UBS Group AG Q3 FY2023 earnings call

• Integration of Credit Suisse:
  • Progress made in integration, stabilized Credit Suisse, with new client acquisition and share of wallet gains.
  • Incurred $2 billion in integration-related expenses, running down non-core assets.
• Client Momentum:
  • Strong flows in GWM and P&C; Credit Suisse Wealth Management had net inflows for the first time since early 2022, with $25 billion net new deposits.
• Capital Position:
  • Strong capital position with CET1 ratio 14.4% and TLAC nearly $200 billion; reduced RWA from NCL portfolio.
• Tax and Cash Taxes:
  • Reported loss due to $500 million tax expense, paid $200 million cash taxes in Switzerland.

Global Wealth Management (GWM): Net new money inflows of $22 billion. PBT was $1.1 billion, over 40% higher sequentially. Revenues were $5.5 billion, broadly flat. Underlying net interest income (NII) down 3% underlying. Cost-to-income ratio dropped by around 3 percentage points to 80%. Personal and Corporate Banking (P&C): Profit before tax (PBT) increased to CHF773 million. Revenues were $2.2 billion. NII decreased by 4%. Credit loss expense was CHF154 million. Underlying cost-income ratio down to 57%. Asset Management: Underlying PBT increased to $156 million. Revenues were $755 million. Net new money was negative $1 billion, driven by Credit Suisse outflows. Investment Bank (IB): Operating loss was $116 million. Underlying revenues declined 6% year-over-year to $1.9 billion. Non-Core Legacy (NCL): Underlying operating loss $1 billion. Revenues $350 million. Credit loss expense $125 million. Integration-related expenses $918 million.

• Expect CET1 ratio around 14% throughout integration timeline.
• Fourth quarter integration-related expenses expected over $1 billion; expect $500 million pull to par accretion next quarter, $150 million NII from cash flow hedge in 4Q.
• GWM NII expected mid-single digit decline in 4Q from deposit mix shifts.
• P&C NII expected low single-digit decline in 4Q from deposit rotation.
• Asset Management net new money expected to gradually return with proactive client engagement; IB expects revenues to ramp up in 2024 but pressure in 4Q due to market conditions.

• Macroeconomic and geopolitical challenges impacting business.
• Market conditions unfavorable to IB business model.
• Credit risk exposure in certain local emerging markets and bilateral positions.
• Uncertainty around regulatory changes and their impact on liquidity and capital.

Q: Outstanding SNB funding update, connection to liquidity ordinance, LCR guidance A: Funding levels unchanged at this stage; no specific connection to liquidity ordinance; LCR to remain prudent Q: Capital distribution, stepping stones for buyback A: Patient, finalize three-year plan in February; linked to cost savings and legal merger process Q: GWM NII trajectory, implications of deposit pricing, regulatory changes on deposits A: Deposit mix shifts driving NII decline; no impact from pricing; no specific disadvantage from regulatory changes on deposits Q: Revenue bridge to 2027, operational risk RWA assumptions A: Focus on cost and resource utilization; op-risk RWA initial assessment with regulator engagement ongoing Q: Net new money at CS, RoCET1 assumptions A: Stabilized CS, combined net new money plus dividend and interest reporting; RoCET1 assumptions validated in February through business planning Q: Non-core RWA outlook, P&L in non-core A: Aggressive RWA reduction; P&L revenues dependent on market conditions, costs correlated with balance sheet rundown Q: Tax rate reduction timing, cost exit run rates A: Elevated tax rate due to separate entities; $3 billion cost saves by year-end, further progress expected in 4Q Q: Legal entity merger timing, Q4 revenue picture A: Mergers planned in 2024; revenue picture clouded by market conditions and seasonality Q: Recovery of CS funds, non-core budget A: Win-back strategy in place; non-core assets quality, cost focus on sustaining assets Q: Profitability in 4Q, consistency of regional wealth flows A: 4Q profitability better than break even; regional wealth flows consistent across CS and UBS wealth franchises