Good morning, everyone. It's Martin Osinga from Investor Relations. Welcome to our Third Quarter Results Presentation. This morning our CEO, Sergio Ermotti will provide you with an overview of results and our CFO, Kirt Gardner will take you through the rest of the presentation. For the analysts' Q&A later on, we kindly ask that you limit your questions to a maximum of two per analyst, and we will answer each analyst's first two 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, including 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 conditions. Now I hand over to Sergio.

Thank you, Martin. Good morning everyone. In addition to the normal seasonality the third quarter was marked by a continuation of the macroeconomic uncertainty and geopolitical tensions that we have seen over the past several quarters. Despite these challenges and substantial provisions for litigation, we delivered a strong performance with an adjusted pre-tax profit of CHF1.3 billion. The Group generated CHF827 million in net profit attributable to shareholders with an adjusted return on tangible equity of 10.1%. We also maintained strong capital ratios which are well above current requirements. Our wealth management businesses combined generated CHF1 billion in adjusted pre-tax profit, with an improvement in net margin for both businesses, as the advantages of being the world's only truly global wealth manager, with a strong presence in both mature and growth markets, helped mitigate the headwinds of a challenging quarter. Wealth management delivered a solid profit, seeing the first benefit of its cost reduction efforts and making progress on its strategic initiatives; while wealth manager in America delivered a record performance with adjusted profit up 28% year on year. Net new money was positive in all regions except emerging markets where it was almost flat, and we remain disciplined with respect to attracting assets that are expected to drive long-term profitability. Year to date, we have attracted nearly CHF50 billion of net new money despite ongoing cross-border outflows and client deleveraging in wealth management. Personal and corporate banking delivered another very strong result with an adjusted profit before tax of CHF473 million, its best performance since 2008. While revenues will come under pressure as negative interest rates are likely to persist, we are very pleased with our momentum in client acquisition and the success of our digital initiatives. Asset management generated an adjusted pre-tax profit of CHF138 million with strong…

Thank you, Sergio, good morning everyone. My commentary will reference adjusted results, and comparisons will be with the third quarter of 2015 unless otherwise stated. This quarter, our results have been adjusted for CHF444 million in net restructuring expenses, and CHF21 million gains related to investments and associates. In wealth management, we delivered solid overall results, with expense discipline, resilient revenues and strong net new money. PBT was CHF643 million. Transaction revenues decreased to the lowest level we've seen since 2008, reflecting clients' reaction to the continued uncertain environment and seasonality factors. Fees paid to P&C for client referrals and upshifts were higher, which also impacted transaction revenues. Recurring net fee income decreased due to the impact of lower investment fund and custody revenues, as a result of client asset allocation shifts, as well as cross-border asset outflows. These declines were partly offset by higher average invested assets, pricing actions and net new mandates. Net interest income decreased due to low interest rates. Expenses were down 6% to CHF1.2 billion with the reduction in all expense lines reflecting the initial results from wealth management's previously announced restructuring. The cost to income ratio was 64%, flat year on year, and down 2 percentage points sequentially, despite lower income. Last quarter we mentioned that we expect to realize net savings of around CHF200 million per year in wealth management from the first quarter of 2017 versus full-year 2015, which will contribute to the Group's net cost reduction program of CHF2.1 billion. While we have seen some benefits accrue already, we expect any further improvement in the fourth quarter to be more than offset by an increase in other costs, including corporate center allocations due to seasonal factors. The strong momentum in net new money from the first half of the year continued…

We will now begin the Q&A session for analysts and investors. [Operator Instructions] The first question comes from Al Alevizakos, HSBC. Please go ahead.

Two questions. The first question is regarding the new restructuring guidance. You're saying that it's going to be on the same run rate. I'm just trying to get a bit more clarity on what that means. Is that CHF300 million, CHF400 million per quarter and therefore does it lead to another CHF1.5 billion to CHF2 billion instead of the CHF700 million that we had in our models. Then the second question is regarding the prime brokerage. You've seen significant declines in prime brokerage payables in the past few periods. I can see your numbers [indiscernible] payables have now gone down to CHF33 billion versus CHF45 billion at the end of last year. I'm just trying to understand what is this all about. Does it relate to non-operating deposits that you take off because of the LRD denominator? Is it because of geographical shift of prime brokerage or basically do you need to be more competitive on the pricing?

