UBS Group AG Q4 FY2024 earnings call

• 2024 saw strong fourth quarter results contributing to a full year net profit of $5.1 billion and underlying return on CET1 capital of 8.7%.
• Delivered on all key integration milestones in 2024, including legal entity mergers and client account migrations in various regions, significantly reducing execution risk of Credit Suisse acquisition.
• Ended 2024 with a CET1 capital ratio of 14.3% and intends to propose a dividend of $0.90, a 29% increase year-on-year.
• Made changes across the business in the Americas to introduce new capabilities to increase operating leverage, improve profitability, and drive sustainable growth.
• Continues to invest in technology across all businesses and supporting functions to improve client experience and operation.

Global Wealth Management (GWM): Fourth quarter pre-tax profit was $1.1 billion, an increase of over 80% as revenues grew by 10%. Excluding litigation charges, PBT rose to $1.2 billion. Net new assets reached $18 billion, and net new fee-generating assets were $13 billion. For the full year 2024, net new assets acquired were $97 billion, representing a 2.5% growth rate. Recurring net fee income increased by 12% to $3.3 billion, and invested assets grew sequentially to $4.2 trillion. Net interest income was $1.7 billion, up 4% sequentially. Personal and Corporate Banking (P&C): Fourth quarter pre-tax profit was 572 million Swiss francs, down 18% primarily from lower interest rates affecting net interest income down 8% and elevated credit loss expense. Recurring net fee income increased by 8%, transaction-based revenues were up 13%, and sequentially NII decreased slightly by 1%. Asset Management: Pre-tax profit increased by 20% to $224 million as strong cost discipline more than offset lower revenues. Overall revenues were down 7% or 6% excluding gains on asset sales. Net new money in the quarter was positive $33 billion, and for the full year 2024, net new money was $45 billion. Investment Bank: Pre-tax profit of $452 million was driven by strong revenue performance, up 37% year-on-year. Banking revenues increased by 19% to $675 million, and markets revenues increased by 44% to $1.9 billion. Non-core and Legacies: Pre-tax loss in the quarter was $606 million. Revenues were negative $58 million, operating expenses were down nearly 50% year-on-year and 5% sequentially, and risk weighted assets were $41 billion, down $3 billion sequentially.

• 2025 GWM NII expected to have low to mid-single-digit percentage sequential decrease in first quarter, low single-digit percentage full year decrease compared to 2024, inflecting by 2Q with second half broadly flat.
• 2025 effective tax rate expected to be around 20%.
• Aim to achieve around $13 billion of gross cost saves by the end of 2026, with $7.5 billion cumulative by year-end 2024.
• Expect underlying return on CET1 capital of around 10% in 2025 versus 8.7% in 2024, with core businesses being main drivers of growth and returns.

• Integration-related operational risks, such as data migration and decommissioning of legacy infrastructure in 2025.
• Interest rate变动 impact on net interest income, e.g., lower Swiss franc and euro rates affecting GWM's NII and P&C's NII with near zero rates expected to drive down deposit margins.
• Non-core and legacy business risks, including funding costs not offset by gains on exits and continued impact of Credit Suisse's past lending practices on credit loss expense.

Q: On integration, to what extent is the extra $1 billion in cumulative integration cost front-loaded and is there scope to outperform?

A: The change is not reflective of complex vs less complex. It's seen in light of initial assumptions and identifying incremental opportunities to unlock shareholder value with some incremental cost.

Q: On too-big-to fail rules, do you have room to offset ROE dilution from more capital requirements?

A: No easy fixes, no low hanging fruits, whatever comes is on top of plans and will be dilutive.

Q: On U.S. wealth management, what's different this time to improve performance?

A: Implementing various initiatives like rebalancing client segments, aligning FA incentives, building banking capabilities, and simplifying organizational structure to improve efficiency and profitability.

Q: On noncore deleveraging, why is deleveraging not faster?

A: Positions are smaller, hedged, with transfer restrictions and exotic security types limiting potential buyers, making it take extensive work.

Q: On U.S. wealth management plans, why tilt towards more affluent segments?

A: To rebalance, as profitability is higher in high net worth and affluent segments while maintaining strength in Ultra, and it's a rebalancing not a strategy shift.

Q: On share buyback plans, are they deducted from CET1 capital?

A: The $2 billion share buyback plan is subject to conditions and the $1 billion is already in.

Q: On U.S. business PBT margin to 15% by 2027, what's the plan and cost?

A: Focus on incremental technology investments and capabilities, with the investments already made and captured in pretax margin expectations, aiming to improve profitability by 2027.

Q: On capital repatriation and UBS AG's CET1 ratio, why the change?

A: Dividend accrual to group to offset capital repatriated from subsidiaries, addressing the need to manage capital ratios at group and parent bank levels.

Q: On Global Banking pipeline and Basel III impact?

A: Industry fee pool down 21% in January, Basel III implementation had day one impact of around $1 billion incremental RWA, with various adjustments contributing to the result.