Ladies and gentlemen, good morning. Welcome to the UBS Third Quarter Results 2017 Presentation. All participants will be in listen-only mode and the conference call is being recorded. After the presentation, there would 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.

Hi everyone and welcome to our third quarter results presentation. This morning Sergio will provide an overview of our results and Kirt will take you through the details. After that, we'd be very happy to take your questions. But 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 the nature are uncertain and outside of the firm's control and our actual results and financial condition may vary materially from our belief. Please see the cautionary statement included in today's presentation and the discussion of risk factors in our Annual Report 2016 for a description of some of the factors that may affect our future results and financial condition. Thank you. With that I'd like to hand over to Sergio.

Thank you, Caroline. Good morning everyone. The third quarter was another example of the strengths of our business model, with reported profit before tax of CHF1.2 billion, up almost 40% year on year and net profit of 946 million. Our return on tangible equity, excluding the impact of deferred tax assets was 13.3%, and we maintained our strong capital position. We made more progress on costs and expect to realize the full 2.1 billion in savings targeted by the end of this year, which I would like to reiterate is a net number. At the same time, we have made and continue to make substantial investments in our business, partially funded through ongoing efficiency measures. We also addressed several legacy matters, further reducing the number of material items we need to resolve. We saw good results across our business divisions, including another strong quarter for Global Wealth Management. Building on a strong first half, year-to-date pre-tax profit reached the 3.1 billion mark. Revenue rose across all income lines, notably in recurring net fee income. Invested assets continued to rise strongly, as did mandates, which now represent nearly a third of assets under management, supporting recurring revenue growth, which improves earnings quality. Loan balances increased by 7% and our efficiency metrics were broadly stable. Asia Pacific continues to be an important driver of profitable growth for the Group, with profit up 37% year-to-date on very strong operating leverage, and double-digit net new money growth for wealth and asset management. Our invested assets in the region have now reached almost 0.5 trillion. Our success reflects improved client sentiment, as well as our investments across the franchise. Over the last three years, we have invested despite the challenging environment, and will continue to do so. An important example is our Swiss One Wealth…

Thank you, Sergio. Good morning everyone. For the third quarter, our results were adjusted for CHF285 million in net restructuring expenses. My comments compare year-on-year quarters and reference adjusted results unless otherwise stated. PBT for global wealth management rose by 4%, underscoring the benefits of being a globally diversified wealth manager. Our leading global wealth management business delivered another good quarter, building on a strong first half. Net margins were broadly unchanged from the prior year. Revenues were up 6% with increases in all lines, with some variation in the trends across regions. Transaction-based income increased 2% year on year, driven mostly by Asia Pacific. We saw a slow-down in activity in WMA, partly reflecting fewer trading days. Net interest income rose 8% overall, reflecting higher US dollar rates and benefitting from the CHF10 billion increase in our loan balances, as this remains a key strategic focus. On net interest income, there are a few moving parts in WMA that I would like to call out. Given US rate rises, we've often been asked about deposit betas, and interest expenses have risen by around $15 million since 2Q17, when higher client rates were introduced. In the US, we also offer our clients the ability to sweep balances in excess of the FDIC-insured limits to other banks, so they benefit from additional deposit insurance. This reduces our required levels of HQLA, benefitting liquidity coverage and leverage ratios. We lose a little net interest income as a result, gain some recurring net fees, and overall, improve economic profit. Recurring net fee income for global wealth management rose 6% on strong invested asset growth and improved mandate penetration, which increased by 170 basis points year over year, as we continue to focus in this area, which benefits our clients and shareholders. Overall costs…

[Operator Instructions] The first question comes from Kinner Lakhani, Deutsche Bank. Please go ahead.

My first question was on the implied forward curve analysis that you provided us in Q3 and Q4. I wondered if you could give us an update, I'm particularly interested in the WMA part of that, where I think we expected about a billion on a forward curve basis. In the context of obviously the deposit beta seemingly going up since Bank of America started to reprice and net interest margin seemed to have kind of stabilized if not coming down as a result of that in the US. Secondly, I just wanted to circle back on litigation and the US RMBS issue. I'm sure you saw Wells Fargo took a billion provision in relation to US RMBS in Q3, yet clearly, they had a very small pre-crisis market share in US RMBS, so wondered if that was a data point that you considered relevant. Many thanks.

