UBS Group AG (UBS) Q1 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, good morning. Welcome to the UBS First Quarter Results 2016 Conference Call. All participants will be in listen-only mode and the conference is being recorded. After the presentation, there will be two separate Q&A sessions. Questions from analysts and investors will be taken first followed by questions from the media. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to UBS. Please go ahead.

Good morning, everyone. Its Caroline Stewart here, Head of Investor Relations. Welcome to our first quarter results presentation. This morning, Sergio will provide you with an overview of results and Kirt will take you through the details. After that, we'll be very happy to take your questions. Before I hand over to Sergio, I'd like to remind you that today's call may include forward-looking statements. These statements represent the firm's belief regarding future events that, by their very nature, may be uncertain and outside of the firm's control, and our actual results and financial condition may vary materially from this belief. Please see the cautionary statements included in today's presentation on the discussion of risk factors in our Annual Report 2015 for a description of some of the factors that may affect our future results and financial condition. Thank you. And with that, I'd like to hand over to Sergio.

Thank you, Caroline, and good morning, everyone. A lot has been briefed and then said about the challenges faced by the industry in the first quarter. Many of the risks that we have been pointing out for the past few quarters materialized in the first three months of the year, leading to even more pronounced client risk aversion, and abnormally low transaction volumes. For UBS, this was true, particularly when compared to the exceptional Q1 we had last year following a high level of transactional activity triggered by the removal of the euro currency floor by the SNB, as well as our strong performance in APAC. Nevertheless, our discipline and focus will allow us to deliver a resilient adjusted profit before tax of CHF 1.4 billion with positive contributions from all businesses, divisions and regions. Net profit attributable to shareholders was CHF 707 million, and our adjusted return on tangible equity was 8.5%. The bank maintained its strong capital position with a fully applied Basel III CET capital ratio of 14%, and a Swiss SRB leverage ratio of 5.4%. Turning to the business divisions, despite the lowest level of transaction volumes recorded for a first quarter, Wealth Management's pre-tax profit was resilient and the business continued to make good progress on its strategic initiatives. Even with moderate client deleveraging, Wealth Management attracted very strong net new money without compromising quality or sustainable profit growth. Net inflows were particularly strong from clients in Asia Pacific, and the ultra-high-net-worth segment. Wealth Management Americas delivered a solid pre-tax profit significantly higher than the prior quarter as expenses for litigation declined, and an increased net interest and recurring fees income more than offset a decline in transaction revenues, which was the lowest for a first quarter since 2009. Net new money was strong and reflected net inflows predominantly from newly recruited advisors, as well as from advisors employed with UBS for more than one year. Our financial advisors continue to be the most productive among peers with an average of $147 million of invested assets per advisor. We delivered net new money from our combined Wealth Management businesses of CHF 29.1 billion, the best since the first quarter of 2008. While there is a volatility in net new money from quarter-to-quarter, the one constant is our focus on quality rather than quantity. As we look to the full year, we continue to expect net new money growth to be within our target ranges. Personal & Corporate Banking deserves applause for posting excellent pre-tax profit, especially given continued challenges from negative interest rates. Net new business volume growth from retail clients was 4.9%, and while the first quarter is typically the strongest for new business, this is the highest growth rate we have seen since the first quarter of 2012. Furthermore, we continue to manage credit risk prudently with minimal credit losses this quarter. Results in Asset Management declined and were affected by the very challenging conditions for active managers in the quarter, which particularly impacted performances. Net new money outflows, excluding money markets, were CHF 5.9 billion, including CHF 7.2 billion of pricing-related outflows from one client and CHF 3.8 billion of outflows driven by client liquidity needs both from lower margin passive products. As I said a few weeks ago in the environment observed during the quarter we would consider our Investment Bank's performance to be satisfactory if it covered its cost of equity, which it comfortably leads with a 19% adjusted return on attributed equity. The first quarter of last year included a very strong performance, reflecting very high client activity levels that particularly favored our business footprint. In Q1, the Investment Bank continued to demonstrate prudent risk and resource control in line with very low levels of client activities. On costs, we made further progress in the quarter with an additional CHF 100 million in reduction. As we progressed on detailing our cost reduction plans, we have defined specific front-to-back initiatives that we will now implement to achieve our net CHF 2.1 billion savings target despite increased ongoing regulatory costs. There is no magic bullet that can fully offset material revenues headwinds, without compromising sustainable profitability, or in fact, the future of our franchise. Therefore, we will continue to carefully balance our investments in structural growth with tactical adjustments to our cost base to mitigate the cyclical headwinds we are facing. We and the industry continue to face challenges, and while UBS is in a position of strength, we will not be complacent. We'll continue to execute on our strategy with discipline and transition to the new regulatory capital requirement at an optimal pace. Most importantly, staying close to our clients and delivering on our commitments to shareholders remains paramount, particularly with respect to our capital returns policy. We remain committed to our policy of returning at least 50% of net profits to shareholders. Although, it's early in the year, our aim is to continue to grow our ordinary dividend, while building the capital needed to address regulatory requirement and to support our growth. Thank you. And Kirt will now take you through the details for the quarter.

