Earnings call transcript: UBS Q1 2025 shows stable revenue, cost savings

UBS Group AG, with a substantial market capitalization of $92.9 billion, reported stable financial results for the first quarter of 2025, with net profit reaching 1.7 billion dollars. The company’s earnings per share stood at 51 cents, and revenues were flat year-on-year at 12 billion dollars. According to InvestingPro analysis, UBS maintains a "GOOD" overall financial health score, reflecting its robust operational foundation. UBS has made significant strides in cost savings and operational efficiency, achieving 900 million dollars in gross run-rate cost savings. The stock experienced a slight decline of 0.87% in recent trading, reflecting investor caution amid market volatility.

Key Takeaways

• UBS reported a net profit of 1.7 billion dollars for Q1 2025.
• The company achieved 900 million dollars in cost savings this quarter.
• Revenues were flat year-on-year at 12 billion dollars.
• The stock price saw a minor decline of 0.87% amid market volatility.
• UBS continues to integrate Credit Suisse technology infrastructure.

Company Performance

UBS’s performance in Q1 2025 remained steady, with a net profit of 1.7 billion dollars and revenues holding at 12 billion dollars, unchanged from the previous year. While quarterly figures were flat, InvestingPro data shows impressive revenue growth of 21.24% over the last twelve months. Trading at a P/E ratio of 21.99, the company focused on cost management, achieving substantial savings and reducing its workforce by 20% from the 2022 baseline. UBS’s strategic initiatives, including investments in generative AI and enhancements to wealth management platforms, are positioning it well in the competitive financial services sector.

Financial Highlights

• Revenue: 12 billion dollars (flat year-on-year)
• Earnings per share: 51 cents
• Operating expenses: 9.2 billion dollars (stable)
• Net profit: 1.7 billion dollars
• Cost income ratio: 77.4%
• Underlying return on CET1 capital: 11.3%

Outlook & Guidance

Looking ahead, UBS expects financial markets to remain sensitive to global developments. The company targets a 13% cost income ratio by the end of 2026 and projects a full-year 2025 effective tax rate of around 20%. Based on InvestingPro’s Fair Value analysis, UBS currently appears undervalued, suggesting potential upside opportunity for investors. Discover comprehensive valuation analysis and expert insights in the exclusive Pro Research Report, available to InvestingPro subscribers. UBS continues to integrate Credit Suisse’s assets, with a focus on client migrations and reducing Non-Core and Legacy risk-weighted assets to less than 8 billion dollars by the end of 2025.

Executive Commentary

"Our strong results in the first quarter demonstrate once again our ability to deliver for stakeholders in different market conditions," said Sergio Amotti, Group CEO. Amotti emphasized the importance of competing not just for returns but also for capital, highlighting UBS’s strategic focus. He noted that investments in infrastructure have resulted in stable and resilient operations.

Risks and Challenges

• Market Volatility: Significant fluctuations could impact trading volumes and investor sentiment.
• Global Trade Tariffs: Uncertainty around tariffs could affect market dynamics and UBS’s global operations.
• Integration Challenges: Continued integration of Credit Suisse’s technology and assets poses operational risks.
• Regulatory Changes: Potential changes in financial regulations could affect UBS’s strategic plans.
• Economic Conditions: Macroeconomic pressures, such as interest rate changes, could impact UBS’s financial performance.

Q&A

During the earnings call, analysts inquired about the potential impacts of U.S. tariffs, UBS’s capital management strategies, and the outlook for net interest income. Executives also addressed regional lending and deposit strategies, providing insights into the company’s approach to navigating current market conditions.

Full transcript - UBS Group AG CFD (UBSG) Q1 2025:

Conference Operator: Ladies and gentlemen, good morning. Welcome to the UBS First Quarter ’20 ’20 ’5 Results. The conference must not be recorded for publication or broadcast. You can register for questions at any time by pressing star and one on your telephone. At this time, it’s my pleasure to hand over to Sarah Mackey, UBS Investor Relations.

Please go ahead, madam.

Sarah Mackey, Investor Relations, UBS: 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. On Slide two, you can see our agenda for today. It’s now my pleasure to hand over to Sergio Amotti, Group CEO.

Sergio Amotti, Group CEO, UBS: Thank you, Sarah, and good morning, everyone. Our strong results in the first quarter demonstrate once again our ability to deliver for stakeholders in different market conditions. The quarter was characterized by a substantial shift in investor sentiment and growth expectations alongside periods of significant market volatility. This damped the positive seasonal effect that we typically experience at the start of the year and tempered the bullish outlook the market had coming out of 2024 and into the first few weeks of January. Against this backdrop, these results reflect the power and scale of our diversified global franchise, our unwavering commitments to clients, disciplined cost management and the substantial progress made in integrating Credit Suisse.

Altis is underpinned by a balance sheet for all seasons. First quarter net profit reached $1,700,000,000 and our underlying return on CET1 capital stood at 11.3%, supported by positive operating leverage in our core businesses. Net new inflows onto our asset gathering platform were robust, including €32,000,000,000 in net new assets in Global Wealth Management and €7,000,000,000 net new money in Asset Management. Although we haven’t seen a major strategic shift in asset allocation, the breadth and depth of our advice and global capabilities help clients protect their wealth and navigate the market volatility. We saw significant demand for mandate solutions, structured products and alternatives, including new offerings within our unified global alternatives units where total assets reached nearly CHF300 billion.

For our clients in Switzerland, we kept delivering on our commitment to be a reliable partner. During the quarter, we granted or renewed CHF40 billion of loans. In the Investment Bank, we continue to execute on our capital light strategy. Investments we made in our areas of strategic importance allowed us to win further market share. Global markets achieved its best quarter on record.

In global banking, we outperformed the fee pools in m and a and ECM despite a challenging market backdrop. I’m also pleased to see that we are building on our already healthy pipeline. As the second quarter kicked off the unveiling of significant changes to tariffs on trading partners by the US administration, increased uncertainty and market volatility, while in some days, trading volumes exceeded their COVID era peak by around thirty percent. I’m especially pleased by the way our colleagues were able to intensify their engagement with institutional and private clients during this period. The investments we have made to reinforce our infrastructure are paying off with our operations proving stable and resilient as we facilitate client activity across asset classes.