Your first question on restructuring; I think, as I indicated, we do expect to continue at the same run rate that we've seen on average for the first three quarters of this year. So your math is roughly right. Just as a reminder, the reason why we're incurring higher levels of restructuring expense is that we need to generate higher levels of gross saves, in order to meet our CHF2.1 billion net cost reductions at the end of 2017. I think you see quite clearly on page 16 in the presentation, where we've highlighted that there were CHF200 million of permanent regulatory expenses in 2013, those have increased to CHF600 million through the end of the nine months of this year, and we expect some further increase into next year. So absorbing that CHF400 million plus the additional regulatory expenses going forward requires higher levels of gross saves. Your second question in terms of prime brokerage, that really relates actually to the investment bank focusing on their LCR outflows, which are very much driven by cash that our prime brokerage clients hold with us and working to optimize to bring those cash levels down, interacting with clients to find alternatives or other ways for them to deploy that cash. That's really just a consequence of our business divisions becoming more focused on the overall liquidity resources that we have to hold, based on their liquidity requirements, without compromising our clients.

Okay, excellent. Thank you very much.

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

Two questions, please; firstly, I think it's really positive you made a lot of reductions in assets and leverage exposure in this quarter. I just wondered if that's prompting you at all to rethink your medium-term guidance. I know the CHF950 million is not a target and you expect to remain below it, but it's getting to the point now where it's feeling like a very high number, and you could give us a new guidance number for where we're likely to be in the medium term, if business conditions are similar to this. Second question was on the cost saves. It looks like they're much more visible in this quarter than they have been previously. I just wondered if that's a changing phase of that program that the visibility is increasing; it's dropping to the bottom line much more effectively than it seemed to be last quarter.

Yes Jeremy, thank you for your two questions. In terms of our LRD targets, there really is no change in our medium-term expectations. As we previously communicated, both for RWA and LRD, the assumptions when we made that medium-term -- we communicated the medium-term expectations were under more normalized conditions. We still would expect, if we actually see full return of normalized conditions, that our business divisions would be able to put to work additional balance sheet up to those levels, and to create the commensurate level of revenue and economic profit. That would in turn flow through to our CET1, and our leverage ratios and our capital ratios would balance out accordingly. Obviously, and you've seen our outlook statement, when we said for the foreseeable future we don't see any change in the conditions. So I think you would expect that, as the current conditions persist, we'll continue to maintain very prudent use of balance sheet to offset obviously the lower run rate that we're seeing in terms of our net profit and how that flows through to our capital. In terms of your cost saves, I think really what you're seeing this quarter is just the cumulative effect of the cost-save programs that we've been building up since 2013. In addition to that, you're seeing of course the impact of the fact that we extended that program to front to back, so you're now seeing the combined of our business division driven saves. For example, in particular you can see that in wealth management, with the restructuring program that they launched, where we highlighted, we expect CHF200 million of run rate saves by the end of the first quarter next year, some of that's flowing through this quarter, in addition to lower allocations from corporate center related to and again as we show on page 16, you see the CHF800 million in overall corporate center allocations to the business division; an CHF800 million reduction since 2013 that is now flowing through to our business divisions. I will highlight though, as a re-reminder, that we do expect to see seasonally higher costs in the fourth quarter. That's going to be related to items such as the UK bank levy, as well as just in general we see higher G&A expenses in the fourth quarter.

Okay. Thank you.

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

I've got one question relating to slide 17 and the DTA guidance. I just wanted to check, in terms of the upward revaluation on the profit forecast for WMA, is that a positive update for years one to three as well as four to seven? Or is there an improvement in four to seven and a potential decline in one to three? And just any other commentary you can give around that would be helpful for question one. The second question relates to slide 14 and the interest rate sensitivity. On that, I was just curious what kind of factors, or what kind of changes, would potentially create a more positive impact on NII in terms of the shape of forward curves. Thank you.

