out and it has passed with flying colors. So we're Quite happy with the performance there.

Maybe just to add to Ben's question on the Chinese regulatory developments. I was in Asia last week and obviously something discussed with the local colleagues and the team on the ground sees this repatriation regulations mainly as a formalization of the process on capital flows in and out of China. As you know, all the official regulated channels Wealth Management Connect, Stock Connect to Hong Kong all remain fully open and our team on the ground doesn't see any reason for concerns. In fact, as Evi just highlighted, we're very bullish on the long-term prospect of the region. We celebrate 20 years on the ground and we're doubling down on investments there.

Thank you and all the best, Emi.

The next question comes from Nicolas Herrmann from Citi. Please go ahead.

Yes, good morning. Thanks for taking my questions. Just coming back to the de-risking, please. Could you just, sorry if I missed this, could you quantify the impact of the de-risking in the first half on the revised risk and compliance framework? And I think you said it's too early to quantify that. But I guess just broadly, do you expect that rate to increase from here? And then just like, sorry, just a final related question. Does that impact of de-risking in 27 mean that the progress on net new money will be more hockey stick now? Or are you still expecting a consistent part of the 4% to 5%? And then on the recurring margin, just curious if there were any performance-related elements in your recurring margin in this period, which has expanded quite nicely. And I guess on a related note, you're already in the 37 to 39 basis points range. Does this make you more confident that you can get to the upper end of that range? or I'm just kind of curious how you're thinking now about the recurring margin from here. Thank you.

Thank you, Nicolas. Let me start with the net new money question. You're absolutely right. We should think more of a hockey stick type of development given by 2028 we'll have The higher de-risking because of the implementation of the risk and compliance framework behind us and of course at the same time also we'll see the benefit of all the investments where we make on the growth side in terms of the specific impacts hard to quantify given the effects both existing clients but also prospects.

Hey Nick, Evie here. On the recurring margin, yes, we did a little bit above 37 basis points. We're happy about that. We've always said this is going to be a slow grind to get to the 39 basis points. The levers are well known. We talked about them extensively in the strategy update last year. What I would say is that we've had quite some success in terms of our discretionary mandate flows, so discretionary mandate penetration Thank you very much.

On that, have you seen any impact on demand for private assets on the back of all the negative news flow? And I guess if penetration of private assets were to remain unchanged from here, would there be a lack of uplift in your recurring margin versus kind of the part that you set out in your strategic plan? And I guess would you be able to roughly quantify that lack of uplift if period assets penetration were to be unchanged?

Look, there's a lot of moving parts. What I would say is that where we are in terms of our private markets penetration, we have a lot of upside ahead of us, Nick. So I'm optimistic that we'll be able to get that gross margin associated with recurring up in the next couple of years. And I think, Stefan, maybe you have a couple of comments to add?

Look, generally, I would say that in private markets, given there's a lot of money leaving the space that maybe you could argue should never have been there in the first place. This opens up opportunities for sophisticated, high net worth clients like ours. And so we see lots of opportunities to take advantage of that. You can think of private credit, you can think of

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

Hi, good morning. I've got three questions. Firstly, on RM hires, can you talk about which regions are you hiring them from? Is there a focus in particular countries or regions? That's the first question. A second question is about re-leveraging. It's good to see a boost in May and June. Is this the start of more, you think, re-leveraging to come? And do you think this could be maintained? And lastly, just a clarification, Evie, I think you mentioned the exit margin in May, June. Did you say that an interest-driven margin was 21 basis points? I just wanted to check if that was correct. Thank you.

Thanks Hubert and thanks a lot for the question so on the I'll start from the third one on the gross margin for the exit rate for interest-driven it was well above 21 basis points in terms of the re-leveraging that we saw in May and June I think if you Take into account the lately quite hawkish narrative that's coming from central banks across Europe and the United States and what the market is pricing in now in terms of potential rate hikes. I would be cautious to extrapolate the re-leveraging trend for the rest of the year. We don't do so in our budgeting and as you'll recall from the strategy updates that we did last year in London, we've put out those mid-term planning targets assuming a stable lending penetration at current levels. Then finally, the first question on RM hires. We are hiring across the board in all our key regions with a particular focus in our key markets.

Great, thank you and good luck in the future.

The next question comes from Amit Ranjan from JP Morgan. Please go ahead.

Good morning and thank you for taking my questions. One, please, can you please talk about the split in contributions coming from these end advisors versus those on a business case that you have talked about in the past? Thank you.

Hi, good morning, Amit. Thanks a lot for the question. So, the split between seasoned RMs and RMs on business case has held steady from where it was last year. So, it's about two-thirds, one-third. I would also say that we're very pleased with the performance of our relation managers That are on business case. Business case achievement rate is around 69%. As you know, the average business case is around 200 million. And I would also call out the fact that today we have about 31% of our relationship manager population on business case, which is the highest proportion in the last seven and a half, half year periods.

Maybe just to add, Amit, obviously this also implies that there's a lot of upside in terms of the productivity over our seasoned ORMs, and it's a big focus item as part of our growth strategy.

Thank you, and thanks once again, Evi, for all the engagement over the years, and wish you the best for the future. Thank you.

Thank you, Amit. The next question comes from Stefan Stahlmann from Autonomous. Please go ahead.

Good morning. I have two questions, please. It looks like you actually wrote off a good chunk of your impaired loans, about 600 million during the first half. Is that related to the infamous property group that caused problems in late 2023? And is the fact that you are writing off this exposure also implying that the chance of recovery here is now very low? And the second question I wanted to ask is about the risk and compliance framework and the exercise to introduce this new risk and compliance framework. Is it fair to say that the completion of this project will be a condition for FINMA to sign off on the enforcement action or are those two things totally unrelated? Thank you very much.

