UBS Group AG (UBS) Q3 2012 Earnings Report, Transcript and Summary

Good morning, and welcome to our third quarter results presentation. This morning, we also announced an update on our strategy. Today, we'd like to provide you with more details on both of these announcements, and so the format for today is slightly different to usual. This is the agenda we'll be working through this morning. We expect our presentations to take about 40 minutes, and after that, we'll be very happy to take your questions. Before I hand over to Sergio, I'd like to draw your attention to this slide, which contains our cautionary statement with regard to forward-looking statements. And with that, I'd like to hand over to Sergio.

Good morning. Thank you, Caroline. This morning, we have announced an acceleration of our strategy to transform UBS. Implementing the next phase of our strategy comes on the back of a journey that we started 1 year ago and of considerable progress we have made so far. We are ahead of our schedule in our plans to build additional capital strength and reduce both costs and risk-weighted assets. This gives us the ability to take these decisive actions from a position of strength to cement UBS's long-term competitive advantage. The business model we are creating will be unique in the banking industry. UBS will be less capital and less balance sheet intensive, highly cash-flow generative, more focused on serving our clients and capable of maximizing value for our employees and shareholders. We are reshaping our Investment Bank, and we'll achieve this by exiting or significantly reducing lines of business, predominantly in our fixed income businesses that have been made uneconomic by changes in regulation and in the markets. Therefore, we will further reduce risk-weighted assets and our balance sheet. And by further reducing costs and improving efficiency and effectiveness across the group, we will free up resources to invest in the businesses where we already excel and where we have chosen to compete. And so we are even more confident about our future. We have proven we can execute restructuring on a large scales, which give us the confidence and expertise to do more. Our capital position is second to none, which eases the pressure to conserve future earnings as our powerful franchises generate significant amounts of cash. We will deliver strong and sustainable returns, while maintaining the capacity to invest. This will allow us to focus on serving our clients in the best possible way and make us even…

Thank you, Sergio. Good morning, everyone. Our adjusted pretax profit of CHF 1.4 billion is a solid performance in a quarter that is typically seasonally weak. This result excludes a goodwill and other asset impairment charge of CHF 3.1 billion, resulting from our transformation of the Investment Bank and own credit losses of CHF 863 million as our credit spreads tightened significantly over the quarter. I'll refer to adjusted performance figures in the remainder of my remarks. We recorded a net tax benefit of CHF 345 million. This includes the effect of a loss for the quarter, as well as the impact of a projected taxable loss for the year for Swiss tax purposes. Additionally, as in prior years, we remeasured our deferred tax assets as part of the business planning process. This remeasurement had no impact on the U.S. DTAs, while the net impact on Swiss DTAs contributed to the tax benefit recorded this quarter. In addition to the tax effects of the goodwill impairment, our decision to adopt the IAS 19R accounting standard in the fourth quarter on a retrospective basis has benefited our Swiss DTA position. As we look to the fourth quarter, we believe market conditions will only improve if progress is made to address the pressing economic, fiscal and geopolitical issues that have concerned investors for the past year. Despite this, we remain confident our asset gathering businesses, as a whole, will continue to attract net new money. As a result of the acceleration of our strategy, we expect to recognize restructuring charges of about CHF 500 million in the fourth quarter. This, combined with reduced Investment Bank revenues as we exit certain businesses and an expected own credit loss on tightening credit spreads, will likely cause us to report a net loss for the…

Thank you, Tom. UBS has a unique franchise, with compelling growth prospects. And over the past 12 months, we have built a strong financial foundation, demonstrated by our industry-leading capital position. The actions we are -- we announced today will allow us to unlock the full potential of UBS. We are creating a business model which will be unique in the banking industry. Let me explain the changes we are making in more detail. The strategy we outlined last November has not changed. For sure, however, there is a change of pace. UBS is a bank with a leading franchises in each of its businesses. We have the world's preeminent Wealth Management businesses, managing CHF 1.6 trillion of invested assets, and we are well positioned in the largest and fastest-growth markets. Our Swiss universal bank is a leader in its home market. These businesses are complemented by our diversified global asset manager and our Investment Bank. In the future, our Investment Bank will be built on its traditional strengths: our long-term success in advisory; our world-leading research franchise and leading positions in equities, FX and precious metals. It already excels in all of these areas. Therefore, we will invest in and grow our capabilities to create a simpler, more focused and profitable business that is a source of competitive advantage to UBS. The long-term trends supporting growth for all our businesses are compelling and remain intact. Our goal is to continue to invest and grow in all our businesses and maintain our leading positions in each division. As I said, we are in a position of strength today as we have executed successfully over the past year. We have built our capital strengths, and our fully applied Basel III common equity tier 1 ratio is up over 300 basis points…