Looking ahead, the economic path forward is particularly unpredictable, and the range of possible outcomes is wide. The prospect of higher tariffs on global trade presents a material risk to global growth and inflation. While we are encouraged that negotiations are ongoing, a prolonged period of discussions and speculation will come at a cost. Uncertainty is likely to affect sentiment and lead businesses and investors to delay important decisions on strategy, capital allocation and investments. In this environment, we expect financial markets to remain sensitive to new developments, both positive and negative, which are likely to lead to further spikes in volatility.

In light of this, we are unwavering in serving our clients, executing on our growth strategy and following through on our integration plans. On that, over the course of this of the first quarter, we finalized our preparations to meet to migrate more than 1,000,000,000 clients in Switzerland onto UBS platforms and continued to integrate 95 petabytes of data. We moved a small pilot group of clients at the April, and we are on track to complete the first main wave of migrations by the end of the second quarter. We are pleased with our progress in non core and legacy as we continue to reduce the complexity of our operations through book closures and the decommissioning of applications. Moreover, our active wind down efforts have proven so effective that we have been able to upgrade our credit and market risk weighted assets ambitions for 2025 and 2026.

Our CET1 ratio capital stands in line with our guidance at 14.3%. This, combined with the substantial derisking of the acquisition and our highly capital generative strategy, gives us confidence in our ability to deliver on our 2025 capital return objectives. This remain contingent on maintaining a CET1 capital ratio of around 14% and the absence of material immediate changes to the current capital regime. Our capital strength also supports our ability to deploy investments that reinforce our leadership across the globe and position UBS for the future. We are working to further enhance our client offering and capabilities to improve profitability in The Americas.

At the same time, we are building on our status as the number one wealth manager in APAC by scaling our offering in the fastest growing markets across the region, while reinforcing our leadership position in EMEA and Switzerland. As highlighted in February, technology investments are a key enabler for growth. We are encouraged by our developments and adoption of generative AI solutions as we empower our colleagues with tools to improve productivity and deliver tailored solutions to clients. In closing, we are pleased with our strong performance this quarter and continue to operate from a position of strength. But we are not complacent as we are only around two thirds of the way to restoring UBS’ pre acquisition levels of profitability.

In that sense, the next phase of the integration is especially important to harvesting the full benefits of the acquisition for our clients and shareholders and delivering on our long term ambitions. In the meantime, we are staying focused on what we can control, serving our clients, delivering on our financial targets and continuing to act as an engine of economic growth in the communities we serve. With that, I hand over to Todd.

Todd, CFO, UBS: Thank you, Sergio, and good morning, everyone. Throughout my remarks, I’ll refer to underlying results in US dollars and make year over year comparisons unless stated otherwise. During the first quarter of twenty twenty five, our core businesses grew their combined pretax profitability by 15% on strong positive operating leverage. Overall, our group profit before tax was 2,600,000,000.0, down 1% year on year. Group revenues were broadly flat at 12,000,000,000 and up 6% across our core franchises.

Operating expenses were also stable at $9,200,000,000 as we continue to successfully reduce our non production related costs across the group, offsetting higher financial adviser and variable compensation accruals in the quarter. Our EPS was 51¢, and we delivered an 11.3% return on CET1 capital and a cost income ratio of 77.4%. As illustrated on slide six, this quarter’s underlying performance demonstrates the strength of our franchise and diversified business model, particularly in challenging and complex markets. By supporting clients in ways that differentiate UBS, while maintaining a sharp focus on cost and resource efficiency, each of Global Wealth Management, Asset Management, and the Investment Bank achieved double digit pretax growth, absorbing net interest income headwinds that in particular weighed on our personal and corporate banking business. Our non core and legacy unit delivered a strong first quarter, although short of the exceptional results of last year’s one q.

On a reported basis, our pretax profit of 2,100,000,000.0 included 700,000,000 of revenue adjustments from acquisition related effects and 1,100,000,000.0 of integration expenses. Our effective tax rate in the quarter was 20%. For two q, we expect a tax rate of around zero due to a capital neutral tax credit from further legal entity streamlining in The US and from other planning measures related to the integration. We continue to expect our full year 2025 effective tax rate to be around 20% with a second half tax rate of around 30% influenced by NCL’s reported pretax performance. Turning to our cost update on slide seven.

In the first three months of 2025, we achieved an additional 900,000,000 in gross run rate cost saves, bringing the cumulative total since the end of twenty twenty two to 8,400,000,000.0 or around 65% of our total gross cost save ambition. By quarter end, we had nominally decreased our overall cost base by around 10% from our 2022 baseline. Yet looking through variable compensation and litigation and neutralizing for currency effects, we delivered an even greater net reduction in underlying expenses exceeding 20%. As a result, more than 50% of our cumulative gross cost saves have translated into net saves that benefit our run rate. The overall employee count fell sequentially by 2% to 126,000 and by around 20% from our 2022 baseline.

As I’ve highlighted in the past, one of the keys to meeting our target cost income ratio by the end of twenty twenty six is shutting down legacy Credit Suisse technology applications and infrastructure. To date, we’ve retired over a third each of these applications, computer servers, and data centers that are targeted in our plans for decommission. These actions have generated more than 700,000,000 in technology cost saves with non core and legacy’s balance sheet reduction, a key driver of this progress. We expect that most of the remaining 4,500,000,000.0 in gross saves required to achieve our 13,000,000,000 target will come from reductions in technology, staffing, and vendor costs. As an example of what’s to come in the technology context is a run rate cost save of 800,000,000 related to Credit Suisse’s legacy applications in the Swiss booking center, which will decommission after the completion of the client account migration in 2026.

Turning to slide eight. As of the end of the first quarter, our balance sheet for all seasons consisted of 1 and a half trillion in total assets with around 615,000,000,000 in loan balances, 745,000,000,000 in deposits, and a loan to deposit ratio of 80%. The strength of our balance sheet is not just an essential component of our strategy, but a competitive advantage and source of confidence for our clients, especially during times of uncertainty. A fundamental driver of our balance sheet strength is our credit book. 93% of our lending positions are collateralized with 57% of the total balance consisting of mortgages where the average LTV is 50%.