Hi Stefan, good morning. Thank you for the question. Indeed, if you look at Note 9 in our half-year report, which I assume you've already done, you'll see that we have written off the largest exposure associated with private debt exposure in 2023. I will note that last year we had quite substantial recoveries from that position and going forward we of course are trying to recover some more but I think from now on the recovery potential is more limited.

And Stefan, your second question. First and foremost, this exercise is about bringing our business in line with our core wealth management lane and the strategy that we outlined last June. And we are very focused on having a book that has the right parameters going forward.

Thank you very much and all the best to you. Thank you.

Thank you, Stefan. Hi, good morning.

Thank you for taking my questions. And Yvi, thank you very much for the dialogue and all the best for the next adventure. In terms of questions, so costs, second half, you know, some investments you are flagging. Could you quantify perhaps how much do you expect costs to increase in the second half and how much costs to achieve? Do you expect? And then, Stefan, on your comment about the hockey stick on a new money in 2028, does this mean that you probably expect 26 and 27 to be roughly stable around this level, like two and a half, three percent? And then, you know, the step up towards four to five in 2020? in 2028. I'm wondering because consensus is currently expecting three and a half in 27 and yeah, I'm wondering if that's realistic or probably it will be lower. Thank you.

Morning, Julia, and thanks a lot for your kind words and for the questions. So let me start with the costs. I think I tried to give some indication. If you take the exit margin of May and June in terms of gross margin of 80 basis points and you take that as an input factor, I would expect the cost-to-income ratio for the second half of the year to be less than 67%. I don't want to give you a specific number on cost growth, but what I can tell you with respect to the cost to achieve, we did seven million in the first half of the year. I expect that number to more than double in the second half.

And Julie, on your question around the hockey stick. As we said before, we don't have enough visibility yet. It's too early to quantify the impact for 2027. What we are saying is that there's a gradual positive impact coming from all our growth initiatives. And as always, our strategy is not to kick the can down the road. And so we are trying to Get the book in line with our risk and compliance framework as soon as possible. All we can tell for now is that it is likely spilling over into 27.

Thank you. And sorry, can I just go back to the comment on cost income below 67% in the second half? So essentially, you're already at the 2028 target. In the second half. Do you expect it to stay there to improve in 27 or 27 will be more investment and therefore, you know, you can maybe be about 67.

Why don't we give you an update on that in the November IMS when we are more progressed with our planning cycle for 27, Julia, if that's okay. The next question comes from Jeremy Sigi from BNP Paribas. Please go ahead.

Morning, thank you. Just one follow-up, please. On the advisor numbers, you're still seeing quite heavy advisor exits. And I just wondered, rough terms, what proportion of those are recent hires from the last three years not working out versus longer tenure, seasoned RMs rotating off? What's the rough split of the exits that you're seeing at the minute?

Morning Jeremy, thanks a lot for the question. I would say that the vast majority is RMs on business case that we're not able to perform according to our expectations rather than seasoned RMs. By definition, seasoned RMs are RMs that have made it.

Thank you and thanks Evie for everything. Thank you very much.

As a reminder, if you wish to register for a question, please press star followed by one. Our next question comes from Nicolas Payen from Kepler Chevreux. Please go ahead.

Yes, morning. Thanks for taking my questions. I have two, please. The first one is coming back on the de-risking exercise. I just wanted to know if there is any region which is more impacted than the others from this exercise. And the second one would be on the interest-driven income outlook going into H2 and 2027. We have red cuts, we have deposits which are repricing, we have a bit of lumbar growth. So how should we think about the interest-driven income going forward? Because I think you mentioned that The interest-driven income was well above 21 basis points on the exit margins. And the slide question, could we have the size of the treasury swap book as well, please? Thank you.

Morning, Nicolas. Thanks for the question. So on the size of the swap book, I'll start from the last one, the FX swap book. It's around 27 and a half billion as of H1. In terms of the Interest-driven income, the component of gross margin. I did mention it was a little bit above 21 basis points in terms of exit margin. Part of that was due to an increase in... Time and call deposits towards the end of the period which impacted a little bit the number however in our forecast for the second half of the year we're looking at a contribution from IDI of around 22 to 23 basis points and with respect to 27 I think we'll be able to give you a better picture once we further progress with our planning for next year.

And on your first question on de-risking, we do not disclose the detailed description of our risk and compliance framework, but you can think of different client types in high risk countries or certain sensitive industries that no longer fit our risk profile.

Thank you and good luck for the future. Thank you.

Thank you, Nicolas. We have a follow-up question from Anke Reingen from RBC Capital. Please go ahead.

Yeah, sorry, but just two follow-up questions. The first one you say you expect the RM number to be higher by year and is that relative to end of June? And then I just have a question about your dividend accrual at 120 basis points versus 300 basis points capital generation. Just to confirm, your dividend payout ratio guidance for this year is 50%.

Thank you very much. Thanks for the follow-up questions, Anke. Yes, the dividend policy remains unchanged. And with respect to the net increase in RMs, I refer to year on year. Yes.

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

Thank you all very much for your engagement and your questions. We'll be back with our next update at the IMS in November. As usual, the investor relations team is available offline in case of further questions. Thank you all and have a good day.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coruscall and thank you for participating in the conference. You may now disconnect your lines. Goodbye.