Thank you, Sergio. Good morning, everyone. My commentary will reference adjusted results unless otherwise stated. This quarter, our results have been adjusted for restructuring charges of CHF 265 million and net foreign currency translation losses of CHF 123 million. As previously noted, we've adopted the own credit presentation requirements of IFRS 9 with own credit recognized in OCI and no longer affecting our income statement. Wealth Management delivered a resilient performance with profit before tax up 26% to CHF 636 million. Transaction revenues were the lowest they've been in any first quarter on record. However, revenues increased as activity picked up from the extremely low levels in the prior quarter, which also included the CHF 45 million client shift fee paid from P&C to WM. Recurring net fee income decreased the benefits of pricing measures and higher mandate penetration were more than offset by lower invested assets in cross-border outflows. Net interest income declined as higher deposit revenues were more than offset by lower allocations from Group ALM and lower lending revenues as loan balances decreased on currency effects and client deleveraging. The cost-to-income ratio was 66%. Operating expenses decreased 10% to CHF 1.2 billion, largely due to lower net expenses per litigation, regulatory and similar matters. Net new money was CHF 15.5 billion, the highest since 2007, with an annualized growth rate of 6.5%. Strong net new money in the quarter was delivered despite client deleveraging, which continued but slowed from the high levels we saw in the second half of 2015. Invested assets decreased to CHF 925 billion, as currency effects and market declines more than offset strong net new money. Mandate penetration increased by 60 basis points to 27% with CHF 6.9 billion of net new mandates. Net new money was positive in all regions and particularly strong in APAC with CHF 8.8 billion, the second highest since 2007. Net new money was also strong in the ultra-high-net-worth segment with CHF 13.3 billion, an annualized growth rate of 10.5%, the highest since the first quarter of 2013. Wealth Management Americas delivered another solid quarter with profit before tax of $245 million. Operating income rose 1% to $1.9 billion on record net interest income, which benefited from higher interest rates. Recurring net fee income also increased with transaction-based revenue decreased on lower client activity. Operating expenses decreased to $1.7 billion mainly due to $215 million lower net expenses for litigation, regulatory and similar matters. Excluding these costs, expenses increased mainly due to higher allocated cost from Corporate Center, as the prior quarter included a cost agreement credit of $36 million. Personnel expenses also increased partly due to higher initial cost related to our new healthcare plan. Net new money was $13.6 billion, predominantly from newly recruited advisors, but also with solid net new money from advisors who have been with the firm for more than one year. For the second quarter, we expect to see typical trend of increased client withdrawals associated with seasonal income tax payments. In the previous three years, second quarter outflows from tax payments have been in the range of $2 billion to $4 billion. Invested assets increased by 2% to $1.1 trillion. Managed account assets were up 3% to a record $361 billion, or 34% of invested assets. FA productivity remained industry-leading, as both revenue and invested assets per FA increased. Lending balances were flat as growth in mortgage balances was offset by lower securities-backed lending. Personal & Corporate Banking delivered another solid performance, despite persistent negative interest rates and the challenges facing the Swiss economy, with profit before tax increasing 7% to CHF 422 million. Operating income increased 5%, mostly on higher transaction-based income, as the prior quarter included the CHF 45 million client shift fee paid to Wealth Management. Net interest income decreased as higher loan and deposit revenues were more than offset by lower allocations from Group ALM. Despite this, net interest margins remained healthy at 166 basis points. Net credit loss expenses were negligible. Its costs for newly impaired positions were offset by recoveries. As mentioned in the previous quarters, given the reliance of the Swiss economy on exports, the continuing strength of the franc may impact some of the counterparties within our domestic lending portfolio and lead to an increasing level of credit loss expenses in the future periods. Operating expenses increased by 4% on higher allocated costs from Corporate Center - Services, as the prior quarter included a cost agreement credit of CHF 49 million to P&C. The cost to income ratio was stable at 56% for the fourth consecutive quarter. Annualized net business volume growth for our personal banking business was seasonally higher at 4.9%. We continued to attract new clients with the highest first quarter net new domestic clients on record, mainly driven by younger clients, a testament to our strong e-banking and mobile banking offerings. Asset Management delivered a profit before tax of CHF 110 million in a challenging environment for active management, which impacted performance fees, particularly in Equities, Multi-Asset and O'Connor. Net management fees decreased primarily reflecting the sale of Alternative Fund Services in the prior quarter. Net new money, excluding money markets, was negative CHF 5.9 billion and included a CHF 7.2 billion pricing-related outflow from one client and CHF 3.8 billion of outflows driven by client-liquidity needs, both from lower margin passive products. Against the backdrop of a very challenging market conditions and needed client activity, most pronounced in Europe and APAC, the Investment Bank generated CHF 370 of profit before tax. Together with low continued consumption of financial resources, this resulted in a return on an attributed equity above our target of greater than 15%. Corporate Client Solutions' revenues were CHF 474 million, down 39% year-over-year as the global fee pool decline substantially, with the largest decrease in ECM but also in advisory, while DCM were broadly unchanged. Financing Solutions decreased on subdued client activity and margin compression. Risk management revenues decreased due to higher hedging cost and as the prior year included a gain on a portfolio macro hedge. In Investor Client Services, equities revenues were 20% lower against a strong first quarter as weak client activity and challenging trading conditions impacted revenues particularly in derivatives. The Americas equities business had a very strong quarter with positive trends in all products. Looking at FX rates and credits, we are pleased with the progress we are making particularly given market conditions. Apart from first quarter 2015, where we saw exceptional activity and revenues related to the SNB floor removal, first quarter 2016 is our best FRC quarter in the last 12 quarters as our client-centric, low-inventory model worked well in volatile markets. We recorded a net loss recovery of CHF 2 million as recoveries more than offset expenses from new provisions. In respect to our oil and gas exposure, at the end of March, our total funded and unfunded net banking product exposure decreased by CHF 600 million, to CHF 5.5 billion. This was driven by reductions in the exploration and production, as well as services and supply subsectors. We recognized a credit loss expense of CHF 17 million against these exposures, including the effect of establishing a collective provision, taking the total provisions to CHF 56 million. The idea exhibited strong expense and resource discipline. Operating expenses, excluding services to/from were down 26% year-over-year and personnel expenses were down 29%, mainly reflecting lower expenses per variable compensation. LRD was CHF 32 billion year-over-year and down CHF 6 billion from low year-end 2015 levels. VaR was at its lowest levels since 2013 and RWA was stable. Corporate Center - Services recorded a loss before tax of CHF 211 million compared with a loss of CHF 326 million in the prior quarter, largely as the prior quarter included retained costs, reflecting differences between actual annual costs incurred in allocations to the businesses. We have refined our group asset and liability management disclosure in order to provide greater transparency. Income from Group ALM's activities is disclosed for the three main risk management areas: business division-aligned risk management, capital investment and issuance, and group structural risk management. A description of these activities is provided on page 46 of our quarterly report. Total risk management net income, after allocations, retained within Group ALM can vary significantly quarter to quarter. This volatility is driven by factors such as movements in basis spreads and interest rates, the general market environment, which impacts the consumption of liquidity and funding by business divisions, and the volume of buffers that we are required to hold, combined with the returns we earn by managing these low-yielding assets. While the retained balance for the first quarter was negative CHF 17 million, in current conditions, we expect it to average around negative CHF 15 million per quarter in the short term, although there will be swings around this figure. We have organized a call for analysts and investors with Claude Moser, the Head of Group Asset Liability Management, where he will discuss Group ALM's activities and objectives and also answer questions on our new disclosures. We will provide details shortly. Group ALM operating income decreased negative CHF 27 million with a profit before tax of negative CHF 25 million as improved risk management net income, after allocations, was offset by the effects of accounting asymmetries related to the economic hedges as well as hedge accounting ineffectiveness. Profit before tax in Non-core and Legacy Portfolio was negative CHF 181 million, up from negative CHF 312 million in the prior quarter as expenses decreased largely due to lower net expenses for provisions for litigation, regulatory and similar matters, and as the prior quarter included a charge of CHF 50 million for the annual UK bank levy. There were also lower losses from novation and unwind activity as we take a more passive approach to reducing the remaining exposures. Non-core and Legacy LRD decreased by 11% to CHF 41 billion, mainly due to lower OTC-derivative exposures. And as previously highlighted, we expect a slower pace of reduction in LRD relative to prior experience, with the transition from active management to natural asset decay. Of course, we will actively reduce exposures, when doing so is accretive to shareholders. If we look back, we have delivered over CHF 2 billion of net Corporate Center cost savings since 2011. This includes saves to offset the more than CHF 0.5 billion of incremental annual ongoing regulatory costs. For the quarter, we achieved an additional annualized net cost reduction of more than CHF 100 million in the Corporate Center, bringing the total savings to CHF 1.2 billion, compared with the 2013 exit rate. And we are on track to deliver CHF 1.4 billion by the second quarter. Savings were largely driven by lower personnel expenses across Corporate Center - Services and Non-core and Legacy Portfolio. Occupancy costs decreased largely as a result of our ongoing efforts to improve real estate efficiencies. We are fully committed to delivering CHF 2.1 billion net cost reduction target by the end of 2017. As we've continued to make progress in our cost efforts, we've identified other opportunities to generate saving of a front-to-back nature. This has given us increased confidence in our ability to deliver the full CHF 2.1 billion, despite increased ongoing regulatory costs. For example, as part of our Investment Bank's simplification program, we do see the number of booking models in our swap business and reducing our legal entities will enable streamlining in the finance operations and risk functions that support them. We are also continuing to evolve the Wealth Management towards a more globally integrated model. This includes simplifying and streamlining middle office support functions, and creating a global distribution and advisory approach, which will increase our agility and ability to serve clients. We will continue to focus on capturing synergies across Wealth Management and Wealth Management Americas, specifically improving collaboration around our platforms. This will not only create savings as we capture additional benefits from scale, but also improve our client offering as we ensure that the best products and services available from across the globe are accessible to clients. Another opportunity is the review of our risk management and compliance activities and processes, where we identified opportunities to eliminate overlaps, streamline controls, centralize support activities and enhance accountability. This will both improve our control environment and deliver efficiencies and it will help improve client base and staff productivity. Apart from our structured costs, we will continue to look for more tactical actions to mitigate typical headwinds. Our capital position remains strong with a fully applied Basel III CET1 capital ratio of 14% and a fully applied Swiss SRB leverage of 5.4%. CET1 capital decreased as profits were more than offset negative currency translation effects and dividend accruals. Details on CET1 movements can be found on page 83 in our quarterly report. RWA increased by CHF 6 billion, driven by regulatory add-ons, book size, the net excess of a revised operational risk model partly offset by currency effects. LRD increased by CHF 8 billion due to higher on-balance sheet exposures in Group ALM related to our HQLA portfolio, as well as an increase in securities financing transaction exposures. These were partly offset by currency effects. We continue to build our capital position to address the revised Swiss too big to fail ordinance. In March, we issued CHF 1.4 billion of high-trigger AT1 capital, the first such transaction in 2016 attracting very strong demand. We also issued CHF 1.3 billion of TLAC during the quarter and issued $5 billion in early April, which will contribute to our total loss absorbing capacity under the new proposed capital requirements. Thank you. And with that, Sergio and I will now open it up for questions.