Thank you, Kinner. So, in terms of implied forwards, I'm sure as you probably saw in our third quarter report, we reduced and there's rounding of course as the total expected net interest income increased from 100 basis point parallel shift from 0.7 to 0.6 billion and that was driven predominantly as you highlighted by wealth management in Americas and there's two factors. One is the deposit beta that you referenced and so as you saw at the end of the second quarter, we increased our client rates effectively pushing our deposit beta up above 50% to somewhere around 58%. In addition to that we had, and I highlighted this in my speech, we offered a multi-bank facility to our clients so that they could take advantage to move some of their deposits with us that were not insured to other banks to take advantage of FDIC insurance. So, the combination of both of those resulted in the rounding change of the lower expectations showed 100 basis points shift incur. Secondly in end terms of your question on litigation, first of all let me just mention that of course prior to the quarter we resolved our NCUA issue and then secondly, just to take advantage on, well I highlighted that during the quarter we saw a small uptick in provision to address our trustee matter. And there we have reached a settlement agreement with selected certificate holders who are in the process now of obtaining majority support for that settlement. Once that occurs, well in fact if we get that matter behind us, beyond that I won't comment on any other RMBS matters. All banks have different exposures in different patterns.

Next question comes from Anke Reingen, RBC Please go ahead.

Good morning, it's Anke from RBC. Just two questions, the first one is on the performance on the personal expenses in the wealth management operation. Clearly you showed very good operating leverages and just wondered, should we expect this to continue or if that trend where personal expenses can go up also with relationship managers going up. And then secondly on your guidance of risk weighted asset inflation, is your guidance from the second quarter you gave us about the trends I assume that you reiterate that risk weighted asset inflation. Thank you very much.

Thank you, Anke. In terms of personnel expenses, as you have observed in our international wealth management business, our personnel expenses overall are down and are at a low level, down excluding compensation - variable compensation. And that's as a consequence of actions that we took last year to restructure or reposition the business. And going forward, we would expect of course as we do resume to continue to invest in the business, particularly in areas of growth like Asia Pacific that we will see an increase in personnel expenses. However, I would reiterate that we have built-in structural positive operating leverage in our international wealth management business. And the migration to one wealth management platform that Sergio highlighted will continue to give us scale advantages as we grow that business going forward. And so, we would expect positive operating leverage, but we still would expect increase in personnel expenses as we continue to invest to grow that business. In terms of RWA inflation, I believe last quarter I guided that we expected around 6 billion for the fourth quarter, for the second half of the year, excuse me. And we saw about 1 billion in third quarter and what I updated my guidance to indicate that we expect around 4 billion of further RWA inflation for the fourth quarter.

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

So, my first question is on the restructuring costs as we go into 2018. You talk about that tapering, but I wonder if you could be a little bit more precise around the guidance in terms how the full year might look relative to 2017. And then the second question is on your strong growth in APAC. It looks it was more driven by market effects and net new money. Is that just normal volatility that we see quarter-on-quarter in the net new money? Thank you.

In terms of your first question, we indicated that we expect between 300 and 400 million of restructuring in the fourth quarter. In terms of tapering next year, we're still finalizing our planning process and will provide some updated guidance in the fourth quarter. We do expect it will come down substantially. Potentially settling somewhere around a 0.5 billion, but again we'll be up a little bit more specific around our fourth quarter disclosures. Our performance in Asia Pacific that's really reflected fundamentally of our franchise there and the strength of our franchise, and the fact that, yes, there has been a pickup of activity, our clients have become more active this year versus last year. And also, we've seen more activity in primary and secondary markets, but with the positioning that we have in the region, we capture we believe more than our fair share of that pickup in activity. And we've done that with limited increase in expenses. And so, we've seen very positive operating leverage. And that's really is a result of the investments that we made in prior quarters and our significant investments and positioning our franchise over time. And so, we're seeing the benefit of our franchise that is showing upside in more positive markets on a year-on-year basis that's driving the growth that you're seeing in Asia Pacific.