Thanks, Sergio. Over the last 12 months, we've built a strong financial foundation from which we're taking significant steps to better position the group. Based on the actions we're taking, our future capital requirements will be lower than our expectations at our Investor Day last year, reflecting our smaller balance sheet and lower RWAs. As Sergio said, we plan to reach our Basel III CET 1 ratio target of 13% on a fully applied basis in 2014. We'll reduce our RWA needs to less than CHF 200 billion by 2017, which is a 50% reduction from 1 year ago. As a result of a smaller balance sheet, our FINMA total capital requirement should fall from 19% to 17.5%, as the volume of loss-absorbing capital we'll need to carry is expected to represent 4.5% of RWAs. Our liquidity and funding positions are best in class and will be further enhanced as we work to improve our leverage ratio. Our funding requirement will also fall with our reduced balance sheet, which will allow us to consider debt buybacks in the future. As Sergio said, we'll also take far-reaching action to reduce our cost base and add to the CHF 2 billion in cost savings we've already announced. Over the next 3 to 4 years, we'll reduce our cost base by an incremental CHF 3.5 billion. We believe we'll maintain our current leadership position, and we're targeting a fully applied Basel III common equity tier 1 ratio of 11.5% in 2013 and plan to reach our target of 13% in 2014. We also believe we'll be the first bank in our peer group to achieve these ratios. In the future, over 1/2 of our funding will come from customer deposits, which are more stable and typically less expensive than most other funding sources.…

The first question from the phone is from Mr. Huw Van Steenis from Morgan Stanley.

Two questions from me. First, as -- Sergio, as you and the Board think about the decision on dividends, would it be fair to summarize that this is really a 2015 debate? Or is there already a possibility to start the dividend program in 2014? And then secondly, in terms of the RWA rundowns on Page 44, I understand why the OTC positions going to be naturally run off. But in terms of the cash positions, I was wondering if these are relatively conservative targets and you'd try to actually make much more progress because still having CHF 20 billion by the end of '14, I thought as surprising if these are fairly liquid credit positions that you should be able to sell down. And then lastly, in terms of the haircuts to the risk budget facility positions, would it be fair to say you're assuming a 2 to 5 percentage point haircuts to sell the assets? Or is there any thoughts you could share on that?

Well, in terms of dividend policy, I think that's -- as I mentioned in my remarks, we are basically targeting a 13% Basel III core equity ratio of 13%. Once we achieve this target, we will immediately implement a capital return policy. So it's not necessarily going to be 2015. Our target is to achieve this target in '14. Therefore, if we reach those target before, we will start to implement our strategy. We are currently accruing for a dividend. We started a dividend return policy already last year with a CHF 0.10 dividend. And so we are on our journey to deliver on what we promised. In terms of Page 44, I think that, yes, when we look at this cash position, we have been expecting -- we do expect some exit costs that are factored into our top-line models and our capital assumptions and our return on equity assumptions. The decision is pretty straightforward. If we -- if by accelerating we create economic profit, i.e. we can't execute and trigger any disposal -- any loss triggered by the disposals is lower than the cost of equity to support this business, we will do it. Otherwise, we will just wait for the best opportunity. We are not under pressure. We don't have any necessity to act right now. We can manage, as we did with the legacy portfolio, in the most efficient way for our shareholders. And the last question, sorry, I...

I think that already answered it. So it's just that will this -- what are you modeling in terms of haircuts [indiscernible]?