[Operator Instructions] The first question is from Huw van Steenis from Morgan Stanley. Please go ahead, sir.

Good morning. Thanks for your presentation. Two questions, really, both on cost. So, if the revenue environment doesn't improve, how have you, sort of, came through what additional work you'd do on costs? You mentioned about tactical measures, but how would you more profoundly improve the operational leverage? And then, secondly, you mentioned, Kirt, you're moving to a more passive stance in terms of run-off at the Non-core portfolio. Have you investigated whether there are benefits to take out more costs more quickly through a more accelerated trend? And how do you think about these trade-offs? Thank you very much.

Thank you, Huw. As I mentioned in my remarks, I think, trying to offset the speed of the contraction of the top line is - I would say, on a short term business, is impossible. I think that the CHF 2.1 billion initiative that we are working on are going to help over time, if these conditions persist to match that environment. But I would say that we cannot consider this kind of conditions that we saw in the first quarter as permanent as a new normal. If that would be the case, of course, we would do our best to get to an environment in which we can keep the value of the franchise and the optionality for better days in fact. I think that's taking Draconian actions to show cost contraction for few quarters, and that would impair our ability to be there when the situation normalizes would be a major mistake. So, we're very focused to do that, but there is no magic bullet to take down billions of cost in the short-term. I do think that as time goes by, if this is the condition we're going to face in the industry, the industry itself will be forced to rethink many of the processes that we are doing on a stand-alone basis, on a more collective basis and try to combine and create economy of scales for the industry in a consolidated way. But it's not something that I do see happening in the next 12 months to 24 months. And that's the situation. So, I think that we have to keep our competitive position intact. And as I mentioned before, be very careful about not throwing out the baby with the bathwater, as we do that. In terms of Non-core and Legacy, I think Kirt highlighted that when we look at the time decay of this portfolio, we constantly look also at ways to - if the opportunity presents, to unwind faster, if the economic profit generated by not only the fact that capital will be released, but also the cost associated with supporting activity will disappear. So, our - when he says that we're going to do it in a shareholder-friendly way, we are including both cost of capital and cost that would disappear. And of course, as we are working right now in taking down Corporate Center costs, the first beneficiary of that movement is indeed Non-core and Legacy, because this is, in the next few years, clearly a business that is not going to be there, and therefore, our first priority is to really shrink and take it down to as close as we can to zero.

Okay.

Huw, let me just add to the Non-core and Legacy question, if you look at the cost structure, the majority of the costs are legal. They include such items like, last quarter, the UK bank levy, and they also include, of course, allocations from some of the support and functional costs. And as Sergio mentioned, we continue to take those allocations down. The opportunities to reduce direct costs is minimal at present and we'll continue to work that down as we see the Non-core and Legacy Portfolio reduce over time. And we have looked at other options like trying to outsource the Non-core and Legacy Portfolio, but we actually found that the economics really don't work.

Thank you, actually.

The next question is from Kinner Lakhani from Deutsche Bank. Please go ahead, sir.