At the March, our lending book reflected credit impaired exposures of 1%, unchanged from the prior quarter. The cost of risk decreased to seven basis points as we recorded group credit loss expenses of 100,000,000, reflecting 121,000,000 of net charges on credit impaired positions and 21,000,000 of net releases across our performing portfolio. The net releases were due to our recalibration of the expected credit loss scenarios and rebalancing of the factor weights. Onto liquidity and funding. In the quarter, we made strong progress on our 2025 funding plan, already having completed our AT1 issuances intended in 2025, in addition to having issued 3,000,000,000 in Holdco debt.

I would highlight that our funding stability is underscored by the balanced currency mix across our assets and diversified sources of long term funding and deposits. Our average LCR was 181% and remained around this level throughout April’s volatile markets. Turning to capital on slide nine. Our CET1 capital ratio at the March was 14.3%. As a result of our continued progress with the integration, coupled with strong financial performance in the first quarter, it is now our intention to execute on all of our 2025 capital return ambitions announced in February.

Consequently, our CET1 capital not only accounts for the 500,000,000 in shares repurchased during the first three months of the year, but it also reflects the accrual of the remaining 2 and a half billion share buyback we intend to execute through the rest of 2025, of which 500,000,000 in the second quarter. Risk weighted assets fell by 15,000,000,000 sequentially, driven by lower asset size and the implementation of the final Basel III standards, which ultimately resulted in a net reduction of $9,000,000,000 in RWA. This revised amount reflects further infrastructure and data quality improvements finalized during the quarter, as well as the effects of additional mitigation and derisking actions we took across various credit, counterparty and market risk categories. After receiving regulatory approval, the final operational risk weighted asset level also came in around $2,000,000,000 lower than our February estimate. Netted within the overall reduction, FRTB led to an increase of $6,000,000,000 mainly related to the investment bank.

At the same time, despite the offsetting effects of mitigating actions, our leverage ratio denominator was $42,000,000,000 higher sequentially, resulting in a CET1 leverage ratio of 4.4%. The uplift in LRD was driven by an increase of 29,000,000,000 from derivatives exposures now calculated under the revised Basel III standardized approach for counterparty credit risk. With FX accounting for a 27,000,000,000 increase in the quarter, these factors more than offset asset size reductions of 13,000,000,000. A word on parent capital and group equity double leverage. As of the March, our parent bank standalone CET1 capital ratio on a fully applied basis is expected to be 12.9% within our target range.

The sequential reduction reflects an accrual for dividends intended to be paid in 2026. Over the next few quarters, the parent bank’s dividend paying capacity is expected to be supported by both dividends and capital repatriations from subsidiaries. In addition, earlier this month, as expected, UBS AG paid a 6,500,000,000.0 ordinary dividend to our holding company. Taking into account capital returns to shareholders completed or anticipated during the first half of the year, we expect the group’s equity double leverage ratio to improve to around 110% by the time we publish our group standalone accounts at the end of the second quarter. These actions are consistent with our intention to restore the group’s equity double leverage ratio towards pre acquisition levels over the next several quarters.

Turning to our business divisions and starting with Global Wealth Management on slide 10. GWM’s pretax profit was 1,500,000,000.0, up 21% year over year as revenue growth outpaced expenses by five percentage points. This translated to a year over year improvement in GWM’s cost income ratio of over three percentage points to 75%. In Asia, with our integration efforts now largely complete, we’re well positioned to deliver our full range of capabilities to our clients. Notably, our APAC franchise drove excellent PBT growth of 36% on 14 points of positive operating jaws and a pretax margin of over 40%.

In The Americas, where we’re executing on our growth plans, we delivered PBT growth of more than 40% and a pretax margin of 12%. In addition, each of our Switzerland and EMEA regions grew profits by 7% in the quarter. You can find additional regional details, including a breakdown of revenue lines, credit loss expenses, net new deposits, and customer deposit balances, as well as comparatives across our four wealth regions in our newly enhanced disclosure in the quarterly report and on page 22 in the appendix to this presentation. Onto flows. GWM invested assets increased by 1% sequentially with favorable currency effects and positive asset flows offsetting negative market performance.

Net new assets in the quarter reached $32,000,000,000 representing a 3% annualized growth rate with growth in all regions led by The Americas where strong same store performance supported NNA of 20,000,000,000 Our flow performance again this quarter reflects the actions I’ve highlighted in the past regarding balance sheet optimization that support higher pretax margins and returns on attributed equity, but at times come at the expense of net new assets. For example, we again successfully managed the roll off of preferential fixed term deposits associated with our 2023 win back campaign. Of the 54,000,000,000 in deposits maturing in 1Q, as in prior periods, we converted around 85% into more profitable liquidity and investment solutions, but some less profitable flows left the platform. You can see the clear improvement we’ve achieved in enhancing profitability from these balance sheet actions in GWM’s revenue over RWA ratio, which has grown two points year over year and has reattained pre acquisition levels. Further evidence of clients seeking our market leading advice and solutions and helping drive sustainable revenue growth is underscored by our net new fee generating asset performance of 27,000,000,000 in the quarter, a 6% annualized growth rate.

We saw continued momentum in discretionary mandates, including SMAs in The US and our signature MyWay solution delivered through our Swiss and international platforms. MiWay mandates have grown to 20,000,000,000, up almost 80% from the prior year quarter. NNFGA growth was especially strong in our APAC franchise at an annualized growth rate of 10% with mandate penetration at its highest level on record. Looking ahead to the second quarter, while maturing fixed term deposits are becoming a less material headwind to flows, seasonal US tax related outflows in the high single digit billion range elevated as a result of last year’s strong market performance are expected to weigh on GWM’s 2Q net new assets. I would also highlight that we saw a modest pickup in lending across the wealth business with client releveraging supported by a lower rate environment.

