UBS Group AG 2026 Q3 Earnings Call

Please go ahead, madam. Good morning and welcome, everyone.

Before we start, I would like to draw your attention to our cautionary statement slide at the back of today's results presentation. Please also refer to the risk factors included in our annual report, together with additional disclosures in our SEC filings. Throughout our remarks, we will refer to underlying results in USD and make year-over-year comparisons unless stated otherwise. On slide 2, you can see our agenda for today. It is now my pleasure to hand over to Sergio Ermotti, Group CEO.

Thank you, Sarah, and good morning, everyone. In an increasingly complex market environment, our strong third quarter performance once again demonstrated the benefits of our diversified global business model and disciplined execution. We remain focused on what we could control, deepening client relationships, prudently managing resources and risks, and finalizing the integration of Credit Suisse while delivering on our related financial ambitions. With a year-to-date return on CET1 capital of 17%, we are increasingly confident in our ability to outperform our 2026 exit rate return target. We remain on track to achieve our exit rate cost-income ratio target of less than 70%. Our global diversification remains a key source of strength and momentum. In APAC, our One Bank approach is driving year-to-date pre-tax profit margins towards 50%. In the U.S., our strategic investments continue to translate into consistently higher levels of profitability and growth.

In Switzerland, the value clients place in our local and global capabilities is increasingly evident in our results, and we granted or renewed around CHF 40 billion of loans to businesses and households. Meanwhile, in EMEA, our enhanced scale is translating into stronger operating leverage in the region. More broadly, the breadth and depth of our offering allowed us to attract CHF 55 billion of inflows in Global Wealth Management. We also saw record demand for our Unified Global Alternatives strategies, further bolstering our scale and growth momentum. In the Investment Bank, we improved on our already best-in-class efficiency with record third-quarter performance reflecting the strength of our equities franchise and our ability to capture high return opportunities, particularly in Asia. As we enter the fourth quarter, investor sentiments remain measured amid elevated macroeconomic volatility, ongoing geopolitical tensions, and political uncertainty with consequential elections, including in the U.S.

Against this backdrop, we are staying close to clients to help them navigate market conditions and capture opportunities. Our profitability and balance sheet for all seasons gives us the capacity to do this while also delivering on our capital return plans. We have repurchased $4.8 billion of shares and accrued $2.8 billion for our dividend year to date. We have already achieved the ambition we set early in the integration journey for 2026, with total capital returns now to exceed pre-acquisition levels. Over the next three months, we intend to repurchase $1.2 billion of shares, completing our current program. As usual, we will outline our capital return plans for 2027 with our fourth quarter results. Turning to the integration of Credit Suisse, we are in the last mile, and the finish line is in sight.

Nearly all legacy applications are no longer in use, with 90% fully decommissioned, and as said, we are close to achieving our related financial ambitions. Of all we have accomplished over the last three years, I remain very proud of how our people come together under a common culture and vision. Our recent employee survey results continue to exceed financial services benchmarks across all comparable measures, with overall sentiment remaining strong and broadly consistent across UBS and former Credit Suisse employees. That sense of shared purpose has been a driving force behind our success. More importantly, it gives me confidence that we can continue to evolve as a firm and unlock the growth opportunities that lie ahead. Increasingly, technology and AI are amplifying the ability of our people to serve clients and operate as a more integrated firm.

Our progress was recently validated by the 2026 Evident AI Index, with UBS recognized as the global leader in responsible AI and talent development in banking. Of course, another defining factor for the future of UBS is the ongoing parliamentary process related to banking regulation in Switzerland. I am convinced that, as was the case in March 2023, we are once again in a critical juncture where the course for the coming decades will be set for the Swiss Financial Center. September's outcome in the Upper House is very concerning. We have made every effort to engage and contribute constructively to create a basis for a truly democratic process. Our goal has been and remains to reach a solution that balances financial stability, taxpayer protection, and competitiveness. Unfortunately, the latest proposal on the table also fails to achieve that balance.