Yes. Good morning. I have a few questions. Firstly, just on the recurring fee and commission margin within Wealth Management, which saw some pressure? You seem to indicate it's a continuation of the cross-border outflow story. I guess my question is what is the outlook from here? Are we at the end of such headwinds, given that most of the regularization in Europe has happened or should we expect a regularization elsewhere in the world? The second question was on the retained funding cost. Thanks for the new disclosure on slide 20. Just want to try and understand this a bit better. The buyback that you executed at the end of last year, I think you'd suggested some funding cost savings of CHF 170 million per annum starting in 2016. Where should we see that coming through? And how does that help that line? And then, thirdly, just on the BCBS changes where obviously Basel is suggesting a kicking out of the AMA model within operational risk, could you give us some guidance as to what that does for your operational RWAs? And the final question, which I asked a quarter ago, is your RoTE target for this year, which is stable in 2016 on 2015. Given that the Q1 RoTE is 8.5%, the outlook remains relatively cautious. Are you still comfortable with this target? Last year, I think we had close to 14% RoTE. Thank you.

Let me take, [indiscernible], your first three questions, actually [indiscernible] in terms of our recurring fee margin, actually if you look at our recurring fee margin overall for Wealth Management, it was 39 basis points, which is - it's been hovering around 41 basis points and 40 basis points and it was slightly below where it was in the last couple of quarters. And what we've been doing is that we've been implementing pricing actions to try to offset the impact of some of the outflows due to the regularization process. And we continue to this and also, of course, we've been addressing other fee and revenue opportunities. And where we are in terms of that process, as we've highlighted previously, is it's largely complete in Europe and we will see some remaining residual outflows as we go to the next couple of quarters. And we highlighted in the fourth quarter that Italy was really the last major market to go through its amnesty. Also, we highlighted last quarter, however, we do expect to see some outflows going forward for countries outside of Europe in anticipation of the automated exchange of information and, of course, early adapters will be effective in 2017. And that process is ongoing. Also, we would expect to see outflows as other markets pursue their own amnesty programs as we've already seen in Israel and we've seen in South Africa and, of course, it's well publicized that Brazil and Russia are exploring such programs. And we do expect that that will impact our business during the course of this year and into next year. The margin impact you see in Wealth Management, just to kind of finally comment on that question, is really from our transaction margin which was 17 basis points as I highlighted in the first quarter, the lowest that we've seen. Normally, in a typical first quarter, transaction margin will run around 24 basis points, 25 basis points. So it's substantially below typical levels. Now, in terms of your retained funding costs, what we announced with the buyback in the fourth quarter is that we would expect to see about CHF 187 million of benefit that would begin to flow through this year. Now, we're already seeing that in the first quarter, and we expect that that should continue to pick up as we go through the next couple of quarters. And that really is embedded in the overall net income from risk management activities after allocations that I highlighted. So, that's already reflected in the CHF 17 million negative net income that we saw in the first quarter. And it's also already reflected in the negative CHF 15 million that we guided on a go-forward basis although with some degree of volatility. Now, for your third question on BCBS changes, just first of all, just to remind you that, at present, under the expected TBTF 2 ordinance, LRD will be our binding constraint. And we would need to see about 50% increase in an RWA for RWA to become our binding constraint. Now, clearly BCBS has come out with guidance across - standard guidance across operating risk, market risk and credit risk. And clearly, of course, we have assessed that the current guidance and also are participating in ongoing QISs. Now, we would highlight that there still is quite a bit of clarification that needs to be provided, for example, in terms of ultimate floors and where we end up or in terms of the interplay between internal models and standards across our different businesses. And obviously, in terms of what ultimately gets adopted by FINMA and implemented in Switzerland. So, therefore, it wouldn't make sense for us to provide any guidance consistent with our past. However, I would highlight - and we've indicated this in our earnings report that if the current rules were to be implemented, we would clearly see a very significant increase in our RWA. Sergio, I'm not sure, if you want comment on RoTE.

On RoTE, I think it's clearly still too early to update our expectation on return on tangible equities. And we will probably be in a better position at the end of this quarter to do that. Of course, the macro assumptions underlying our business plan, in particular, in respect of the yield curve in U.S. dollars shifted dramatically. If you look at the overall assumptions on GDP growth in the globe and wealth creation have changed. So, the situation from a beta spend point of view is clearly not the one that we have been planning over the years, and particularly towards the end of 2015. But as we highlighted in our outlook statement, I think that we are well-positioned to capture even - and benefit from even a moderate improvement of the situation. And if you go back into last year volatility on RoTE, I think that although the situations and the reasons were maybe different, but there is high degree of volatility on this number. So, it's really too early to say that, but of course, current market conditions, as I mentioned before, cannot be seen as a new normal and as a final outcome for the full year 2016.

Great. Thanks, Sergio and Kirt.

The next question is from Al Alevizakos from HSBC. Please go ahead, sir.

Hi. Good morning. Thanks for taking my question. My first question is basically on the return on equity of the Investment Bank. You just mentioned once again that the LRD seems to be the binding constraint and still you allocate the capital using this kind of allocation, using also capital and then leverage, et cetera, and you say that the ROE of the business is about 19%. Even though it seems that if you do it on an LRD basis, this is actually closer to 10%. Still wonder why you're not doing it based on the kind of higher equity that's needed and you do it like on an amalgamation. And then the second question is the mandate penetration went back to 27%, which is actually good. I just want to confirm that the target remains at 40%. And then, what's the way that you can actually accelerate this? And therefore, what's going to be the impact on your P&L, if you do it? Is it going to be mostly on the cost-to-income ratio or mostly on the revenue? Thanks.

Thank you, Al. In terms of our equity attribution framework and we've been very, very consistent and transparent over the last several years on our framework and we provide detail in our Annual Report and also update in our quarterly earnings. In addition to that, of course, we update the framework every year when we go through our planning process. And our equity attribution framework reflects our strategy and our business model. And our business model is that Group Treasury and ALM specifically manages liquidity on behalf of the business divisions. And through our funds transfer pricing framework, they allocate liquidity costs and funding costs back to the business. We also maintained a flexible resource usage model, so that we give flexibility to the businesses to flex and increase and reduce the resources. And you see that that benefited BID, for example, during the quarter, where they reduced and maintained very well levels of resource consumption when opportunities were not available in the market. But also, we would highlight that we provide a full transparency so that you can actually make any assessments and make any adjustments based on alternative strategy and business models. And we're fully confident that if you do that under really any alternative, all of our businesses would more than cover their cost of equity and actually would show quite resilient and strong performance. Now, in terms of the mandate penetration, the 40% target is still active and it's one that the business is pursuing. We've indicated that we expect that over the medium-term. As we continue to increase penetration of mandate, clearly that will provide a margin improvement overall to our invested assets. And that should show up both in terms of revenue, but also, in terms of cost to income, as we really should not have very substantial incremental cost associated from migrating our clients from a self-directed product to a mandate, given that our mandate platform is fully automated and fully straight-through.