Net new loans were 2,200,000,000.0, driven by Lombard lending in APAC. Turning to revenues. GWM’s top line increased by 6% driven by elevated client engagement, increased solution take up by clients seeking diversification across geographies and asset classes, and higher average asset levels. Recurring net fee income increased by 8% to 3,300,000,000 from positive market performance and over 70,000,000,000 in net new fee generating assets over the past twelve months. Margins continued to hold up sequentially and are expected to remain around these levels, especially as recently migrated clients and those remaining on the Credit Suisse platform now have access to the full breadth of our CIO value chain led capabilities and solutions.

Transaction based income increased by 15% to 1,400,000,000.0 in a market environment where our franchises enduring advantages set us apart. Without a major shift in asset allocation during the quarter, clients nevertheless actively repositioned portfolios, benefiting from our investments in capabilities, solutions and unified teams. This drove double digit growth across structured products and cash equities with wealth planning and life insurance up by more than 50%. Alternatives were up 40% fueled by the joint unified global alternatives initiative with asset management. Regionally, we saw a continuation of transactional growth spanning the wealth franchise led by APAC and The Americas where transactional revenues increased by 2816% respectively.

Net interest income at 1,500,000,000.0 was down 4% year over year and 7% quarter over quarter with the sequential trend reflecting a lower day count and headwinds from declining rates in Swiss franc and euro, partially offset by ongoing balance sheet optimization efforts. Of the sequential decline, one percentage point reflects a change to our client segmentation approach between GWM and P and C that we implemented in February, but was not included in our guidance. This change led to a shift of some affluent clients from GWM to P and C, including loan balances of 8,000,000,000. Despite the modest effect on NII, we ultimately decided to not restate our accounts for this transfer given the immaterial impact to the p and l of both divisions overall. Now to our NII outlook.

For the second quarter of twenty twenty five, we expect GWM’s net interest income to decrease sequentially by a low single digit percentage despite day count helping, primarily from lower Swiss franc and euro rates after the March cuts. We also expect a seasonal decline in client deposits following April tax payments in The US, although there could be upside should clients maintain a more defensive posture amid ongoing market uncertainty, driving higher sweep and account balances. For full year 2025, we continue to expect GWM’s net interest income to decrease by a low single digit percentage compared to 2024. Underlying operating expenses were up by 1% with lower personnel and support costs offset by higher variable compensation tied to revenues. Looking through variable compensation, litigation, and currency effects, costs were down 5% year over year.

Turning to personal and corporate banking on slide 11, where my comments will refer to Swiss francs. PNC delivered first quarter pretax profit of 597,000,000, down 23% as lower interest rates led to an 18% reduction in net interest income. Recurring net fee income increased by 3% driven by record volumes of investment products in personal banking supported by strong sales momentum, including a 12% annualized growth rate in net new investment flows in the first quarter. Transaction based revenues decreased by 2% as strong performance in personal banking was more than offset by the effect of lower corporate finance activity amid softer economic conditions. Sequentially, NII decreased by 7%, largely reflecting the effects of the SMB’s fifty basis point rate cut announced in December and a lower day count, partly offset by the effect of the client segmentation shift between GWM and P and C that I mentioned earlier, which provided a one percentage point quarter on quarter uplift to P and C.

To mitigate the effects of lower rates, we adjusted deposit pricing on select products and continued optimizing our banking book. Looking to the second quarter, we see a sequential decrease in the low single digit percentage range for P and C’s NII in Swiss francs, which translates to a sequential mid single digit percentage increase in US dollar terms based on current FX rates. The outlook is driven by last month’s SMB 25 basis point rate cut despite day count helping and the latest change to the SMB’s threshold factor for remunerating site deposits. For full year 2025, we continue to expect an NII decline of around 10% versus 2024 in Swiss francs, translating to a more modest reduction on a US dollar basis. Credit loss expense was 48,000,000, an eight basis point cost of risk on an average loan portfolio of 245,000,000,000.

This included stage three charges of 54,000,000, again, predominantly from Credit Suisse exposures. Reflecting on developing macroeconomic events, we currently assess that exposures to our more tariff exposed corporate clients within our Swiss credit book are well contained. On this basis, for full year 2025, we continue to expect PNC’s CLE to be around 350,000,000. This said, we’re closely monitoring US trade policy developments and their first and second order impacts on our Swiss loan exposures, thereby intending to update our credit loss expectations and allowances as and when appropriate. P and C’s operating expenses in the quarter were 1,100,000,000.0, down 4%.

Moving to slide 12. Asset management drove a pretax profit of 208,000,000, up 15% year on year with disciplined cost management more than compensating for lower revenues. Net management fees declined by 4% as the effect of higher average invested assets was more than offset by margin compression from clients having rotated into lower margin products over recent periods. This said, we’re gaining traction in delivering differentiated and higher margin products, including in our credit investments group and in UGA, which saw strong net new commitments in the quarter and invested asset growth of 13% compared to a year ago. Performance fees were 30,000,000, in line with the prior year and with higher revenues from our credit capabilities.

Net new money was positive 7,000,000,000 with strong flows in money market and active fixed income as well as sustained demand for SMAs, which saw inflows of 4,500,000,000.0 this quarter. Operating expenses were 10% lower as asset management retools for growth by continuing to make strong progress in streamlining its infrastructure and operating model. On to slide 13 and the investment bank. In the IB, we delivered pretax profit of 696,000,000, up 72% and a return on attributed equity of 16%, all while absorbing incremental RWA from the implementation of the final Basel III FRTB rules. Revenues increased by 24% to 3,000,000,000, driven by global markets, which posted its best quarter on record.

Banking revenues decreased by 4% to 564,000,000, broadly in line with the fee pool. While the market environment weighed on our banking results across products and regions, and despite growing economic uncertainty, our pipeline continues to build. We remain top 10 in announced m and a and saw continued momentum in our mandated deal book. In advisory, top line growth was 17%, while capital markets revenues declined by 13% mainly due to softer sponsor activity. In The Americas, the mix within the LCM fee pool shifted towards corporates and away from sponsors where we’re more concentrated.