Yes, I guess you can probably try to figure out yourself by reverse engineering all the numbers. But we have enough conservative buffers. We have an assumption that may not be for free. But as I said, it's totally driven by doing what is right for shareholders from an economic profit standpoint of view. That's the luxury we are in today. We have a strong capital position that allow us to look at the most efficient way to manage down those risks in a strategic way.

Next question from Mr. Jon Peace, Nomura.

I have 2 questions, please. So the first one was on costs. On Slide 46, so you've broken out the cost by area where it's to be achieved. If you were to recut that by business line, I just wonder if you could sort of allocate that CHF 5.4 billion between Investment Banking, Wealth Management, et cetera? And then the second question is just on the absolute amount of capital you expect to run with in the future. So on Slide 45, you show us that by 2015, you expect to be running with CHF 42.5 billion of average attributed equity. Today, you've got a little over CHF 50 billion even including the IAS 19R impact. So should we imagine that CHF 7 billion could come back to us by way of special dividends in the future?

Okay. Thanks, Sergio. So thank you, Jon, for those questions. On the cost by business line, I think if you look at the restructuring costs that we've laid out in the slide, the assumptions that you can make are roughly the fourth quarter of 2012 are very targeted and focused on the IB, on that very particular business division. If you look out at the restructuring costs that occur over the remaining years, it's more part of the broader cost program that we have, which will have benefits across the group as a whole. Largely, those will come via the changes in the allocations that come to the different business divisions from the Corporate Center. As some of those have, as you can imagine, by looking at some of the programs that we have, some of those will have a bit of a J-curve effect, too, where you'll have an investment in the first 2 years before you return -- before you start realizing the savings in Year 3. One of the things that will help us is the fact that we started the CHF 2 billion program prior to this last year. And so we have those benefits coming through, they're helping to fund the investments that we're making in the second cost program. But I don't think you should believe that outside of the fourth quarter that those would be distributed in any way that's other than proportional to the allocated costs that the business divisions receive today. Your second question was on the amount of attributed equity that we have, and should you automatically draw the assumption that, that reflects the amount of capital return that we would have. I think you could draw a conclusion that it could reflect the potential amount that we could return. And I'd refer you to the slide that Sergio had in his presentation, which walked through a number of different categories, both the baseline dividend, the supplementary returns that we would consider, investments in our businesses, as well as any management countercyclical buffer that we might choose to apply given the environment that we're in.

Next question, Mr. Kinner Lakhani, Citi.

So I've got 2 or 3 questions. Firstly, I just wanted to understand what's your sense of the one bank revenues that were achieved between the kind of wind down products and the rest of the business in the past and how much cost did the wind down products kind of share with the rest of the group. Secondly, in terms of your capital return plans, I just wanted to get your sense on other regulatory considerations that you might have in mind, such as the ongoing kind of risk-weight reviews, the fundamental review of the trading book and also the views of FINMA and S&P?

Thanks, Kinner, for -- well, look, I think that what we have right now are -- we never really disclosed these numbers in details. But clearly, we are talking about multibillion synergies between our businesses on the top line. I would describe those synergies so far as a mix of what I would call passive revenue synergies, so the fact that we executed -- the fact that we distribute each of the products and that we leverage in the interest of clients the best possible solutions. But in my point of view, we -- the new business model more focus, more align to the one integrated bank will unlock further potential for us to work together as a truly integrated bank. So I'm really confident that over time, there is an additional value that we can create both in our client services proposition and also for shareholders. The costs are also quite important. I think that having all these businesses under one umbrella in a -- as Tom just mentioned, more and more, as we try to look horizontally, the way we manage the bank in certain terms of costs rather than vertically, we will also be able to generate significant added value. So I do expect the interaction between Wealth Management, the Investment Bank and asset management to provide more growth in the future as we focus on our client needs. On capital return?

Sure. I'll take that, Sergio. Thanks, Kinner. So on the second one, have we considered other regulatory considerations, I think the growing importance that we're placing on the leverage ratio denominator in that we actually really emphasized in our business planning process this year, I think shows a growing recognition on whether or not it's strict application of standardized methodologies or whether it's a proxy for that like a leverage ratio. We clearly believe that it's something we had to anticipate, build into the way that we ask the businesses to build their plans and that clearly factored into our decision-making process around the acceleration of the strategy.