In terms of your first question, as we do each year we've gone through a three year planning process. And based on how the updated revenue forecast relate to each of our legal entities when we booked our DTAs, that's reflected in our revaluation. So the CHF681 million upward valuation of our U.S. DTA just reflects the update of our three year forecast in the U.S., principally driven by WMA. You've seen that WMA has had a very, very strong year to date result. You actually see that we had record profits for the third quarter. So we are seeing very good financial results out of WMA and our updated forecast for the next three years reflects the expectations for that business going forward. In addition, for years four through seven we apply a very moderate growth rate to come up with a total revaluation. In terms of your second question, what we show on slide 14 merely isolates the impact of implied forwards. Obviously it doesn't take into account any other management actions that we're likely to take to reflect the interest rate environment. That's going to include pricing, it's going to include anything we do in terms of client volume, anything we do from a treasury or an ALM in order to offset the impact of interest rate trends as we go forward. Also again, I would re highlight that these are implied forwards and clearly, each year, we see that often implied forwards do not materialize, and that could cause, obviously, some change in the trajectory that we actually see versus what we've indicated on page 14.

The next question comes from Chirantan Barua from Bernstein. Please go ahead.

One quick question. Given that you've done your three-year views on the U.S. right now, could you update us on how you're looking at the DoL, the fiduciary rules, because WMA has actually done very well. What on the income line, expense or any other business change you've had in WMA? That's question one. The second one is much more strategic. I've noticed your GBP15,000 entry level, the robo-advice platform; are you making a push into the mass affluent market right now? Or is it just something that you're testing the technology for your other businesses? I just wanted to be clear on that.

In terms of the DoL rules, as we've indicated before, we of course do expect an impact on the cost of doing business in order to adopt the DoL rules. Also, I think I can highlight that we don't expect a significant financial impact from the rules in our WMA business going forward. We clearly, of course, plan to communicate what we intend to do in response to those rules some time later this year. You've seen that at least one of our competitors has come out already with an initial communication. In terms of your second question, the launch of UBS SmartWealth in the UK; the intention there, of course, was to leverage our CIO platform and the rich wealth content that our CIO provides to the market, in addition to our solutions platform, to make that available to clients that don't have access to our more traditional CA channels through an online platform. Initially, of course, as you've seen, we've launched that in the UK and we believe that as that is successful, that we will look to see if we can leverage that and launch that in other markets. And I would also highlight we see that not only as an opportunity to address another segment, but we also see that as a potential feeder for our high net worth and our ultra-high net worth eventually over time.

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

My two questions would be the following. The first one, Mark Branson from FINMA suggested the other day in an interview that there is one of the two large Swiss banks on FINMA's red list of high money-laundering exposure. Could you make any comment at all whether that bank might be you or not? And the second question relates to your litigation exposure and litigation risk. You have built your litigation provisions by about CHF300 million during the quarter and you have also increased your potential capital at risk from operational risk events by around CHF200 million during the quarter. So it looks like your perceived risk exposure to litigation risk has gone up by about CHF0.5 billion during the quarter. Could you point to any particular areas where this might come from?

Yes, Stefan, we are not aware about this list or we are not aware of being part of this list, so that's the only comment I can do about this matter at this stage. And the second point is on the op risk.

Yes, in terms of your litigation comment, as you've seen, we actually had a CHF419 million build and as I highlighted, CHF409 million of that relates to NCL and that relates to RMBS matters. And I also highlighted the fact that there are several RMBS matters that we disclose in our note 15, that that CHF409 million in total relates to. In addition to that, we had disclosed previously that we adopted our AMA model for our op risk RWA during the first quarter of this year, and we just completed with FINMA the semi-annual update to that AMA model, and as a consequence of the update to that AMA model, we saw an increase in our op risk RWA of CHF1.3 billion. And so that's what you saw flow through to the impact on our capital and also it was a part of the contribution to our increase in RWA from CHF214 billion to CHF217 billion, not necessarily related to the provision bill that I previously referenced.

Okay, thank you very much.

The next question comes from Fiona Swaffield, RBC.