Okay. And if I may, a final question on the LRD. So, I can see that this quarter, it increased for the two reasons that you highlighted; basically the increase in the secured financing transactions and also the fact that you had to increase your liquidity portfolio ahead of the IHC finalization. So, what I'm trying to understand is you've got this aspiration of CHF 950 billion of LRD. And I'm trying to understand the difference between the current figure and CHF 950 billion, will it be mainly covered by regulatory kind of requests or will it be like just actually increasing the portfolio in the Wealth Management businesses, because obviously it makes a difference on how we should think about the revenues going forward.

Yeah. We should clarify very importantly that the CHF 950 billion is not an aspiration. What we've indicated is that that's an expectation that we have over the short to medium-term. And our model, and it's very consistent with what I outlined in terms of how treasury works, is a flexible model whereby if there are opportunities in the market that, based on client activity, that they've fully justified from an economic return perspective to increase resource usage, then we would expect the businesses to increase the level of balance sheet that they're deploying for their businesses. So, what you saw in a quarter, where client activity was very, very, very low, there was low demand such as in the first quarter and also in the fourth quarter of last year that the level of LRD we deployed in the businesses used was very low and actually reduced considerably during the fourth quarter, remained relatively low levels during the first quarter. We would expect that to continue. If the environment improves, we would expect that you would see an increase in LRD accordingly that that would then show up in terms of our overall results and we would manage towards that CHF 950 billion overall expectation in the short to medium-term. Also, I'd just re-highlight that, as you saw in the first quarter, the increase was due to security financing transaction and also, as you highlighted, HQLA requirements and as well and this is important because the liability side and the liability activity also generates LRD increase. It's also an increasing cash that we saw related to client risk, risk preferences, as well as the net new money activities that also resulted in an increase in our LRD.

Okay. Excellent. Thank you, Kirt.

The next question is from Andrew Coombs from Citigroup. Please go ahead.

Good morning. Three questions please on capital costs and on net new money, especially on capital. And I noticed on page 83 at the move in your Core Tier 1 capital, CHF 581 million of the move is attributed to other. Can you just confirm what portion of that CHF 581 million relates to the dividend accrual? And the reason I ask is even if you see all of it related to the dividend accrual, it would appear that you are accruing as dividend broadly in line with last year's ordinary dividend, and despite your statement, you're aiming to grow the ordinary dividend. That's the first question. The second question would just be on the memo that's been sent to Wealth Management staff, talking about new Wealth Management structure from July 1 talks about delayering reductions in personnel, hundreds of millions of potential cost saves. Just to clarify, if those cost saves associated with that new Wealth Management structure already embedded into a CHF 2.1 billion cost reduction target by 2017. And then, the final question should be on the net new money, very impressive during the first quarter, running well above your 3% to 5% target run rate in Wealth Management. On the date it's been reported, do you expect net new money to moderate for the remainder of the year? And is that because you - I think there were some lumpy one-off, ultra-high net worth inflows in the first quarter, as it relate to the aforementioned amnesties that you spoke about? It would be great if we get more color on the net new money direction. Thank you.

Okay. I maybe take the last two questions and then Kirt will take the first one. Let me start with net new money. I think that the volatility, as I mentioned before, we saw volatility on net new money in the last few quarters. And, for sure, when you look at this quarter, one positive effect was that we had less outflows due to cross-border. So, that was - a couple of negative headwinds that we saw in the previous quarters were not there. Although we saw a moderated deleveraging during Q1 of around CHF 2 billion, less than CHF 2 billion, I think that was also clearly a positive development. I think that because we keep focusing on quality rather than quantity, we cannot extrapolate the first quarter results into the rest of the year like we did it in the past. We never extrapolated results that were below our range in the past. We're not going to extrapolate it now. The only constant things we want to keep is the quality of this flows. And there is nothing that I would consider extraordinary in terms of nature. I think that we always have those dynamics affecting net new money. But if you look at the pattern, it's still very much Asia, consistent story also in a seasonal manner and also ultra-high net worth. When you look at the U.S., the story is quite different because, clearly, there we saw the impact of new hires having a strong effect, like we already saw in the fourth quarter. But that's the reason why if we want to keep quality, we need to keep our corridor of 3% to 5% and 2% to 4%, as we reported in the past. In respect of the Wealth Management reorganization that you mentioned, what we are modifying is really the organizational structure, and particularly in respect to new velocities and the interaction between new velocities of back end to the front end. So, the impact on our front end will be extremely limited. And this is the reason why we described this kind of cost saving under Corporate Center, because the nature - the vast majority of those processes are usually done there. And so, Wealth Management will benefit over time through a reduction of allocated cost to these businesses. And we are now basically going into execution of those plans, something that we have been planning for a few months. And now is the right time after having completed a huge transformation in Wealth Management over the last few years. So, the migration to a cross-border [indiscernible] environment that we saw in the last few years in Switzerland, the reorganization of our CIO activities, the reorganization of our IPS end product, so all these were basically the pillars and the base [indiscernible] going and face the next phase. I mean, we are rationalizing, like in the Investment Bank, legal entities. So, all those measures are allowing us now to go to the next level of execution of efficiencies. And as I mentioned before, it's very important for us to minimize and really be careful about not changing too much into the client-facing nature. We don't want client advisor to be affected, other than having more productivity and better environment to operate and serve our clients.

Andrew, just to turn back to your first question, the other that you see reported on page 83 in our earnings presentation as we footnote includes our dividend accrual, however, we don't provide any additional disclosures on what else is in other.

But the aim is still to grow the ordinary dividend this year?

We've stated very clearly our dividend policy. We will continue to return more than 50% capital of net profit attributed to shareholders. Our intent certainly is to be progressive and clearly, depending on the environment, we'll do everything possible to protect our baseline.

Thank you.

The next question is from Kian Abouhossein from JPMorgan. Please go ahead.

Yes. Hi. Thanks for taking my questions. The first question is related to Asia and just the geographical mix of earnings. If I look at current mix, roughly 20% of the profits are coming from Asia compared to 30% in full year of 2015. And looks like the main delta is the IB. I'm just wondering how you see the IB developing with an improving exit-March into the second quarter and maybe you can also briefly discuss how that has impacted your Wealth Management business. Just wondering if there has been some improvement in the environment relative to what we've seen through the first quarter. The second question is on cost. The CHF 1.2 billion cost savings are very difficult for us to reconcile considering that you have these ongoing regulatory expenses, but you also have regulatory program expenses, which more or less offset your CHF 1.2 billion. I'm wondering, how should we think about regulatory expenses offsetting ongoingly potentially your Corporate Center cost program? And why don't we see Corporate Center staff declining? If I look year-on-year, you're actually roughly up 1% in the Service area. Could you please discuss those points? Thanks.