So also, I would add that clearly, as we outlined, we have a clear capital return policy. We have also countercyclical buffers that allow us to manage this process. And last but not least, I think that it's clear that if the water levels goes up, it will go up for everybody. So I think that from a competitive standpoint of view, we are still extremely well positioned to tackle this potential further enhanced requirements.

That's great. If I could just follow up, I just wanted to ask you on the funding side. Clearly, you'll be able to buy back some of your debt, whether you've tried to quantify what kind of funding benefits you might get going forward?

Kinner, we factor those into our plans, obviously, in terms of the targets that we have going forward. So we won't quantify them specifically. That will be one of the things that we'll be working through with the treasury team over the coming quarters. But clearly, the combination of what we're able to do to accelerate the schedule that we have on Page 44 in terms of the reductions in the businesses to be exited, that will affect our plans on the liability side and how we'll manage that versus our target structures.

Next question from Mr. Kian Abouhossein from JPMorgan. Kian Abouhossein - JP Morgan Chase & Co, Research Division: Could we go through some questions? And I have quite a few, if I may. First of all, revenues. Can -- you mentioned CHF 20 billion of cost. Can you give me an indication of what you assume for revenues, assuming CHF 20 billion of cost base? The second question is relating to legacy assets. Could you give us an idea of the P&L of the newly created legacy assets in the Corporate Center at the first quarter 2013? What's revenues? What are costs? The third question is related to staff numbers. Could you give us an idea of front office? I saw 2,000 somewhere on Bloomberg. Just to make sure that this is correct, 2,000 front office, and how much of that is in the IB? And I assume the rest is Corporate Center, but could you please clarify that? The fourth question is on Page 45. You mentioned CHF 70 billion of risk-weighted assets, CHF 7 billion of equity, which looks quite low to me from CHF 22 billion. Even if I strip out goodwill, et cetera, still the numbers have material change. So I just want to understand why allocated equity is so different from the Tier 1 of 10 [ph] under Basel III? I have a few more, but maybe if I can stop here considering the other people on the line.

I guess, it's all yours.

Thanks, Kian. I think on the revenue side, I think if you look at -- if you look overall at the way we've laid out the targets, the percentage of revenues that we expect from different businesses, I think you'll be able to back into the revenue assumptions that we have. In particular, I'd focus you on the return on equity of greater than 15% for the group from 2015 forward, as well as the cost income ratio numbers at 60% to 70%. On the legacy P&L, if I understood your question correctly, it's what are we modeling in going forward. And I think again, I would refer you to the comments that we made on the group ROE with the combined severance cost, which we've given you, as well as with the exit costs on the portfolio, producing an average of a mid-single-digit ROE over the years 2013 to '14 versus the target in '15 of greater than 15%. I think that should give you some guidance there. The staff numbers on the front office, reductions in Investment Bank, the 2,000 number is an accurate number. And you should assume similar staffing ratios to the ones that we have today to assume the back office reductions as well. Finally, on the allocation of equity... Kian Abouhossein - JP Morgan Chase & Co, Research Division: 2,000 -- so from the 2,000, how much is IB related?