My two questions were, when we look at the gross margin in wealth management year on year, so 76% compares to 83%, could you tell us how much you think is due to risk aversion of clients versus mix change? So the moving parts in that 7 basis point decline. And then a question on mandates. Are you seeing pricing pressure within mandates as clients haven't had great performance? Or is this really just the risk aversion mix shift? Whether you could talk more about your mandate strategy and performance. Thanks.

Yes. In terms of your first question, we really haven't broken down the specific contributors to the reduction that we've seen in our gross margin. We merely -- as, Fiona, you picked up on, we've talked about the different factors and I would just highlight that there is a considerable contribution to the risk aversion. I think if you were just to look at the reduction in our transaction margin that we've seen, a large portion of the reduction, just in the transaction margin, is much more related to risk aversion in the environment than to any of the other structural factors that we've highlighted in terms of the segment mix with ultra and in terms of the cross-border outflows. Also, there is a less of a portion but there is a portion of the reduction in recurring margin that's related to the risk aversion, but also there's an impact, of course, of our cross-border outflows where we tend to have a very high concentration of mandates. So that really directly impacts our recurring margin, as well as the shift towards ultra-high-net-worth clients; you see some of that impact across both of those components. So maybe that will help you work through the relative impact of structural factors versus market conditions. In terms of your point on mandates and pricing; the impact is really less due to the pricing of our mandates and it's more due to the mix in the type, both in terms of clients moving into less risky mandates and our less risky mandates do have lower margins, they're priced lower. As well as -- if you look at the mix of the mandates that we are showing to our clients, this year we did introduce an advisory light mandate, if you will, and that mandate itself has a lower margin. So the mix of mandates that we're selling, the overall weighted average mix, will be impacted both by the risk profile of our clients and the type of mandates they're going into as well as the different categories of mandates we're selling to our clients.

Thank you very much.

The next question comes from Andrew Stimpson with Bank of America, Merrill Lynch. Please go ahead.

So I saw in the full report that your liquidity coverage ratio fell to 124%, so that means that the leverage exposure there fell by CHF22 billion, which seems to account for all of the improvement in the leverage ratio. Is that 124% a more realistic level for you to operate at? I know that's where some of your peers operate at but you have been above 130% for the majority of this year, I think from memory. So I just wanted to know how you see that ratio developing. And then secondly, on the rates, on the slide 14; in the past, and I know I'm half mixing up slides here, but you said that U.S. rates would be by far the biggest swing in your net interest income and clearly the forward curve for U.S. rates is much more positive in two to three years' time. I understand euro and Swiss rates forward curves are not. Am I getting it wrong on the previous guidance, that you were much more leveraged into high U.S. rates? And if I haven't got that wrong, what's changed? Why isn't a more positive U.S. curve going to feed through more positively for you? Thank you.

On your first question, what you really saw is first of all, earlier in the year, we were building up HQLA in anticipation of going live with our IHC. And so we went live effective July 1, and if you look at our U.S. IHC, we have fairly significant trapped, liquidity trapped HQLA in that entity that's not available for Group use. And so what you saw is that initially, the HQLA that we deployed into the IHC, that was held at Group level, and so that actually impacted our LCR ratio, was one of the reasons why we had a relatively high LCR ratio. We moved that into the IHC, it became trapped. That actually went out of the Group LCR ratio calculation, and that drove the vast majority of the reduction from 133% to 124%. Now in terms of what we expect going forward, obviously that's going to be quite a volatile ratio and it's going to depend on additional trap requirements we have across our subsidiary. And it's also going to depend on our ability to continue to build up infrastructure so we get better transparency and we can optimize how we manage our liquidity. In terms of your second question, if you look at our previous guidance, and if you just take last year when we developed our plan, the implied forwards in U.S. dollars was really quite a substantial increase in interest rates, and the expectations I believe for this year were up to six hikes. Now clearly those expectations have changed and so if you look at the implied forwards right now for U.S. rates, if you look at next year, actually implied forwards here going forward, there might be two rate hikes that have been built into the implied forwards. So obviously then, the impact that flows through to our U.S. dollar positions are substantially lower. What we show on slide 14 is, if you look at WMA over the next three years, with that much more moderate or much lower level and much shallower U.S. dollar curve, there's about CHF500 million of impact that flows through to WMA. You can well imagine if we had six hikes and we had last year's curve that the impact to U.S. dollar would be substantially higher and that would have more than offset the impact of euro and Swiss franc. Also I will highlight, if you look at euro and Swiss franc, implied forwards now, if you look over the next three years, those rates are implied to stay negative. Previously, last year, when we ran our planning process, there was expectations that the euro and the Swiss franc would turn positive over the three-year period.