In ECM, although the 1% revenue decrease outperformed the fee pool, we remain focused on our pipeline build, which is expected to yield meaningful returns over the medium term. Regionally, APAC grew its overall banking revenues by over 70% compared to the prior year quarter and delivered its best first quarter on record in m and a. Revenues in markets increased by 32% to 2,500,000,000.0. Against the market backdrop of elevated activity and volatility in equities and FX, where our IB is more concentrated, we capitalized on the enhanced capabilities acquired with Credit Suisse and our multiyear investments in technology. We saw increases across all regions with The Americas, APAC, and Switzerland each delivering their best quarterly performance on record.

Equities revenues reached a new high driven by equity derivatives with increases across all regions and supported by cash equities and prime brokerage. FRC increased by 27% primarily driven by FX. Operating expenses rose by 14%, largely reflecting increases in personnel expenses. On slide 14, non core and legacy’s pretax loss was 200,000,000 with 284,000,000 in revenues. Funding costs of around 130,000,000 were more than offset by revenues from position exits, particularly in structured products.

This included the expected gain of around 100,000,000 from closing the sale of Credit Suisse’s US mortgage servicing company announced last year, which also eliminates run rate costs of around 100,000,000 per annum. Operating expenses were down 38% year on year and 12% sequentially as NCL continues to make excellent progress in driving out costs. For the remainder of the year, we expect NCL to generate an underlying pretax loss, excluding litigation, of around $1,700,000,000 including revenues of around negative $300,000,000 mainly from funding costs. Revenues from carry, continued exits, and remaining fair value positions are expected to net around zero, and underlying operating expenses should average around 450,000,000 per quarter. While the current environment may slow the pace of exits, it is unlikely to materially affect the financial performance of our NCL portfolio.

As examples, hedges in the macro book and the nature of our now much smaller credit book render the valuation of both portfolios less susceptible to market volatility. Now on to slide 15. Since the second quarter of twenty twenty three, noncore and legacy has freed up almost 7,000,000,000 of capital, reduced its cost base by over 60%, and closed 74% of the 14,000 books they started with. As of the March, risk weighted assets in NCL were $7,000,000,000 lower than in the prior quarter as position exits across securitized products, credit and macro more than offset the inflationary effects of the final Basel III standards. Again, this quarter, the skillful expertise of the NCL team has kept us well ahead of our derisking schedule.

Given this accelerated progress, we’re upgrading our ambitions and now aim to drive NCL’s credit and market risk RWA below 8,000,000,000 by the end of twenty twenty five and to around 4,000,000,000 by the end of twenty twenty six. While we expect the reduction in balance sheet to continue to contribute to NCL’s cost performance, as I’ve highlighted in the past, further savings from technology, real estate and resolving ongoing litigation matters will take longer to achieve. This underpins our 2026 exit rate cost guidance I offered last quarter. With that, let’s open for questions.

Conference Operator: We will now begin the question and answer session for analysts and investors. Participants are requested to use only handsets while asking a question. The first question comes from Jeremy Sigee from BNP. Please go ahead.

Jeremy Sigee, Analyst, BNP: Morning. Thanks very much. Firstly, just a basic one. The fact that you’re accruing the whole of the 2025 share buyback suggests that you intend to do that almost regardless of what the draft rules look like when they’re published in June. Is that fair interpretation?

And then my second question is a bit broader. Could you talk about how your wealth management clients in different regions are reacting in April post the the tariffs in The US? Are they doing more with the bank or less with the bank? What are their risk appetites? If you could talk about that, that would be great.

Thank you.

Sergio Amotti, Group CEO, UBS: Thank you, Jeremy. Not it’s not a fair representation considering what I say. That’s you know, our language hasn’t changed. We say very clearly that, you know, we are accruing based on what we know and we see today, based on our strong performance, based on our strong capital position. But, of course, all of this is subject to us continuing to develop well in terms of financial targets, the integration.

And as we pointed out, material and immediate change in the regulatory regime. So in respect of the activity in April, I can only say that, course, we had a as I mentioned in my remarks, we had we saw a huge spike in in client activity and and volatility in in the first couple of weeks, in the first few days of April. So even achieving a thirty percent increase compared to the peak of COVID times, which is quite exceptional. But it’s fair to say that if you look at the last ten days or so, there is a fatigue and, know, coming in. You see it also in financial markets.

I think that’s markets are stabilizing around current levels across many asset classes, and it’s much more of a wait and see attitude. And so in that sense, you it’s a more normalized environment.

Andrew Coombs, Analyst, Citi: Thank you.

Conference Operator: The next question comes from Giulia Miotto from Morgan Stanley. Please go ahead.

Giulia Miotto, Analyst, Morgan Stanley: Yes. Hi. Good morning. Thank you for taking my question. So the first one, I was surprised to hear that there is releveraging in Asia.

That’s quite a positive development. And I was wondering if that has carried through also in April or was on was it only a q one phenomenon and then, you know, got shut down by the tariff discussion? And then the second question instead, of course, I have to ask on capital. May is the next catalyst to that or at least we will learn something there. Is there any development that you can share with us in terms of what to expect, what will go under government ordinance, what will be put to parliament?

Yeah. Any any updated thoughts would be helpful. Thank you.

Sergio Amotti, Group CEO, UBS: We pick up the second one, and Todd will pick up the first questions. There are no developments other than the updated timeline for the announcement of of the proposal that are now seen are gonna now come in India during the first week of of June. So we don’t know what what’s the content of this proposal in terms of also, if there is any split between ordinance or legislative process. So we are on a wait and see, and we will see, like, everybody in six five to six weeks’ time.

Todd, CFO, UBS: And, Julia, it’s I’d say it’s helpful to step back and and look at the bigger picture here on the lending question. I mean, clearly, for GWM, one of our strategic imperatives is to grow lending, albeit selectively and profitably, and as a and as a driver of enhanced relationship revenues for clients. So we’re pleased with the developments that we saw in one q. I mean, we we can’t, speculate on on where, things are gonna move, you know, given the current environment, for sure. But, we’re we’re pleased with the 1Q performance, and that still remains a strategic focus for us.

Giulia Miotto, Analyst, Morgan Stanley: Thank you.

Conference Operator: The next question come comes from Kian Abouhsin from JPMorgan. Please go ahead.

Kian Abouhsin, Analyst, JPMorgan: Yes. Thanks for taking my questions. I wanted to come back to U. S. Wealth Management.