That's 100% IB. On the change in the attributed equity, remember, in our existing attribution of equity model, we attribute goodwill. So by the write-off of the goodwill in the Investment Bank, there's a CHF 3 billion reduction right off the top. And then the remaining amount of the adjustment is -- again, it's 50% weighted by RWAs and 25% of leverage ratio, denominator 25% on the risk-based capital model. So the risk-based capital model has an operational risk component associated with it. There are several businesses that are being exited that have high operational risk weights, one. And then two, if you think about the dramatic decline in the leverage ratio denominator, that's also reducing the equity attribution to the IB as well. And we can -- I mean, we can walk you through it after the call, if you'd like. But it's -- if you think through what we're doing in the strategy, we essentially felt the leverage ratio denominator was becoming a constraint. We've now taken the new IB and slimmed it down quite a bit on the leverage ratio denominator. So you've taken away that piece, you've taken away the goodwill, and then risk-based capital also has an effect. Kian Abouhossein - JP Morgan Chase & Co, Research Division: Yes, maybe we can discuss it offline. Just one more question, coming back to dividends, my understanding is you want to pay 50% once you reach '13. On my numbers, your expectations for 2013 -- sorry, 2014 when you reach 13%, first of all, is that correct? And is 50% payout kind of a base case scenario? And then you have numbers on top. Just to understand, you mentioned something about a base level of dividend payout, I assume, an absolute level. Can you give an idea of what you're thinking there? And secondly, your Tier 1 ratios are actually not improving as much as I would have expected. And just wondering is there any change in deferred tax assets or any other additional changes that you might have made? Or is the number just very conservative because I get to a much quicker 13% achievement than what you have.

Well, Kian, I think that our targets to reach the 13% ratio for 2014 are credible targets in respect of the overall macroeconomic picture, the challenges that we are facing today. Once we achieve this target, you are correct, we will have a minimum of 50% capital return policy in a form of a baseline dividend. This is a dividend that we expect to basically be fairly regular, that will be not subject to many movements due to economic macroeconomic conditions or volatility in the profitability levels. In addition to that, we may have supplementary return -- capital returns initiatives, which can take form of special dividend or share buyback. And -- but all this will be balanced, considering, as we mentioned before, our needs for reinvestment. Because as we develop and execute on this strategy, we then want also to be able to grow and leverage fully the potential of the franchise. And also, last but not the least, we have to consider countercyclical initiatives that we may take in terms of capital requirements depending on the macroeconomic conditions. But the 50% is a baseline that you should expect to be very stable. And in addition to that, we will take other initiatives.

Next question is from Mrs. Fiona Swaffield from RBC.

Just a couple of things. The 11.5% core Tier 1, you've obviously given us the RWA. So that looks like it's an absolute number of pretty close to CHF 29 billion. Can I compare that with what you gave in your illustrative example in Q2? And within that, are there any -- would there be lower -- is there any change in deductions? Or is that basically the way to look at what you're receiving on exit losses? Is the first question. The second question is the disclosure on DTA. I'm sorry if I've missed this, but could you talk us through -- I think you mentioned that you've done something on the DTA in the U.S., but I can't quite follow what it is or whether it's been offset by something else because I don't think I've got the moving parts. I wondered if you could talk about that a bit more. And the last thing is on the gross margin in Q3, which obviously relatively solid and transactions going up. I was just somewhat surprised by the trends there and whether there's anything one-off or you think that's a sustainable base.

Okay, all right. Thanks for these questions, Fiona. So first, starting with your first question on the CET1 and also to start by following up to the portion of Kian's question that we didn't get to on Tier 1 ratios. What I would say in our Tier 1 ratio is, as Sergio described all of our targets, we believe they are credible and appropriate. On your question, Fiona, about the 11.5% CET1 target for 2013, that's the first time we've given a target. In previous quarters, we've shown -- or at our Investor Day, we've shown an illustration based on certain components of consensus, for example, and other assumptions. So there's been no change in our set of assumptions in terms of the way we've thought about it. There is nothing missing. That's just the target that we've set for 2013 based on the performance that we expect in that year. And that obviously includes the restructuring costs that we've shown you, as well as any exit costs associated with the businesses to be discontinued. On your question on DTA, in terms of looking at the Slide 53 in the appendix, it gives you a good outlay of the unrecognized, as well as recognized DTAs. In my remarks, what I was covering was the fact that the U.S. DTA was unaffected in our total evaluation that we had this year, which is based on a number of factors. Only one factor is the IB business. We also have the Wealth Management Americas business, our asset management business in the U.S. as well. And so the prospects for Wealth Management Americas have certainly improved based on their performance, and that was somewhat of an offset on any assumptions we had on the Investment Bank in the U.S. And we also believe we've been quite prudent in our assessment of the U.S. DTAs as we think you can see from that chart on 53. Regarding the Swiss DTAs, we did have a write-down on Swiss DTAs that were related to the holdings of the subsidiaries that were affected by the goodwill write-down. However, at the same time, as I noted in my remarks, we will -- we anticipate having a Swiss tax loss in 2012 and that allows for a writing-up of new DTAs, which essentially was what caused us to have a zeroed-out effect. Gross margin, sorry. Your comment -- your question on the gross margin, can you just repeat that one, Fiona?