Next question comes from Andrew Coombs, Citigroup. Please go ahead.

If I could firstly ask a question on the equities result, you saw a strong performance in equity derivatives going from 143 to 208 million. And you actually saw the opposite in cash, going from 298 to 265, which seems to the opposite trend to what some of your peers have demonstrated. So, it would be great if you could just elaborate on the drivers there. And my second question will be a technical question, but on the update FIM decree, it talks about increasing the risk rates on Swiss investments from 200 to 250 on foreign and 200 to 400, I just wanted to clarify is there presumably any impacts on the UBS AG accounts not the Group AG accounts and therefore does it factor a tool in your thinking on your dividend policy. Thank you.

Maybe Andrew, I'll just address your first question and see if you could repeat your second please. In terms of our equities performance, the strong derivatives results year-on-year is reflective of our very strong position in structure product the fact that we saw a pick of activity in Asia, but also in Europe. So, year-on-year that's resulted in a very nice increase in derivative products. Conversely, on the cash side that part of our business is more affected by the very low volatility levels and the same trends that I think others have seen that as our clients are of course very much susceptible to volatility swings and with low volatility levels we're just seeing less trading activity and as we don't carry much in the way of inventory and positions. So perhaps with that, could you repeat your second question?

The second question was just on the recent release the FIM issued talking about changing in the treatment of holdings and subsidiaries. So, I was just trying to clarify whether those new risk rates that are being applied to subsidiaries just impact on the parent accounts or whether it does impact on the Group accounts as well and whether that's a factor or not in your thinking on dividend policy. I'd assume not, but I just wanted to double check.

What FIM has announced is that previously they had a concession and temporary treatment for the participations or the investment in subsidiaries for our AG entity. And what they've done is they've come out with now what is a more final guidance going forward to treat those participations on a gross up basis, different levels for those that are in Switzerland versus foreign subsidiaries. And that actually we think it's a positive confirmation and it's quite consistent with the EU guidance. And overall if you - you'll see the reporting [indiscernible] report we are actually fully meeting those capital requirements on a fully applied basis. And there's no impact overall at the group level, it's purely - it addresses prudential capital requirements at the AG level.

Next question comes from Jeremy Sigee, Exane. Please go ahead.

Two questions, please. Firstly, I noticed the Newswire comments from Sergio earlier on about capital buildup is done and you are keen to move ahead to implement your progressive dividend policy maybe complement it with share buybacks. I just wanted to clarify when you say capital buildup is done, are you envisaging that takes account of Basel 4 requirements as well, is that included within your statement and your commentary and your distribution outlook there, question one. Question two, earlier in the call you mentioned improved client sentiment in wealth management. But I noticed you dropped that reference from your outlook statement. So, I just wanted if you could talk a bit about how you perceive sentiment confidence activity to be amongst wealth management clients at this point in time.

Thank you. Clearly, I'm not able to predict this ongoing discussion and the outcome of the Basel 4 discussions. So, my remarks were clearly based on the current regulatory environment. Although, as you know we are managing the bank with at least 3% buffer above the minimum requirement, so we are also in that sense taking in account any potential future regulatory changes. And of course, as a consequence of that we would also adapt and change and recalibrate our 13% requirement. So, in that sense we are - if you look at our current binding constraint, it's leverage ratio we always say that we believe that 20, 30 bps in addition to the 3.5 level is sufficient. So, we achieved that level. So, it means that we can - looking forward look at implementing - continue to implement our capital return story with progressive increases of our baseline dividend and complemented with share buyback. And this is going to be driven by profitability. So, if we are able to generate cash and we say at least 50% will be paid out. Of course, we will take into consideration any potential outcomes of the Basel discussion, any other cyclical consideration we need to take in account, any consideration on the growth additions. But we remain firm in our intention not to retain unnecessary capital buffer above what is already a very strong and solid set of overall equity and loss absorbing capacity because I like to reiterate that the 80 billion of capital base we have, a very strong 81 component, very strong TLAC component which by the way is not coming for free. So that's a reason why I think that there is a point in time in which we are keen also to reflect to shareholders the cost of and compensated through a balance, but a rewarding capital return policy. In respect of the outlook, I think that we - I wouldn't read too much on the change of tone other than the seasonality factor. I mean look, you know, unfortunately, I have to say unfortunately, but we have been quite right in our outlook statements in the last few years. And if I look at the incoming or the current quarter, one has to look at the seasonality factor in combination with the fact that we had pretty good run in equity markets in all asset classes and it's quite normal during this quarter to see some people taking profits or being on the sidelines. But it's nothing more than that, you can go back into the time series of what it means the Q4, but the fundamental set up and trend of our wealth management business stays intact. So, as I said, the macro picture is quite clear. But clearly the geopolitical tensions and the very good run investors had this year clearly has to be taken in consideration.