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

So I have two questions. Firstly, on the wholesale funding cost; I may have missed your commentary towards the end in terms of the cost of raising debt for banks and how that's gone up, and what the impact is. And maybe just to cross-check that to what has been said before in terms of the retained funding costs, which were originally expected to be a tailwind in terms of reducing funding costs. Now it seems like a headwind. And the second point is in wealth management where I just wanted to home into this fee margin where I know we've talked about the more cyclical factor of risk aversion. But I'm thinking a bit more about the structural factor around the emerging market cross-border outflows, so-called regularization. To what extent did that impact this quarter? How much -- what kind of margins do we have on those type of assets and what's the outlook for that

First of all, let me just clarify; when we first communicated and guided on the impact of our funding costs related to achieving the too-big-to-fail requirements, so last year in the third quarter, we presented that as a headwind. And we highlighted that actually that would have, of course, a negative impact that would be passed on to the business divisions and also would have a drag naturally on our margins to the extent that we weren't able to fully offset that through pricing actions. And really, what I presented today was meant to be an update on that guidance and I highlighted a couple of different factors. So if you look at what drives the increase in funding costs, it's first of all since we have the issue out of holdco for resolution requirements, the opco to holdco spread has been around 50 basis points. When we did our original calculations we factored in somewhere between 60 to 70 basis points. In addition to that, as we roll over our senior debt into that bail-in debt, there is a duration increase to also meet the requirements. And that duration increase has been somewhere around a 30 basis point impact. So you can see that the TLAC issuance is carried up to 100 basis point total incremental cost in funding margin. In addition to that, if you look at our AT1 and you look at the rollover of our Tier 2 into our AT1, since AT1, of course, has increased subordination to the Tier 2, the increase in that spread is around 200 basis points. And then, finally, I just highlighted the natural trend of the market, where you've seen, since 2014, that credit spreads on banks have widened. And it's really the combination of all of those factors that…

Thanks. Could I just check, in terms of the ALM guidance that you've provided on slide 13, does that change now? Now that you're saying it'll cost a few hundred million more going forward?

The AML guidance, what we said in terms of trending around negative CHF50 million for our risk management net income after allocation, that line should not be impacted. Because right now, as we previously indicated, we will fully pass on the increase in cost of funding to our business divisions. Although I will highlight to the extent that we retain some of that funding centrally, if there's low usage of balance sheet within the business divisions, that will have an impact overall in our ALM result that we hold back in corporate center.

Very clear, thank you very much.

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

My question has been asked, but perhaps two follow-ups, one on DTAs and one on litigation. Firstly, coming back to the point on slide 17 about the methodology applied to calculate DTA recognition. You talk about it being based on a three-year strategic plan, which presumably does incorporate the US forward curve. But you then only talk about modest growth thereafter over years four to seven. So I just want to clarify, that modest growth in years four to seven, what does it actually encompass? Does it encompass -- does it incorporate the US forward curve? Or is it a case of, as we go forward, you'll look at the next three years in more detail? And there's therefore a possibility that that could be enhanced. My second question is on litigation. With respect to the CHF421 million increase you've put through in a provision for RMBS, could you just provide some color on what the trigger for that was? Was it progress on the discussions you're having with DoJ? Was it the civil settlements? Was it based on a revised review of the read-across [impaired]? I'd just be interested in a bit more detail. Thank you.

