UBS Group AG Bank of America 31th Annual Financials CEO Conference

Well, first of all, I think that this is an outcome that I have to say was a quite surprising one in respect of what it means. Because if you look at the difference between the current proposal from the Federal Council at 100% and the 90% is de facto the same. Yes, CHF 4 billion of difference, but broadly speaking, it's not really resolving the topic that we should try to address, i.e., the lessons learned from the Credit Suisse crisis. I think that Credit Suisse didn't go down because the regulatory framework was not correct. The fact is that the regulatory framework was not implemented in the way it was necessary. Therefore, going into an extreme solution that with a 90% or 100% backing of the foreign subsidiaries doesn't really resolve that matter.

I think it's quite clearly it's not internationally aligned and therefore creates, in my point of view, a distortion of the competitive position of UBS, and we don't think that this is an acceptable outcome. Also, considering the fact that our shareholders already put on, I would say around CHF 15 billion of forgone profits in order to stabilize and restructure Credit Suisse, also helping the country to avoid a fairly major reputational damage. So I think that we deem this outcome. We are not in control of the outcome, but we don't see this as a compromise, but rather as a little lighter version of the current proposal.

Well, that proposal is a proposal that still, I would say, is a compromise that still leads into substantial increase of our Tier 1 capital, because if you add on the two elements, we have a couple of billions of CT1 plus 13 billion of AT1, which they cost. If you look at what is the difference between the two proposals, the extreme proposal of the Federal Council costs us CHF 3 billion a year. The factor between if you look at the full impact of additional capital that we have to carry because of the current regulation process and the future regulation, the 50/50 would bring that numbers down to CHF 2 billion. So I think that, as you can see, if you add up the CHF 15 billion we basically shareholders paid to restructure Credit Suisse plus an annual additional cost of CHF 2 billion, this is becoming a big topic.

Now, on the AT1, the proposal is all about clarifying the Swiss regime and bringing the Swiss regime in line with the EU and U.K. regime. This is not an experiment. It is actually pretty straightforward clarification of the existing prospectus and the way we look at AT1. So we believe it is a balanced way, which is costly for the bank, but still a balanced way to address the topic and recognizing that adding full CT1 backing. In addition to that, AT1, because the AT1 are not going to be discontinued. It is the way to go.

Oh, I think that according to the current timetable, tomorrow is the upper house vote, and then after that, you go down to the lower house first with the Economic commissions of the lower house, and then the National Council will then deliberate. If they agree on the proposal coming from the upper house, then it goes to the governments for implementation. If they disagree, they need to then meet and try to reconcile their positions and come up with another solution. I can only be hopeful that things are going to be resolved between now and the end of the year. But this is a political process that is highly influenced also by the upcoming elections in Switzerland. This is a very, I don't need to explain in the room or the people watching via video.

These are very technical discussions, and now has become also political discussion, and therefore the complication is very high.

Okay. The third quarter, so we are making good progress in implementing our current plan, and I'm quite happy to see the developments in terms of growth. We see also really now coming fully the fact that we are almost over with the integration. Basically all the people, the front people, are really focused on clients, and they are not distracted by integration topics. So we see good momentum definitely in wealth management. We see still good momentum in transaction, although it's quite clearly we expect this number to be up year-on-year. Unlikely, and actually very unlikely to be as good as last year because the seasonality effect this year is definitely there. Last year was a quite unusual strong third quarter. But still, seeing good momentum there despite the seasonality and having an uptick year-on-year is positive in the investment bank.

Fee pools in banking are going to be down. Generally speaking, we should be in line with market trends. On the markets side of the equation, I think we see robust momentum. We see us still gaining market share and momentum. I am broadly speaking positive about the momentum in the third quarter. You mentioned the liability management. Yes, we basically retired almost 10 billion of Credit Suisse issuance, which we were able to replace at a tighter spread with a longer tenure. It was a pretty successful exercise, which will be very beneficial for NII from 2027 onwards. Broadly speaking, that cost that we are going to take in Q3 will be offset by other non-core legacy asset disposals or litigation resolutions. I do not expect this topic to be actually a meaningful element of our Q3 results.