Next question comes from Nicholas Watts, Redburn. Please go ahead.

I had two questions. The first was around your CCS business, which posted a strong quarter. If I look at your CCS business over the last few quarters, again, some of the publicly available data on fee performance, you seem to be posting much stronger numbers. And I think a component of that is a large number of private deals. And I was just wondering if you could perhaps provide a little bit of quantitative guidance around the mix of public versus private in that business. And in that context how much of the private business flows out your wealth management business. That's the first question. The second question was just around the asset management business, you saw another strong quarter of inflows. And there was some press I think earlier this month around a very large UK local government mandate win. And I was just wondering whether any of that is in the Q3 numbers or if that's something we will see in quarters going forward. Thank you very much.

Yes Nicholas, perhaps I can take the second question first. As you said in asset management we had another very strong quarter. And in fact, we've had a very strong flow performance year-to-date as I highlighted in my speech, this quarter with 9 billion, year-to-date 38 excluding money markets and 50 when you include money markets and up about 9% on an annualized basis. The very large flow that was announced towards the end of the quarter is actually not in the current numbers. And in fact, that very large inflow is going into our assets under administration. And that business we've actually - as we announced we sold that business to Northern Trust. And so, in fact we just closed that transaction. So that was our parting gift to Northern Trust, you won't see those numbers show up in our numbers in the fourth quarter.

Nicholas, in respect of the CCS, I think that we had a solid quarter and a series of quarters and I think that some of the investments we made in the last few years also forcing that part of the business are paying off. Of course, we had a very strong pickup in Asia Pac, in EMEA, 50%, we were involved in landmark transactions. And as you mentioned the results saw an element of private, but I won't really say that the private side is necessarily linked to wealth management actually because I could also argue that a lot of our public side is in many cases related to our wealth management ties. So, this combination of banking with ultra-high net worth clients, entrepreneurs and so on has always been and particularly Asia, a feeder to our business model. That's the reason why it's very important for us to maintain strong competitive capabilities in our ID, because they are both, in many cases, where you have monetization, it's not only good for fees and investment banking businesses, but it's a feeder into our wealth management business. So - but we don't really break down publicly those kind of dynamics, but there is always an element and particularly we are keen to exploit further, and I see a lot of potential for us that in the US to get the asset management, our investment bank and our wealth management businesses working closer together, more like we do in Switzerland and in Asia, to create the same kind of dynamics that are very, very successful.

Next question comes from Al Alevizakos, HSBC.

So, question number one in Wealth Management Americas. Just trying to get a feeling of when do you believe that the increased personnel expenses, obviously due to the new compensation system, will be offset by the lower recruitment cost through the cycle. Will that be also hurting the next 12 to 18 months that has been mentioned before? And regarding - question number two, just trying to understand a very simple number. If the US tax cuts go through, what will that mean exactly for your EPS post the initial DTA impairment? Do you expect the reported EPS to stay exactly the same because you weren't paying a lot of tax in the US? Thank you very much.