Yes Andrew, so to your first question on DTA, our methodology; we go through a very rigorous three year planning process, and so you could assume that that three year planning process includes a full remodeling of all the data factors, including the implied forwards, in addition to a full assessment of all the alpha factors, what we expect management will do to enhance the business beyond what we think the market will drive going forward. That is fully incorporated into our DTA assessment. Now for years four to seven, we don't actually go through a rigorous re-forecast or a rigorous forecast for those years. And so what we did is we just took a very, very modest growth rate, we didn't incorporate any beta factors or alpha factors. We just took a very, very conservative view on what a modest growth rate could be for year's four to seven. In terms of your second question for litigation. We applied the same process that we do every quarter, where we follow IFRS 9 requirements. We look at the facts that have presented themselves and we update. We look across all of our matters and we determine if that has any bearing on what is probable and what is estimable and reliably probable. And we update our provisions, our expenses for provisions, accordingly.

So across all matters.

Correct. Across all matters.

Okay. Thank you.

The next question comes from Kian Abouhossein with JPMorgan. Please go ahead.

Two questions. The first one is related to your comment regarding higher admin expenses or seasonally higher admin expenses that we should be expecting. I was wondering, if you look at history of high admin expenses, which are, if you take out UK tax levy as well as any other one off, historically in the fourth quarter are more on the double digit low double digit to mid double digit growth figures. Would you say that is something we should look at as a trend? What you normally would expect on a fourth quarter run rate? And then the second question is, for third year, more from a top down perspective, your business model is by far the most advanced, relative to your peers. You have a clear strategy, you are on track. What is next for UBS? Because, to me, it looks more it's becoming a cyclical stock, depending on certain factors, which mainly drive your revenue environment. But what else is there that management can do, post the cost saving plan, to improve, from a management perspective, the operations? Either strategically or further operationally. What do you see as options to make a material impact on a longer term basis?

Let me take the first question and I think Sergio will take the second question. In terms of the seasonality, yes, Kian, I think if you were to net out the impact of the UK tax. Now, we do have some other levies in Europe; they tend to be much smaller than the impact of the UK tax levy. That, by far and away is the largest one off impact, if you will, in the fourth quarter. And as I highlighted, we're not able to accrue for that during the year, which leads to the big spike in the fourth quarter. Away from that, and if you assume a similar reduction in previous quarters, I think the trend you see in G&A expenses actually is probably a good indicator of what we expect for the fourth quarter this year.

Kian, on the model, I think that while we are all very pleased that we can focus on serving our clients rather than building up capital and thinking about a strategy, we also know that showing sustainability about how the model works in a very challenging environment is also a top priority. I think that we have been performing well and solidly in a variety of market conditions, but we cannot take our eyes off the ball in this kind of environment. But when we look for the future, I think that's one of the reasons why we need to really, on one hand, really deliver on our cost initiatives, but also not cut the amount of investment we do in our future. I think we are making large investments in our infrastructure, not only to become more efficient and effective, but also to serve better our clients. So digital channels is one topic, as I mentioned before, in terms of our UBS wealth propositions. We do believe that -- as you know, the license is still pending on us being able to enter into the onshore market in China. We see growth opportunity in a fairly mature market like in the U.S.A, but if you look at the last four or five years, we have been restructuring our wealth management business from a loss leader into a substantial contributor to our profitability. And the investment bank did the same. Now they can grow and work together closer. So, I think, from an organic standpoint of view, things can be done on a top-line basis. Of course, you need also some macro and beta effects to normalize, slightly normalize. On the cost side, as I mentioned in the past, I think that we have to see what is the evolution…

And if I may just follow up on that, Sergio. Would that all be organic or would you also be open more in terms of either larger acquisitions or add-on acquisitions as well in certain areas?

Look, I think that we have to be extremely careful because in this environment, of course, in theory you see a lot of interesting propositions. But at the end of the day you always need to think about, what is the impact on your business model? What is the impact -- what is the execution risk related to opportunities? So, of course, if you compare the situation today to a year ago, the chances that the industry will need to look at non-organic options is higher. And we are not immune for having to consider. It would irresponsible for us not to look at all options, but our RWAs, I think it's pretty high and -- because we are looking at those kind of situations, as you pointed out, from a relative, from a position of strength on a relative basis.

Thank you.

The next question comes from Jon Peace, Credit Suisse, please go ahead.