It continues to disregard the serious concerns raised by the overwhelming majority of respondents to the consultation and would excessively tighten capital requirements that are already among the most stringent globally. Just as troubling is the failure to consider the consequences for our shareholders, who remain the first line of defense in periods of stress, and whose critical financial support during the acquisition helped protect Switzerland's reputation and financial stability. We will continue to engage constructively in the hope that the Parliament will reach a solution that supports the country financial stability without imposing undue cost on UBS's shareholders, clients, and employees, and without impacting its long-term competitive position. The ongoing debate is generating considerable attention, leading to a lot of speculation, opinions, and requests for clarification from all of our stakeholders. We do not intend to address everything, but on one topic, we want to be very clear.

For UBS, the top priority is to protect the long-term interests of our shareholders, clients, and employees around the world. In a very competitive environment, it is essential to be able to continue to grow sustainably while remaining strategically committed to our diversified business model and our global and regional footprint, which allow us to create value for all of our stakeholders. After more than three years of disciplined execution, we are on track to complete the integration by year-end and have strong momentum across our businesses. With that, let me hand over to Todd.

Thank you, Sergio, and good morning, everyone. In the third quarter, we delivered reported net profit of $2.7 billion and earnings per share of $0.85. On an underlying basis, our pre-tax profit was $4.1 billion, up 14%, with a return on CET1 capital of 16.7% and a cost-income ratio of 68.7%. Total revenues increased 10%, outpacing expense growth. Within our core franchises, excluding litigation, we delivered four points of positive operating leverage on 3% higher revenues and lower costs. Moving to slide six. This quarter's strong performance was underpinned by year-on-year profit growth in each of our businesses, alongside continued progress on the integration, now in its final stages. Reported results included integration costs of $452 million and a charge of $346 million from the repurchase of around $10 billion of high-cost Credit Suisse liabilities.

The debt repurchase accelerates the reduction of the funding drag in Non-core and Legacy, while also supporting net interest income in GWM and P&C going forward. The effective tax rate in the quarter was 24.7%, slightly elevated as the legal provisions recorded in NCL are not expected to result in a tax benefit. Turning to our cost update on slide seven. With $13.2 billion of gross cost reductions already delivered, including $0.6 billion in the third quarter, we expect to deliver $0.5 billion more in the fourth quarter, bringing the total to around $13.7 billion, above our $13.5 billion ambition. Accelerated delivery of integration milestones has enabled us to identify additional synergies supporting this expected outperformance. Capturing these opportunities entails additional costs.

As we complete the program at year-end, we expect around $0.5 billion of integration-related expenses in the fourth quarter, bringing the final cost to achieve multiple to around 1.1 times at historical FX rates, in line with guidance and a strong outcome given the integration scale and complexity. Total headcount at quarter end was 110,000, 2% lower sequentially and 30% below our 2022 baseline. Similarly, over the same period, we've reduced the group's operating expenses by almost 30% when excluding litigation, variable compensation, and currency effects. As the integration program concludes, our focus shifts from capturing related synergies to sustaining both a structurally efficient cost base and disciplined resource allocation. Together, these generate capacity for growth and attractive capital returns to shareholders. Turning to slide eight. As of the end of September, our balance sheet for All Seasons consisted of $1.7 trillion in total assets.

Loan balances and deposits were down 1% sequentially, as positive net new lending and deposit flows across GWM and P&C were more than offset by FX translation. Credit-impaired exposures remained at 1%, while group credit loss expense was $114 million, corresponding to an annualized cost of risk of 7 basis points, unchanged from the prior quarter. Tangible book value per share increased slightly sequentially as profit in the quarter was largely offset by net charges in OCI and share repurchases. Overall, we continue to maintain a strong and resilient balance sheet with total loss-absorbing capacity of $187 billion, a net stable funding ratio of 115%, and an LCR of 179%. Turning to slide 9. Our CET1 capital ratio at the end of September was 14.7%, and our CET1 leverage ratio was 4.6%.