Yeah. Just to comment on your personnel expense question, first of all, there are a couple components of our year-on-year increase in personnel expenses. So, to isolate first FAs, which was the focus of your question. Obviously, there's the normal revenue increase that drives typically of course increase in FA payouts, but in addition to that, at the beginning of this year, we announced a change in our pay grades and that pay grade effectively increased the level of payout for our most productive FAs, which actually resulted in a year-on-year increase to what we otherwise would have paid to those FAs. And so, you're seeing that flow through the business on a year-on-year basis and that's helping to drive our strategic transformation, which is focused on improving retention. In fact, our regretted attrition is down quite nicely year-on-year, also to improve productivity of FAs. In our FA same store, net new money is up over 50% year-on-year. So, we're starting to see those results. Now, offsetting that of course is the reduction of the reliance on that recruiting and there we actually have seen a reduction in our employee loans. They're down 16% year-on-year to 2.7 billion, but the benefit of that reduction in terms of the amortization of the flow through of P&L is not yet showing up completely into our results. We'll really start to see that as we get into the first quarter of next year and we said before that we expect that to be greater than 100 million. So, what you'll see as of the first quarter, the year-on-year comparison from the pay grade change will effectively be fully in our numbers, but you will start to see the benefit of the employee forgivable loans flow through. Now, in addition to that, in our…

Next question comes from Kian Abouhossein, JP Morgan.

Sergio, I had to adjust my numbers by 500 million on a pretext basis to go from stated 1.2 to 1.7. Kirt just mentioned 500 million potential more restructuring next year. I'm wondering considering that you have restructured the bank, that bank is in a superb position in terms of business mix, et cetera, when do we see stated numbers equal clean pretax numbers. And the second question is regarding recurring fees in WM. Kirt, you mentioned 8 billion of outflows in the fourth quarter, which could impact 2018. Can you talk a little bit about that impact and maybe give us an indication in terms of basis point impact potentially? And, secondly if you can talk a little bit about how we think we should think about recurring fees in 2018 relative to '17? What are the drivers that we should think about?

Yes. Thanks, Kian. I think that's what you see on restructuring charges is fully aligned with what we said in the past and Kirt clearly outlined what it means, next year, 500 and '19 being the last year, will be effect of the ongoing restructuring charges initiatives that we took until 2017 and the rolling effect of the same initiatives. We are not opening new initiatives in 2018 or 2019 that drives this issue. So, as we move into '18, more and more, our focus will be on reported numbers to basically start to go in the direction that you are mentioning, but still keeping the transparency on the adjusted items, because other than restructuring charges, in many cases, the adjusted figures may be positive or negative and there are, maybe extraordinary items that needs to be taken out and therefore, we would probably never stop to have adjusted numbers, but the restructuring effect will go out as a function of us completing the ongoing exercises. As I said, clearly, at the end of 2019, let's say entering into 2020, restructuring charges equal 0. So next year, we'll define the exact expected numbers for '18. We try to also figure out and give you guidance on what we expected in '19 and then for 2020, you can already put a 0 to your spreadsheet.

Yes, Kian. Maybe I'd just complement Sergio's comments, I would also mention you're already started to see a bit of a convergence in our reported and adjusted results. So, if you look at our results within the quarter, year-on-year, we're up almost 40% on reported and we're up only 16% in adjusted and that's just to give, because we realize less restructuring, 258 million this third quarter versus 444 million last year in the third quarter. So, I think you'll continue to see actually our year-on-year trajectory in reported is going to be better than our year-on-year trajectory is adjusted as we converge to fully eliminating the adjusting items, the restructuring. In terms of your second question, just given the fact of course that as we saw last year, we'll see an acceleration during the year in our total outflows related to cross border quarter activity. And as I mentioned, around 1 billion, that obviously, since those outflows are typically at a much higher margin and are almost fully concentrated and in under contract product that will have a direct impact on our recurring revenue. And I think you kind of see that with the pattern of what our recurring revenue has been doing in our wealth management business, where we actually had - throughout 2016, year-on-year flat to down slightly, our recurring revenue turned positive, we had 4% growth in the third quarter year-on-year as the actions that we've taken through growing invested assets and also a mandate penetration started to offset some of the cross border impact, but I think what we would expect is after the outflows in the fourth quarter, you'll see a drop off in recurring revenue as a consequence and also reduction in margin, but that should start to actually return and improve as we get into the second quarter and you'll start to see that strengthen as our ongoing mandate penetration program continues to improve that margin and as we grow our invested assets and very importantly, we will fully remove that as a headwind and that's been the most significant headwind to our business and to our margins now over the last almost four years and that will be completely removed from the business beginning the first quarter of next year.