So my first question is on DTAs. I know you weren't keen to give any guidance, but previously we've been expecting about CHF500 million a year from the roll forward of the plan. Does that change at all or could we still keep that in the models? And then the second question is just about the dividend. Would you be comfortable to see this year's ordinary dividend drop below last year's ordinary CHF0.60, or do you still think that is a base on which you will grow in the future? Thanks.

In terms of DTA, as you know, our yearly process is one where we roll the plan forward by an additional year, effectively. So I think if you just look at our balances and you look at what we've done over the last couple of years, I think you can reach your own conclusions on what that potentially could do to our DTA. Obviously, it's subject to a lot of volatility around a number of different factors, beta factors, as well as the potential impact for other DTA facts, like we saw this year, of course, with the UK impairment. But beyond that, as I indicated, we're not going provide any specific guidance for next year.

On dividend, as I pointed out, our dividend policy remains unchanged. Our aim is to have a progressive baseline dividend growth but, as I pointed out, last quarter and for this quarter, our focus for this year is to maintain our CHF0.60 base dividend. And that's -- we will do our utmost and best to protect our baseline dividend.

Great, thank you.

The next question comes from Patrick Lee, Santander.

Hi, good morning thanks for the presentation. I just have a couple of follow-up questions on your wealth management division. In the last quarter presentation you included a slide that gives us the investor asset composition by product and by currency. Can you give us some guidance on how or whether this has changed meaningfully this quarter, given the market environment and geopolitical uncertainty? Secondly along a similar theme; you reported very strong net new money in the third quarter. If I look at your net new money inflow composition, a flow versus stock question, how does net new money composition compare with the stock of invested assets? By that I mean the stock of invested assets is roughly 30% equity, 20% mutual funds. Would the net new inflow be very different from that composition? Thanks.

In terms of what we presented last quarter, on page 25 in terms of our invested asset composition, I think you can assume during the quarter, since as you see with our financials, there really hasn't been a substantial amount of client activity. Generally what we've seen is clients have, essentially, stayed where they are. In the absence of any developments in the macro environment that would provide a different level of attitude towards risk, our clients have largely made their moves already through the first three quarters of this year. And they're currently mostly staying on their current investments without much change. That would suggest that there's not likely to be very significant change overall. The one impact, though that we did see in the quarter is there was a fair bit of increase in invested assets through market appreciation. That obviously will have some impact. That will flow through more, of course, to equity holdings. Even though we saw a net increase in cash of CHF4 billion during the quarter, it actually resulted in a reduction in our overall concentration of cash by about 60 basis points. Just as a consequence of greater market appreciation versus levels of cash that flowed in. In terms of your second question regarding stock of net new money, typically what we see with inflows, inflows come in at roughly somewhere around 40% of cash. Then what we typically do is, over the course of one year, that cash begins to converge towards our 19% to 20% of total invested assets. As our clients work with us to go through their profiling process, they put that cash to work. In addition, oftentimes we'll see an inflow, for example, of one large single stock. Then we'll work with the client to find ways to provide them with a more diversified investment profile. So usually, apart from the higher cash concentration, you usually see whatever assets come in, they tend to be more highly concentrated. They then become more diversified, as we provide a broader, more diversified solution for our clients, over roughly about a one year period.

Perfect. Thanks.

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

I have two very brief questions. The first one is on net new money. Can you just update us how much of the CHF9.4 billion of the net new money inflow is due to Lombard lending? The second question I have is just a follow on a number of questions you had on litigation and U.S. RMBS in particular. Given that a number of European banks seem to have received initial settlement offers from the DoJ, can you confirm whether you have received such an offer as well? Thank you.

In terms of your net new money question, I think if you look at page 5 of our presentation, if you look at our loan balances, our total loan balances fourth quarter 2015, CHF105 billion. They're down to CHF102.6 billion. So there's been actually a total reduction of CHF2.6 billion in our loans throughout this year. So the total net new money inflows we've seen for wealth management, the CHF31 billion, actually have come with no increase of leverage. In fact, an overall reduction of leverage and a slight deleveraging that's taken place. Now I would highlight, though that during the last two quarters, we actually have seen a small net new increase in lending in Asia Pacific. For this quarter that's been more than offset through a small reduction in loans in Europe and emerging markets. So just again to recap, no leverage impact on our net inflows. Our net inflows come purely through the cash, invested assets, without the impact of leverage, and also after absorbing CHF6 billion of cross-border outflows.