I just wondered if you could comment on the sustainability just because the transaction was particularly strong versus my expectations and whether that you think that's a good base going forward?

I think in terms of the gross margin overall, we were steady throughout the quarter. But I would still continue that to be, and I think you see that in our outlook statement, something that can be impacted by developments on the fiscal front, on the political front, on the economic front, and it could be volatile either upwards or downwards. I would -- I think it's one of these cases where assuming a run rate has to be done in the context of what you see in the ongoing environment.

Next question is from Mr. Derek De Vries, Bank of America.

I have 3 pretty straightforward questions. The first one, just -- I was a little bit surprised, I guess, you had a 15% headcount reduction and you're guiding for an 11% cost reduction. And given your business mix, I would have thought headcount reduction and cost reductions were somewhat synonymous. So maybe you can just talk about the differences there. Why is the headcount reduction greater than your total cost reduction? The second question is just a real simple one. On Slide 28, where you kind of show the new Investment Bank, in terms of the ongoing businesses, you mentioned distribution there and then you mentioned sales and trading on the equity side. But I'm just trying to get my head around the new model and what it involves from a credit business, right? I guess when you're talking about distribution, you're talking about distributing both equities and credit, but then you don't mention any sort of credit trading afterwards. So maybe just a clarification on what the new business model looks like for credit? And then just I guess, I'll try the third time to kind of ask the question in terms of the losses assumed on the rundown portfolio and you say we can kind of back into them and that is true. I mean, if we take a mid-single digit ROE for the next 2 years to be 5%, if we take a consensus for the divisions to kind of add up, I mean, that's going to suggest some very big losses, I mean, billions of losses on the rundown portfolios in the next 2 years. And I just want to make sure that's correct, I mean, we should be coming to an assumption that the rundown of these legacy assets is going to lead to billions of losses in each of the next 2 years. I know it's been asked a few quite times, but maybe some more clarity there would be helpful.

Okay. Thanks, Derek. I'll tackle the questions on Slide 28, and then I'll pass the rest to Tom. Well, I think that's -- as we outlined, I think that's clearly -- the part of the credit business you are referring to will still be there. Our focus in respect of credit is very simple. We will do everything that is necessary to support our activity in the origination front and debt capital markets and to facilitate client flows being institutional or Wealth Management. We will not be a participant in making markets in complex products or products that are not efficient from a Basel III standpoint of view. So we will limit our activity to facilitate clients to commit capital in a focused way to the people and the clients who are relevant for our franchise. So anything that is uneconomic from a Basel III standpoint of view will be discontinued. And I think that by doing that, we can still be a relevant player in our debt capital market businesses and serve our clients.

And Derek, on your first question, I think some of the things that are complicating the 15% headcount translating into identical cost reduction, one, I think it depends on the mix of the different functions and the compensation per head. Two, it's also the geographic mix of the individuals that are involved. Three, also, in some of our programs, there may be certain outsourcing arrangements that we have where the headcount is reduced. Maybe there's a center -- maybe we're not a center of excellence for a particular function but another provider is, where we're still paying for services but we've taken headcount off our rolls. So I think all of those factors contribute to some of that disconnect that you see. On the losses, I don't think it would be an accurate statement to say that there are billions of losses in each of the next years. I think that -- you may -- I don't know if you're capturing the charges that we have for the cost savings program as well in that calculation.

Yes, no, I was. Okay, that's clear.

Next question from Mr. Christopher Wheeler from Mediobanca.