Next question comes from Magdalena Stoklosa, Morgan Stanley.

My first question is about your One Wealth platform. You've mentioned earlier that you are at the 80% rollout ex-US and also the resultant potential for lower marginal costs of the new and existing business. My question really is, how should we think about the medium-term cost impact of the One Wealth platform. And my second question is about kind of lending at the strategic focus, again that you've mentioned in your remarks, now, the loan growth was up 7% year-on-year this quarter versus 4% the quarter before and really how do you see the landing activity shaping up going forward across your global wealth. Thank you.

So, on the One Wealth management platform, I think that what - this is really helping us achieving our medium, long term target in terms of profitability, cost to income ratio, productivity, it's a double effect. I mean if I look at Asia, I mean, our current, after of course, getting used to the new systems, but after a while that we'll be able to serve their clients, not only in a faster and more efficient way in terms of costs, but also in a more professional and complete way, opening up capabilities that we already use in Switzerland and as I said, in Europe. So - and last but not least, very important, the productivity of our client advisor will go up and the capacity to serve more clients will go up. That doesn't mean, by the way, that we are not also going to pursue a growth pattern in terms of hiring further client advisors. So, this is very much embedded in our long-term planning and I'm totally convinced that this will be very, very important based from which to grow particularly in our Asian businesses.

Perhaps Magdalena to your second question, let me just address that. Firstly, for the US businesses, as I just highlight, I'll highlight on the last question, we have been invested in building out our banking products platform and we've been adding lending specialists to the business in the US as we intend to look to increase our penetration and our share of that business with our clients. And so, as a consequence of that investment, we should continue to see very good lending growth in the US going forward over the next couple of years. In fact, as we've been planning for that business, we've allocated capital to accommodate for that growth, for Wealth Management Americas. In wealth management, there's really a fairly similar story. As long as our clients stay positive and as long as they continue to have an overall risk on attitude towards their investment, we would expect to see their demand for leverage and we would also expect to see leverage as a vehicle to have a very positive input for their ability to achieve their wealth objective. And I think consistent with that, we would expect to see growth in our loan book on the flow side. Now if those attitudes change, I think you would see our lending growth slowdown. In addition to that, we have been, and we just launched a greater focus on the structured end of our lending with more sophisticated clients, with GFOs, with the upper end ultras where we have a joint venture with the investment bank and there we do, and we will expect to see some growth in loans from that joint venture and from that activity going forward.

So, Magdalena, I think it's very important what Kirt outlined, there is a series of alpha generating capabilities on lending, but consistent, you go back into the last couple of years, there is - one of the main drivers still is client risk appetite. So, we're not going to - we're not going out and trying to deploy and force lending activities just to leverage and get momentum on the top line. There is a balanced approach and the correlation between client risk appetite and lending is one of the main driver and then of course you have to complement with everything that Kirt just mentioned.

Maybe just another closing comment on lending, importantly though, we will always retain our conservative orientation towards lending and that means our loan to value ratios will always be very, very strong and solid. We're not going to - we're never in our wealth management business, are going to pursue cash flow loans, so you'll see that while we look on the opposite side to increase our focus, it's still going to be within the philosophy of how we think about lending overall.

Next question comes from Jernej Omahen, Goldman Sachs.

I only have two questions left please. The first one relates to page 5 or your presentation where you show us the return on tangible equity excluding DTA of 15.5% and I was just wondering what you're trying to tell us with this chart and why that's a relevant indicator of returns. And the second question I have is on the fixed income operation. It seems to be sort of the revenue line in FRC, seems to be I guess accelerating in its decline, asymptotically almost seems to be trending towards 0, if I exaggerate a bit. And I was just wondering, what is the plan there? Is that purposeful? So, is UBS trying to further reduce FRC? Is this number around 250 million, something that we should have in mind when we talk about the relative size of FRC within the investment bank? Or are you still trying to, I don't know, invest or reconstitute the FRC operation?