If you could maybe run you clearly have done some strategic changes around The U. S. Wealth management business, both on compensation but also incentives, etcetera. And if I look on a year end basis versus now, you have reductions in advisers. I just wanted to see where should we think adviser numbers to go to in U.

S. Wells? And how should we think around the net new flows but also impact in that respect because you made some statements in the last quarter there could be a deterioration, but also in terms of improvement in pretax margin. So a bit more of a holistic approach around the changes that you’ve done and the impact. And then secondly, just coming back to the Federal Council report,

Conference Operator: you just can we just take

Kian Abouhsin, Analyst, JPMorgan: a step back and just give your current views around your positioning against other banks, but also potential offsets that you can think about in order to offset some kind of additional capital requirement, even in big picture terms, if you could talk about that?

Todd, CFO, UBS: Hey, Ken. So on, on the, wealth one, let’s zoom let’s zoom out a bit, and and just reiterate that we’re executing at pace on our on our plans and our strategy. You know, clearly, quarter on quarter, we could see volatility. But this said, you know, we’re looking at our ambition to achieve, as you know, a structural midterm mid teen pretax margin, and we look at that as a two to three year journey. You know, on your you know, as we as we zoom in, you know, the question on, really our platforms and and advisers, you know, first, I’d say our platform is, is stable.

There’s been a broad support for our strategy, which, you know, is is intended to better align, adviser incentives with the strategic goals of the firm. That’s evidenced by this by the very strong same store net new money we’ve seen, perhaps, the strongest net new money we’ve seen over many quarters in in the first quarter. You know, in in in terms of the, in in terms of the headcount, I would just say that our recruiting pipeline is robust. There is some attrition that one can expect. And in fact, we’re observing across the industry given the market dynamics of 2024 versus the beginning of twenty five and the outlook, that, you know, would create some movement across the industry in terms of, advisor repositioning, but nothing, I would I would highlight, in, in our own in our own platform.

Sergio Amotti, Group CEO, UBS: Kian, before I answer the question, can you specify what you mean by positioning versus other banks?

Kian Abouhsin, Analyst, JPMorgan: Yes, Sergey. I left it open on purpose just to see leaving the floor open to some extent Okay. To see what, yeah, what you can what you can tell us and your thoughts about it because it is clearly a very open question, and it’s very difficult for us

Sergio Amotti, Group CEO, UBS: to look through that as well. The call is scheduled to end at 10:11 fifteen. So I’m not no. Sorry. At at 10:30.

So I’m not so sure I have so much time to go through that. So Mhmm. But yeah. So the the the issue the issue is very clear that when I look at regulatory framework in Switzerland, it’s one of the most demanding and and particularly after we fully implemented Basel III, I think that’s, you know you know, in terms of relative game, we are comfortable that we have a strong and demanding regime that, you know, capital and strength is is one of our key pillars. Having said that, you know, we all know that, you know, there is a point in time in which too much is is not necessarily positive.

And therefore, you know, that’s the only consideration I can say when we speak about relative terms. So so because at the end of the day, as we always say, we are not only competing in terms of return on capital, but we are also competing for capital. And therefore, having a, you know, an attractive sustainable business that also delivers appropriate returns is a key element on judging and balancing any regulatory regime. That’s what I can say. So in respect of a set of measures, you know, the set of measures can only be decided and analyzed when you know what is the outcome.

And so we will need to assess exactly what the proposal is in terms of impact and timing.

Kian Abouhsin, Analyst, JPMorgan: And so just very quickly, do you expect enough clarity to assess with that report?

Sergio Amotti, Group CEO, UBS: I hope. I don’t expect.

Kian Abouhsin, Analyst, JPMorgan: The

Conference Operator: next question comes from Stefan Stalmann from Autonomous.

Stefan Stalmann, Analyst, Autonomous: Good morning. Thank you very much for taking my questions. I have two on capital, please. The first one on the parent bank, the fully loaded CET1 ratio was, I think, down by about 60 basis points during the quarter. Was there anything particular to highlight that happened during the quarter?

And the second one, a bit more, let’s say, strategic. The risk density in the group has actually come down quite a bit and is now a bit below 31%. And I think the hope was always in a way that Basel IV would kind of lift this risk density towards 35%, where it doesn’t matter anymore whether leverage or risk weighted assets drive your capital requirements. But now at 31%, it looks like you’re quite deeply constrained by leverage, not risk weighted assets going forward. Do you expect this to change at all, from what you can see?

And if not, does it have any impact on the way that you run your capital management going forward?

Todd, CFO, UBS: Thanks, thanks, Stefan, for, those questions. Appreciate you bringing those up. So on on, first on the capital, the the parent bank, quarter on quarter reduction, as I mentioned in my comments, you know, comes from the accrual of a dividend, that we expect to pay in ’26 in relation to 2025, overall earnings of the parent bank. So it’s a dividend accrual, that, effectively drove the capital ratio, within our, within our guidance. On the on the second one, you know, it’s a very good spot on your point about risk density coming in.

You know, I would say you’re you’re also right where, I would say, more constrained by leverage, than than risk weighting. But remember that we set our, our our CET one, capital ratio on, you know, on a risk weighted basis as our key target. So in that sense, that becomes for us, you know, binding unless truly leverage becomes binding. But to answer your question about what you can do about it or what the cause was or is, you know, I would say that you see how we’ve been able to really drive down RWA, you know, because because of the technical nature of it and the way we’ve been able to, you know, manage, down work, you know, also work to get approvals on models, on methodology, on data quality, on all the, on all the issues, coverage of external ratings, all the things that have helped us drive down. I think the leverage ratio, unfortunately, is just, you know, more more simple, less fertile ground for optimization.

And so you saw as I commented, you know, that we had the SACR in in increase, whereas on RWA, had, you know, a more fertile ground to, to optimize. So I think your observation is correct, but I don’t see at this time, you know, given, we we intend to operate with a CET one capital ratio of around 14%, which for us is binding, even though you’re right, leverage, is you know, we have less cushion on the leverage side than we do on the risk weighted side, you know, going nothing is changing as we move forward. That’s, that’s the way we’re thinking about it.