I think, Kian, [indiscernible] if you look at our performance in Asia, and I think as you know, there's a slight increase from the fourth quarter in the IB. And that was clearly off of a very, very poor fourth quarter that we saw with some slight improvement, although still a very challenging...

Sorry to interrupt you, but clearly, the first quarter should be stronger than fourth quarter. So, I'm looking more full year 2015, where you generate 30% of group profit from Asia, compared to 20% in the first quarter?

Yes.

And I'm just trying to understand - and if I take IB divided by four full year, then it looks like your revenues are much, much weaker compared to last year.

Yeah. What we saw last year, Kian, is that first half of the year was extremely strong in Asia Pacific, and it was extremely favorable, in particular, for our Investment Banking business in Asia Pacific, where we saw exceptional derivative performance, exceptional structural derivative performance, which also aligned with the performance that we had in our Wealth Management business. And we also saw very good, a very good environment for our CCS business. Now, that tapered off slightly towards the second half of the year. But, really, the very strong performance in Asia was driven by the first half of the year. And of course, the first quarter was more consistent with what we saw in the second half of the year in terms of Asia performance, which is why you saw that tapering off slightly. It's a very consistent story for our Wealth Management business as well from a regional perspective.

And you don't see any improving trends as we heard from some other players that as we went through March, things have improved and also into April?

All I would say is that we still are very committed strategically to Asia Pacific. We continue to invest. We announced that we opened our Shanghai branch during the first quarter. And what you should expect from us is consistent investment over time. And while there has been some stabilization of markets, the markets have remained very, very volatile, and that still impacts client sentiment. So we haven't seen a very substantial change in terms of how our clients are viewing the markets. Maybe to turn to your questions about our expense programs, just to clarify, what we have communicated is that our net cost savings are net of our permanent regulatory expense. Now, we also report temporary regulatory expenses. And what we have communicated before is our temporary regulatory expenses from initiatives, very large initiatives related to addressing regulatory requirements are expected to be around CHF 700 million in 2016, which is roughly in line with what we saw in 2015. And what we've also highlighted in terms of our CHF 2.1 billion target is that we expect to achieve that by, of course, our exit rate 2017, while absorbing the permanent portion of our regulatory expenses. And we've also highlight that the permanent portion of our regulatory expenses were around CHF 500 million in 2015. And we expect at least an additional CHF 200 million in permanent regulatory expense as we work our way through the next year-and-a-half, and as we absorb the ongoing permanent requirements of some of those initiatives that we are currently pursuing. And the CHF 2.1 billion though will be net of that CHF 200 million increase.

And so your regulatory program expenses, they should then decline to zero?

Base of decline, but as we said, we expect that there's roughly at least CHF 200 million that will be associated with ongoing permanent cost to be able to manage those programs once we bring the initiative itself to closure, and that's the portion that we expect to offset.

And the 24,000 that you have in service people, why is it not declining, and when should we expect it to decline?

Our expense program is focused on overall cost, and not on head count. We're not managing the program to target head count number, because within overall head count of course what would drive cost is the location of that head count, and we've been progressively moving our head count out of high cost location into our service centers and into lower cost locations, and we expect that to continue. In addition, of course, it's the real estate that's occupied that by that head count. And you saw that actually our real estate expenses came down in the first quarter. Also, I think you'll see some timing differences in terms of when we hire incremental people. For example, we hired people in the first quarter, actually mostly related to addressing the regulatory requirements, and when we continue to progress our structural initiatives.

Okay. Thank you.

The next question is from Fiona Swaffield from RBC. Please go ahead.

Hi. Good morning. I just have questions on two areas. On the RWA side this quarter, where are we [indiscernible] I mean, you seem to have quite a big number for regulatory multipliers. And where are we relative to your CHF 5 billion to CHF 6 billion, I think that that was what you're indicating you should see per annum, do you think that you could be higher than that? And then on leverage exposure, I understand you're not willing to give anything on RWAs, but there's been a relatively specific leverage paper out as well. But directionally, where do you think your leverage exposure could go under that new proposal? Thanks very much.

In terms of RWA, as we indicated in our first quarter earnings disclosure last year, that we expect that the multipliers that have been imposed by FINMA for our mortgage portfolio, as well as for investment banking portfolio, to progressively be implemented over the four years from last year first quarter. And eventually, it has an impact of CHF 27 billion increase in our RWA requirement. And as we highlighted, we saw some of those multipliers come into effect during the first quarter. That was the biggest reason for the increase in RWAs that we've reported. We'll continue to see those multipliers come into effect as we go through the rest of the year and as we go through the next couple of years. From an LRD perspective, we have assessed, of course, some of the recent changes in guidelines that have come out, and again those are still preliminary and we do expect further clarification. They have a mixed impact on our overall LRD requirements, that there are some that are positive and there are some that are negative, and we're still determining what the overall impact will be, and also, of course, we're still waiting for the final guidance and how it's actually eventually implemented in Switzerland.

Thanks very much.

The next question is from Andrew Stimpson from Bank of America. Please go ahead.

Good morning, everyone. So a couple of questions from me, firstly on costs. Cost flex in the IB actually looked pretty impressive, I thought, with comps down by 29% year-on-year, so matching revenues there. How much extra flex is there in that number? Because to me it must imply there's almost no variable comp in that number for the quarter, which may be very correct and some people might like that, but it seems unlikely that could be sustainable for the full year. So if you could talk around any extra flex you have on cost there, or whether we're really down to fixed comp costs there now. And then secondly, Kirt, you said you're doing some pricing actions you've taken on Wealth Management. I'm just wondering, how much room is there left for you to do that? We've got a pretty long list of banks now who are really pushing growth in the Wealth Management divisions. Are you seeing any effects from competitors on pricing or costs? And I note there are also on personnel costs, they're actually up 1% year-on-year, and revenues are down 10% year-on-year. I know you mentioned there's a new healthcare program, but that shouldn't account for too much, I wouldn't have thought. So are you finding that costs are a bit less flexible in Wealth Management due to competition for talent and staff there perhaps? And then lastly, on capital, it took a bit of a hit this quarter despite making the profits. It looks like you accrued all the profits for dividend, which I'm sure some people like. But are there any plans there to add in a leverage requirement for your dividend policy? You say that the LRD is going to be your capital constraint, but the risk-weighted asset metric is what you guys are using for your dividend policy. So it seems that, maybe at one stage, those two might have to come together. Thank you.