A couple of questions. First of all, Tom, thank you so much for the rundown of the cost savings and the restructuring charges, but I wondered if you could just overlay on that whether we should be looking at the headcount reductions as broadly going in line with your cost-reduction schedule. That's the first question at Slide 46. The second one is, just what are you going to now do with the StabFund option? Do you have any views on that? Because clearly, that is something that to a degree is linked to what is now your non-core business. And I'm just interested as to whether you can share anything with us about what your preferred treatment of exercising of that might be? And then thirdly, really, I mean, obviously, given the very, very positive reaction your strategy has received, can you perhaps just talk a little bit about -- when you talked to us last November, I think, as you know, the market was perhaps thinking you might be this phlegmatic in what you were going to do. You've now moved on and actually taken a much more aggressive stance. How much of that really is down to the new management team, including the Chairman, further refining and reviewing the business? How much is down to perhaps regulation and the regulator in Switzerland, in particular? And how much is down to what you see in the market? And then just finally, can you share with us -- and I think I asked this question last year of Carsten. What are you putting in place? What kind of team are you putting in place? How are you incentivizing the team who are going into that non-core business? How long are you sort of, if you want, incentivizing those people, including Carsten, to stay with you? Because clearly, reducing the losses in that business is going to be a big factor in making sure you get to your various targets much more quickly.

Thank you, Christopher. I will take the last 2 questions, and then I'll pass the rest to Tom. Well, as you mentioned, this journey started a year ago in November. We outlined very clearly back then and in every quarterly review we had with you and also on media statements. I made it very clear what the strategy of UBS will be in the future. So what you see today is simply an acceleration of the strategy. We have been working with my team and the management board to discuss our progress to review basically the driver of that decision back then, so basically create value for shareholders, the changes in the regulatory framework. And today, we have much more visibility about the fact that those changes are years to stay. But as I mentioned, maybe they are not going to be applied on a homogeneous basis and in the same time frame as we do in Switzerland, but they are here to stay. And also, the experience we gather in the last 12 months in executing the first phase of the strategy together with the macroeconomic environment basically made it quite clear for us that having built up 300 basis points of additional core equity ratio on a Basel III basis put us in a position to take the decisive steps now and accelerate that strategy. So the Executive Board went through this process, and I made a recommendation to the Board that we should move forward. And we are all united to move in this direction, and there is -- this is the way we're going to go. And the second point you are raising in terms of motivating the staff that will help us to manage this transition, I think that there, the situation is very simple. They will motivated by the fact that they are supposed to create value that goes beyond what the natural decay of this position will indicate. As we mentioned to you before, there is nothing wrong with the quality of those assets and any concentration risk that makes this job something that is very -- is an important step. We are not underestimating, but we have a governance and a structure in place that will help us to manage this process. So rewarding and keeping people for something that is a journey of 2 or 3 years is something that has to be related to creating value. And by the way, many of those people will continue to have a job in our group going forward. As things changes, there is a turnover in the industry, so there is -- it's not like we'll have to separate from everybody. So I don't want to create a too special kind of people in the organization. Everybody has to go in one direction: create shareholder value. And that's the way people will be compensated across the group.

And Chris, on your other 2. Before I start that, I would just add to Sergio's remarks on your third question. We've always said that having a premier capital position would be something that would be a strategic advantage for us. And I think you see from the announcements we made today, it's created a lot of strategic optionality for us. Your first question was on the headcount pattern relative to the cost savings pattern on Slide 46, and you can assume that, that's correlated. Second, your question was on the StabFund option. We continue to have -- as our base assumption and to be quite happy with that assumption that we'll continue along the path of letting the portfolio and the loan naturally amortize in the way that the StabFund is run, and we do not intend to accelerate our exercise of the option.

I think we have 1 more question. I'm sorry about the people that are on hold, but I'm sure Caroline Stewart and her team will help you through -- go through some of the other questions so we have a chance to address them one on one. So let's go through the next one. Daniel?

Next question from Mr. Daniel Davies from Exane.

It's Dan Davies from Exane. Just a very quick question about dividend accrual. Are we to take the dividend accrual as informative for this year? In other words, should we expect that until the 13% common equity Tier 1 target is reached, the CHF 0.10 dividend is all that's going to be there? Or is there some scope for increasing that and having a progressive dividend policy in the interim?