So the net new money number for this quarter would actually be CHF200 million higher, right? If you take out what you say is the CHF200 million deleveraging there.

Yes, you can't always directly correlate dollar for dollar or Swiss franc for Swiss franc changes in loans and changes in net new money. Usually, if we're making a Lombard loan, first of all there is a loan-to-value ratio. The loan might underpin -- again it depends on the type of assets, but there could be somewhere an average of around 50% loan-to-value ratio. So you have to take that into consideration in terms of trying to correlate the loans to overall net new money. In addition to that, about one-third of our lending portfolio is in mortgages, so it's real estate and about 70% is Lombard lending.

But the deleveraging is coming from the Lombard loans, yes?

Yes. The deleveraging is coming from Lombard loans, that's correct.

And the DoJ question?

We really can't comment on any specific litigation matters.

The next question comes from Andrew Lim, Societe Generale. Please go ahead.

Can we come back to dividends? Consensus is going for CHF0.56 so obviously looking for a cut in the dividend whereas you're obviously saying that that will be defended this year. And you've also said that decision will be based on phasing capital ratios, which still seem strong. So I'm wondering what you think the disconnect is here, whether you think consensus is wrong or is consensus perhaps envisaging a situation where, despite phasing ratios being adequate, there could be a situation where you could cut the dividend. Is that a possibility in your mind? Then the second question is really coming back to the funding costs we talked about earlier. Could you give a sense of the time period over which we could expect this few hundred million to come through, how that would fall across all the separate divisions? And, related to that, obviously the targets that you've presented for the divisions on cost/income ratio, for example, those haven't changed. Can we presume there that the impact of these extra funding costs aren't enough to really change your targets there?

Andrew, let me reiterate once again our capital return policy, which is clearly saying that we have a baseline dividend. Our aim is to increase the baseline dividend but our priority for this year is to protect our baseline dividend. So it's our priority to protect our baseline dividend. I can't comment on how you and your colleagues come up with your own view, which I fully respect, but I think that I couldn't have been clearer and we could not have been clearer in our statement; also in respect of if you look at our capital position both in absolute and relative terms, relative from an industry standpoint of view and relative to our targets and regulatory targets that are going to get introduced in three years' time. So we do think that if you put all these dots together you can reconcile our language and our aim.

In terms of your second question; so if you look at what's going to drive the funding cost, what I highlighted, the several hundred million, is the consequence of meeting on all of our funding requirements. In terms of where we are and why we're starting to see that impact actually more evident as we get into 2017 is that we raised about 10 billion of total AT1 plus TLAC bonds this year. If you look at where we are, so for our AT1 we're currently at about CHF8.7 billion in total AT1. And at about 1%, you can assume that we're going to continue to issue until we get to the 1.5%, somewhere around there, perhaps a little bit above that just to keep somewhat of a buffer. And that's where we're seeing the 200 basis points of AT1 versus Tier 2 impact and so we're about halfway there, if you will. In terms of our bail-in bonds, our other TLAC bonds, at the moment we're at about CHF17 billion. In that, we're round about 1.9% and what we guided last quarter is that we would expect to operate below 4% in total. So you can assume that there's up to about a doubling of that total volume. So that will be rollover of our senior debt into TLAC where we'll incur a holdco/opco uptick as well as an increase in duration. So that's that roughly 50-ish, 60-ish plus 30 basis points. So you can figure your own math as we go forward. And you should assume that over the course of the next couple of years we will continue our funding efforts to achieve the ratios as we have previously guided. Now in terms of how that impacts our overall targets, there's no change to targets but obviously it does impact, of course, and it adds headwinds to our ability to be able to achieve the targets that we previously have guided on. Clearly, since we're passing that cost on to the business divisions to some extent, we would anticipate the business divisions will recover some of that but there's a question as to how much the market will allow us to fully recoup the funding cost.

That was great. Thank you very much for that.