Yes. In terms of your first question, clearly, if revenue were to go down further on the Investment Bank, we would expect and you should expect to see further reduction in compensation. So there is flex if we accrue on a variable basis. Obviously as well, as Sergio, highlighted and I also re-highlighted, you should expect to see some level, a responsible level of tactical actions that our IB and all our businesses continue to take as we go through the year, and so we see some level of normalization of conditions. So your assumption that there is zero flexibility is not correct. In terms of pricing, we have been progressively implementing pricing actions across our Wealth Management businesses. And we think there's still some remaining opportunity. However, the real opportunity, particularly in our Wealth Management international business is around discounts. And we think that, just in general, that's an area that has been under focused on to-date, and that's where we see some real upside over the next couple of years. Now, overall, if you look at the talent and the pressure on cost, clearly, in some markets particularly Asia Pacific, naturally, we continue to see some pressure on cost. But we actually don't see that the cost pressure from an industry perspective is anything that is more intense now than it was over the last couple of years. We still feel very comfortable with the cost-to-income guidance that we provided for both our Wealth Management and our Wealth Management Americas business. Now, as you highlighted in our WMA business, there was some increase year-on-year in our personnel expense. We did highlight that actually there was a reasonably stiff one-time expense related to the establishment or the migration to our new healthcare program. In addition to that, naturally, you would see, as we increase the level of our recruits, there are some initial upfront costs for on-boarding and that's natural. So you'll also see some of that coming through. Although as we digest, of course, those new recruits, their invested assets and their revenue come on board. You actually should see that start to favor our cost-to-income ratio overall. Now, finally, you talked about our capital, and so what you saw, what we highlighted in terms of our CET1 is that, yes, there was dividend accrual, but in addition to that we actually had a fairly stiff foreign currency translation loss that we realized in the first quarter. So it was the combination of both of those that offset our net profit attributable to shareholders.

Okay. And then you plan to add a leverage constraint on the dividend.

In terms of our leverage ratio, as we've highlighted several times, we will take the full period in order to achieve a too-big-to-fail leverage requirement. And what you saw during the first quarter is we made very, very good progress in AT1 and also on bail-enable bonds. If you look at our total TLAC ratio, actually, it improved quite substantially from 6.2% to 6.7%. And then we'll continue to make progress and take full advantage of the glide path that's available.

Kian, thank you very much.

The next question is from Stefan Stalmann from Autonomous Research. Please go ahead.

Good morning, gentlemen. I have three questions, please. The first one going back to the new money flows in Wealth Management. I noticed that you're also hedging the first quarter CHF 9 billion of deposit inflows, which seems to be quite a high proportion relative to the CHF 15.5 billion of net new money flows. And also, you confirmed the attitude of quality over quantity. But these deposit flows still look very, very large relative to the new money flows in the first quarter. Was there anything particular going on? The second question regarding CET1. I do have a bit of problems reconciling the movements in CET1 with the movements in shareholder equity. For instance, in shareholder equity, there's an CHF 800 million negative foreign translation, foreign currency translation effect, and in CET1 there's only about CHF 300 million. At the same time, there were treasury share purchases and share award effects affecting shareholder equity, and I couldn't spot them in the CET1 reconciliation. Could you maybe add a little bit more color on the moving parts here? And the final question in the Investment Bank, the Financing Solutions revenue line was unusually weak. It seems to be very stable typically in this quarter. It was down almost by half year-on-year. Is there anything to point out there at all? Thank you very much.

Thank you, Stefan. In terms of net new money, as you observed, there was a CHF 9 billion increase in cash in our Wealth Management business, and there are two drivers there; one is just in response to the risk environment, we did have some clients that moved out of investments into cash, and what we would expect there is over time as the environment normalizes, we would expect to see those clients move back into investments and out of cash. And so we would see that as a natural reallocation of assets in response to the environment and risk appetite. Now, in addition to that, there was also some cash inflow related to our net new money, and typically what happens is the inflows come with a fairly high concentration in cash. Normally, it can be up to 50%. And what we typically see is that it takes about three months to six months before that cash is put to work as we go through our assessment of our client's wealth management objectives. We run through the planning process, their risk appetite, et cetera, and we come up with an appropriate plan to invest their money, and we see over time actually that that cash gets put to work than we see it diminish, and we would expect to see that over the next couple of quarters. In terms of your CET1 question, the difference between the CHF 800 million in foreign currency translation impact that you saw in our shareholders' equity, and what you actually see in our CET1 is just the fact that our shareholders' equity, of course, has much higher level of overall balances of roughly CHF 54 billion versus CHF 29.9 billion. And so therefore, they have higher exposure naturally to foreign currency positions. And so therefore, the losses from the Swiss franc appreciation were more pronounced in our shareholders' equity than they were in our CET1. In terms of the treasury movement, they're typically - particularly, when we go and we hedge and we pay out of our hedges for our treasury stock, that movement is reflected in shareholder retained earnings, and it doesn't fully flow through to CET1. Your final question on the Investment Bank and Financing Solutions, you're absolutely right. We actually saw a very weak quarter for Financing Solutions. And there, we just saw a lot of lower corporate derivative activities, and we also saw a compression of margins just given the environment. And so it really was related to the very challenging environment that we're seeing.

Maybe, Kirt, let me add on this last point because I think that when we look at the year-on-year comparison, we have to go back into [indiscernible] we have. And clearly, the first half of last year was highly skewed towards APAC. And also, structurally speaking, in the last couple of quarters, we saw more activity in the U.S. where on a relative basis, we are not as strong as we are in the rest of the world. So that's the first one. The second one, I would add, is also the kind of business model we have is a balance sheet light also in financing. And therefore, you are losing the recurring NII contribution of having those portfolio. And in addition to that, if you look at credit losses, in comparison in the two business models, you see a fairly moderate credit loss environment for us in CCS and financing because we are balance sheet light compared to people that maybe have a bigger business and a more robust top line dynamics, but on the other end, when you look at long lost provisions, they see the negative effect. So I guess it doesn't take away what Kirt say, those are really weaker numbers, but there are some reconciliation that you can bring them back into a more normalized comparison.

Great. Thank you very much.

The next question is Amit Goel from Exane. Please go ahead.

Hi. Thank you. Most of my questions have been answered, but one other question, which I guess is more of a H2 point. But, just on the deferred tax assets, is it still right to assume CHF 500 million benefit for this year, or just looking at the Americas' profitability, I guess it's down a little bit year-on-year because there's the UK decay effect. Should we be expecting a slightly lower number for the full year? Thank you.