Stefan Stalmann, Analyst, Autonomous: Okay. Thank you very much.

Conference Operator: The next question comes from Benjamin Goy from Deutsche Bank. Please go ahead.

Benjamin Goy, Analyst, Deutsche Bank: Hi. Good morning. Two questions, please, from my side. So first, on your India partnership. Maybe you can comment a bit more broader on the onshore offshore dynamics we should expect in emerging markets going forward, even a large market in India, and you have to do a partnership.

And then secondly, markets are now pricing in, again, negative rates in Switzerland. Just wondering, short term, any impact or below zero, there’s there’s not much of an incremental negative impact. The longer term question is the 50% cost to income ratio target in your Swiss business was, I assume, done or based on the product industry outlook on how you intend to achieve that, or do you need to do more on the cost side? Thank you.

Todd, CFO, UBS: Yeah. Hi. Hi, Benjamin. Let me address the second question. So on your observation regarding the market pricing and negative rates, you know, as we indicate in our interest rate sensitivity and as a as I as I’ve commented before, we certainly see convexity in the movement of rates either down or up in the sense that whether rates move into negative territory or move up, that would be accretive to our net interest income in our, in our p and c business.

So in that sense, you know, to the extent that is priced in and to the extent that actually happens, you know, we see upside in, in in our NII. You asked about the expectation on the cost income ratio targets that we have by the end of twenty twenty six, I would say it’s you know, we’re we’re, we continue to, execute against that that expectation. That is our expectation at this stage, not changing that, you know, given, given, interest rate expectations at this point in time.

Sergio Amotti, Group CEO, UBS: So on India, you know, I think that we we see a a secular trends developing for the Indian market domestically and but also at the same time, we see also an opportunity for India residents booking business outside. And and and and looking at our current setup, we we thought that and we decided that the best way to pursue the next phase of growth and growth opportunities in India for us was to partner with the only fully independent asset gatherer in India. And and so through that, you know, through the combination of us buying a stake, but also, you know, bringing our current business into three sixty, we can now we can now leverage for the future. So we see very good prospects across the board in terms of not only sharing our best practice globally, but also learning on the domestic markets. And, you know, we’ll take it from there.

So I think that’s you know, we are very optimistic about long term potential growth in India.

Benjamin Goy, Analyst, Deutsche Bank: Thank you.

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

Sarah Mackey, Investor Relations, UBS0: Hi. Thank you. And then maybe just more of a follow-up question, but just the remarks earlier about the equity double leverage and kind of looking to get down to the 110% at q two and then, you know, continue to to bring it back to pre acquisition levels in in the quarters after. I’m still kinda curious why, you know, what what drives the the pace of that and and kind of what’s the cost or what’s the consequence if you were to stay at 110%? Because, you know, let’s say if if the group were to have less leverage at the parent bank level, what what would stop the group having a bit more leverage at the at the group?

And, you know, what would be the consequence or or what is the benefit of bringing that down from one ten to, say, one zero five or 100? So so that that’s the the question there. And and then just on the PCB business, again, I I appreciate the the response on if rates, for example, if they were to go negative, etcetera, the convexity. Just wondering what you’re thinking about volumes there given the exchange rate movement. Any color would be helpful.

Thank you.

Todd, CFO, UBS: Thanks, Amit. So on, on the first, your your question in terms of consequence of a higher one or the benefit of a lower one, you know, for sure, the way we look at it is a a lower one, which is to say our our our pre acquisition levels, the way we’ve we’ve historically operated. One is more prudent. It’s in line with it’s in line with our strategy. And third, it just offers far more flexibility.

So if you operate at a higher level and then you hit any stress, then, you know, you’re you’re, you you’ve effectively sold your buffer. And so that’s the the reason why it’s prudent to operate, at the the levels that, Sergio and I have been highlighting over the last quarter or two since, you know, I raised the topic last, last quarter. In terms of p and c volumes, as we we look, we look forward, I I would say at this point, the outlook on lending is, is flattish for now, in terms of volumes in ways that, you know, if that is a mitigant, you know, for sure, the balance sheet optimization that they’ve done, that the business has done on the asset side has driven profitability, return on attributed equity, revenue over RWA, accretion appreciation. So I I would say that’s the the main focus on the on the lending side. Deposit outlook is is also, you know, relatively flattish, maybe some short term, moderate down, a bit, you know, in a very competitive market and we’re not chasing, where we’re seeing, you know, competitors buying deposits at, much higher rates to protect their loan books.

So our deposit outlook is stable, I would say. But again, there, you know, we have adjusted deposit pricing on select products, to help. But at the end of the day, as I’ve said before, you know, certainly, the biggest help would be rates either moving down or up from a sort of a a zero, perimeter, as that would really, you know, be the most, accretive from a, NII perspective in the p and c business.

Sarah Mackey, Investor Relations, UBS0: Thank you.

Conference Operator: The next question comes from Andrew Coombs from Citi.

Andrew Coombs, Analyst, Citi: If I could have two follow ups, please, one on capital and one on GWM NII. On capital, coming the way back to Jeremy’s first question, you’ve taken a change in approach. You’ve fully accrued for the buyback rather than taking the capital impact as and when you execute.

Sarah Mackey, Investor Relations, UBS: Can I just ask what

Andrew Coombs, Analyst, Citi: was the rationale for doing this? And is this something you envisage doing going forward as well? And your second question on GWM NII. And I think at the full year results, you talked about Q1 being down low to mid single digits sequentially. You’ve ended up down 7%, and you said that there was one percentage point of that was due to the resegmentation.

But nonetheless, it looks a little bit worse than your original guidance. So perhaps you could explain why it came in slightly worse than you initially expected. And then more broadly, your full year guidance for GWM NII is unchanged, but was previously predicated on the second half being flattish versus the first half. Are you now assuming a slight recovery in the second half?

Sergio Amotti, Group CEO, UBS: So thank you, Andrea. So on capital, again, I think that the main driver here is to also manage our ratio in respect of our guidance. And by doing the accruals, we we basically take it closer to our 14 around 14%. But most importantly, I think that the real factor that has changed is that we moved from having an ambition to having an intention to. I mean, this is all still subject to the conditions we always set in terms of financial performance and and and also no material and immediate change in the regulatory framework.

But it’s clear that now we have because of the results and the progress we are making in the integration and everything that we can control, we feel comfortable that this is the way to go. So you can always expect that as soon as we feel that there is a change between ambition and intention, also from a accounting standpoint of view, we will accrue in a prudent manner, which we believe is also more prudent, that kind of reserve that’s, in order to then execute on capital return plans.

Todd, CFO, UBS: And, Andrew, on the, on the second question, yeah, the the reason I gave some color on the segmentation change is is is just to explain the, you know, a bit of the delta. But, you know, with that with that explained, you kinda get into the into the mid single digit ranges, which is where we’ve, we guided into, one q sequentially from four q. In terms of the outlook going, forward, you’re right. I mean, I’m reaffirming the full year, NII guidance for GWM. I see the loan outlook to be, again, dependent on the rate environment, but the loan outlook, to be positive also dependent on the, macroeconomic environment.

But, that right now, until we see any drastic change, the loan outlook has been, has been accretive, on, on the NII in in terms of, the rest of the year for GWM. And also the deposit outlook is is is helping as well, again, subject to macroeconomic developments, but we also see, you know, some of, the preferential FTD headwinds tapering. And so, you know, ultimately, you know, this is contributing as well to deposit margins increasing. So for those reasons, I’ve kept the guidance stable for the full year, and as I said, offered the the explain to to sort of move into the into the q one guidance range.

Andrew Coombs, Analyst, Citi: Right. Thank you, Ted.

Conference Operator: The next question comes from Chris Hollom from Goldman Sachs. Please go ahead.

Sarah Mackey, Investor Relations, UBS1: Yeah. Good morning, everybody. Thank you for taking my questions. Mentioned in the prepared remarks the LCMP pool shifted towards corporates and away from sponsors. Any insights you can share on your discussions with the sponsor community more broadly, how you expect them to act in the coming quarters based on the operating backdrop we see today?

And maybe at what point would you consider reassessing the banking revenue ambition for 2026, I guess, in light of the slower activity levels year to date? And then second, I just want to come back on this risk of an immediate and material change to the regulatory regime. So, I appreciate the process is maybe less clear than it was. The range of outcomes has probably widened. But has the risk of immediacy also increased?

It feels as though, if anything, you know, stuff’s being pushed to the right a little bit, and, obviously, there hopefully would be still some kind of phase in period, one would assume. So just any thoughts on that? Thank you.

Sergio Amotti, Group CEO, UBS: Well, look. I think that generally speaking, you know, it’s it’s on a year on year basis that the drop in the sponsor related activity was more more more important. But, you know, I would say that in general, sponsors are also, like everybody, on a wait and see attitude. A lot of transactions are on hold. They are not necessarily being canceled.

Of course, if you look at, to some extent, the view levels of funding and spreads and and and and and credit markets may put some transaction at, you know, you know, in in in question. But generally speaking, you know, the sense is that people are waiting to see if the situation clarifies in the next couple of months, and then they go they’re gonna go into executing on on plans for either add on acquisitions or disposals, IPOs. So I think that, you know, the most important issue that we see right now is that the pipeline of potential transaction is still healthy and building up. So we don’t see a stop on on that. So coming to your question, I think that’s where when we would change our outlook for the over the cycle and ambitions on the top line is going to be when if we have a material change in the market conditions and in the prospect the growth of banking businesses in the industry, our intention to be a relative winner out of it by gaining share of wallet remains unchanged.

So if we have to change our revenue assumptions, we’re definitely not going to change our market share ambitions to improve and monetize on the investments we did on the platform in the last twenty four months. In respect of the second one, I mean, look, it’s just a prudent we are not in control of this process. You know, we don’t know what’s coming out, and so we can’t rule out anything in terms of the materiality of the change and the timing. Therefore, it’s you you have to you have to interpret this language more as a prudent way to to to highlight that we are we we we that’s a possibility. That doesn’t necessarily reflect what we expect or don’t expect.

Andrew Coombs, Analyst, Citi: Okay. Thanks, Roger.

Conference Operator: The next question comes from Pearce Brown from HSBC. Please go ahead.

Sarah Mackey, Investor Relations, UBS2: Yeah, good morning. I’ve got two. One on FRC, so up 27% year on year, it’s a much stronger print than a lot of your peers. And I’m just wondering, is that business mix related? You’ve mentioned the strength of FX, or do you feel that you’re still winning back market share in that business?

And then the second question, sorry to come back on capital again, but you did say in the fourth quarter that you had further subsidiary repatriations potentially in the pipeline. I think you mentioned GBP 5,000,000,000 from CSI and maybe something more coming out of the IHC. Can you give an update on progress on both of those fronts?

Todd, CFO, UBS: Hey, Peter. So, on the, first question, the, yeah, the the the pickup in, FRC year on year was driven by FX where, you know, we’re strong, concentrated. You know, we had it was a difficult quarter, I think, for those that are more in, rates and credit, and we’re, as you know, under concentrated there. And so we didn’t have that that impact. So we we we benefited from where we were, well indexed, in in the FRC, segment.

From on the on the capital question in terms of an update, you know, you recall correctly that there remains additional capital to be repatriated out of, some of the foreign subs, in particular, The UK One, and, and a bit more as well in the in The US. We we’re going through the, you know, the normal process with the regulators to approve the release of their capital, which is to say that we continue to work down the portfolios, largely non core and legacy portfolios in those entities. And as we continue to make progress and that capital is indeed excess, including from a supervisory standpoint, under their conservative lens, they’ll give us the, still signal the okay, and then we’ll repatriate, that, over the course of the next several quarters.

Sarah Mackey, Investor Relations, UBS2: Alright. That’s great. Thank you.

Sergio Amotti, Group CEO, UBS: Thank thank you. So there are no more questions. So thank you for calling in and for your questions, and the IR team is at your disposal for any follow ups. So have a nice day. Thank you.

Conference Operator: Ladies and gentlemen, the webcast and Q and A session for analysts and investors is over. You may disconnect your lines. We will now take a short break and continue with the media Q and A session at 10:45 CEST. Please thank you.

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