Yes, Amit. I guess, as we've consistently communicated on our DTA just firstly to re-highlight that as we increase the number of years that we recognize, our internal thresholds become more challenging, and as we highlighted therefore, we certainly didn't expect an additional year of realization during 2016. Now, also as we highlighted, we review our DTA every year as part of our three-year planning process, and based on last year's three-year plan, we indicated that we would expect a CHF 500 million of additional recognition to take place this year, and that continues to be our expectation, of course, until we go through our three-year planning exercise. Now, as you did mention, there is right now a potential for the UK to reduce the percentage of profits that are available for DTA offset from 50% to 25%, as we've highlighted in our earnings report. That could result in a CHF 150 million impairment of our UK DTA. And we'll have to wait to see if that will come into effect. If it does, certainly, then you actually would see that as a potential offset to the CHF 500 million.

Okay. Thank you.

The next question is from Andrew Lim from Société Générale. Please go ahead.

Hi. Morning. Thanks for taking my questions. I just wanted a bit more clarity on the [indiscernible], please, particularly your commitment to making it progressive. It seems a bit vague. And I just wanted to know at what point would it not be progressive. Do you take into account like the leverage ratio, or was it more the case that the stressed CET1 ratio might fall below 10%, or do you think about the payout ratio as the EPS maybe coming under pressure the payout ratio, maybe reaches an unacceptable level? So I just wanted a bit more say, quantitative element to how you think about that. And then secondly, in Wealth Management Americas on slide seven, you obviously show a healthy increase in the NII due to the U.S. rate increase. And I just wanted to know whether there's any follow through in that effect into the second quarter, was there a one-quarter benefit there? Thank you.

Yeah. Thank you, Andrew. Well, I guess the clarity you need, you want to know how much we're going to pay this year. And at the end of the first quarter it's impossible to assess that number. I think that we have been quite clear in our policy. I don't think it's vague. It's quite clearly articulated. We say that we're going to pay at least 50% of net profit attributable to shareholders. We say that we are - our intention is to have a progressive baseline dividend over time. Of course, at the end of the first quarter it's very difficult to assess how much we're going to pay during the year. But also, in respect of capital build-up, being leverage ratio constraint, or any other constraints, we also say that we're going to use the appropriate time to build up those capital targets. So of course, our priority in this environment is for sure to protect our baseline dividend. And our aim still, as we speak, is to implement our progressive dividend policy. But of course, we need to see how market condition change. It's very difficult to give more clarity than what I just mentioned. I think that we're going to retain capital only in order to be able to invest for growth and to fulfill our capital requirements over time. The rest is available for shareholders and the policy is clear.

Yes, Andrew. Just in terms of your question on net interest income, the impact that you're seeing flow through during the first quarter is reflective of the action that the Fed already took, the moves that they've already made. I think any further improvement will depend on future moves by the Fed, which of course, are more in question than they were when we initially developed our plan last year.

That was great. Thanks, Sergio and Kirt.

The next question is from Jeremy Sigee from Barclays. Please go ahead.

Hi. Just a couple of quick follow-on questions on the flows please, which were very strong obviously in Europe and Asia. I just wondered on the Asia flows, could you just talk, could you characterize those flows perhaps in terms of wealth creation flows versus flight-to-safety kind of flows, maybe sort of talking about which sort of assets they're coming into, whether it's mandates, risk assets, balanced or sort of cash-heavy. And then in Europe, could you talk about which bit of Europe or what the driver was behind that surprisingly strong number?

Yes, Jeremy. In terms of Asia Pacific, as you can probably reconcile, we also reported a very strong ultra-high net worth flows. And Asia Pacific actually is a region where we have high concentrations in ultra-high net worth. And so logically, a large portion of those inflows were from ultra-high net worth clients. I think it's in terms of the assets and where they're invested, it's a fairly diverse portfolio of investment as I mentioned. Initially, when those flows typically come in, they tend to be more cash-oriented. And then over time, they are invested as we work through strategies with our clients. And so we'll actually see how those assets get positioned over the next couple of quarters. From a Europe perspective, we did highlight that we had in particular one very large inflow that's partially offset by an outflow. But beyond that, we don't provide any further disclosure on which markets or where the flows come from.

And the European flows, is there any element of money that had flowed out through regularization process coming back in, or is it really a different pot of money that's being attracted?

More generally, it's not related to flows that previously left the bank. It's more related to new flows that are coming in both from existing clients and new clients.

But it's [indiscernible].

Okay. Thank you.

Shared wallet, yes, it's more shared wallet than anything else.

Thank you very much.

The next question is from Jernej Omahen from Goldman Sachs. Please go ahead.

Hey. Good morning from my side as well. I just have one question left and it continues on page six. So this net new money figure, which is obviously, I guess, a huge number in any respect, the CHF 15.5 billion. Sergio, you made a comment frequently over the past weeks that UBS is very selective when it takes on new client business and very price sensitive. Can I ask a question, what could this number have been had you dropped your price sensitivity here? And secondly, I guess, the implication of saying UBS is price-sensitive is the less attractive businesses going somewhere else. Can I ask you, do you think that you've lost - or do you think UBS rather at least given up share to other private banks in order to stay price-disciplined? And finally, and I'm not expecting you to be company specific here, but just I guess, generalizing, who do you think is taking up the net new money in the sector that UBS is turning away? Thank you very much.

Thank you, Jernej. Well, I would say that, again, when we look at our net new money, we are, as Kirt already mentioned before, we really look at different measures and targets that we've set against those inflows. I think it's much easier when you are talking about net new money, share of wallet coming from existing clients. You know exactly how they behave, how they invest, and then you can put a probability of your assumptions being correct at a much higher level than, for example, if you have an acquisition of a new client that brings only cash, which, whatever due diligence you need to do, you're going to have a different - probably a different visibility about how this money will translate into assets. So depending on those elements, we have a set of metrics that we use, and we believe have been proving to be quite important and indicative of future patterns. I think that's - because we do that, our aim is to reduce the probability of not taking on board money that we think could have been profitable. So if we make a decision that, like we did in Q2 and Q3 and partially also in Q4 to exit money or to invite clients to look for other alternatives, we basically have a good indication of what is going to happen. So it's difficult to say that we think we lost money somewhere else that would have been accretive to us. I mean, I hope it's not the case, and the probability is very low. Maybe some other people do benefit from that. It's difficult for me to comment. I will not comment on that. It's not our task to comment on competitor's dynamics. But we do believe that keeping that discipline creates also a clarity of interaction with our clients about what we are aiming, and what they aim for from us, and we're going to continue to do that in the future.

Thanks.

Ladies and gentlemen, the Q&A session for analysts and investors is over. Analysts and investors may now disconnect their lines. In a few moments, we will start the media Q&A session. [Operator Instructions] Please hold the line. The media Q&A will start shortly. Thank you.