Yes. Thanks. Be assured that we are not - we are not trying on purpose to take down our revenues. And if you look on a quarter-on-quarter basis, actually flat and actually our FRC business is highly influenced, as Kirt mentioned before, on a 60% penetration on FX. And if you look at major currencies, volatilities and institutional activity levels, is that. So, our FRC business is positioned to serve clients, accommodate clients, facilitate clients using capital in that kind of environment. And while looking at adequate returns on capital deployed, it's not dissimilar to what's going on in the rest of the industry, but I would say that at least we feel very comfortable about the risk adjusted return on capital deployed in our business and I don't really believe it's going to converge to 0. Now when you look at and Kirt will step in, but if you look at what we're trying to tell on page 5 on looking at return, excluding deferred tax assets, is that if you look at, we try to give to normalize for a relative performance basis, those numbers, the significant and the amount of deferred tax assets that we have on our equity component is - compared to competitors is very high. And this is an important element to normalize our return on tangible equity. And notwithstanding that, at the end of the day, as Kirt mentioned in his remarks, I guess is that, at the end of the day, we are producing capital and we are creating capital this year alone, is almost 1 billion of capital generation coming through deferred tax assets. So, it's a way to normalize returns, nothing more than that.

And maybe just to add to Sergio's comments, so if you look at our return - our tangible equity, over 20% of our tangible equity is DTA balances, including temporary differences and there is really no other bank in the world that has that percentage of their tangible equity in DTA balances. And so, it does provide a much more normal point for comparison. Also, I would argue, when you start to see this is that, there is, I think, a trend towards looking at return on regulatory capital and we think that's another measure that takes some of the noise of some of the other accounting component that can actually be in tangible equity if you want to get kind of a level comparison across banks and there actually, our returns are even higher than they are on our return on tangible equity excluding DTA basis.

Can I just ask on this page 5 question? So, when you exclude deferred tax assets from your base, from the denominator, do you take up the tax as well?

Yeah. We split it both on the denominator and the numerator.

All right. So, can I just ask, so what would the tax rate be if you took out the DTA? What's the number that you use?

And if you want, we can provide a technical explanation of how we calculate it, so we're happy to do that as a follow-up.

Yeah. Also, Jernej, if you look on page 15 of the report, you will see how we do all the calculations on the return on equity, tangible equity adjusted, et cetera.

So, is it on page 15? What is the tax rate that is used then?

So, it's not disclosed in the tax rate, but we can discuss it with you offline.

Next question comes from Andrew Lim, Société Générale.

So, my first one just on the PCB division, page 9. So, you've talked about management actions to stabilize the net interest margin here. Could you elaborate more on what you've done here? Is that impairment and if so, does that mean that your prior guidance of that fall in 140 basis points needs to be revised. And then secondly, [indiscernible] you've given guidance towards the end of the year. What about 2018 and beyond? Do you have any visibility there?

I'll take your second question first and ask if you could kindly repeat your first question. In terms of RWA guidance, of course, we've only given guidance through year end. We're still in the process of finalizing our planning process and we're also in discussions with our regulator, just to confirm our understandings of any potential further regulatory multipliers or increases that we're likely to see in 2018 and beyond. I would mention though that we do expect some further increases based on what FINMA has asked us to implement in the past and we're just finalizing what that actually means going forward. And also, just to re-highlight that that would be fully in advance on Basel IV. So essentially, we're accelerating the absorption of what Basel IV is likely to bring eventually. So maybe, could you repeat your first question?

Personal corporate banking, your net interest margin there was 157 basis points, slide 9, you've talked about actions to stabilize that. But your prior guidance was that you've got a range of 140 to 180. In the near to medium, it should decline towards the 140. So, what's your expectation there?

We actually never guided on where we expect our net interest income margin to be. What we've highlighted is the fact that we do see quite substantial headwinds in the way of increased funding costs and that really comes through the TLAC allocation to our personal and corporate business is a consequence of the equity that we attribute to that business. And on top of that, of course, we see interest rates, headwinds in the banking book as we roll over our hedges at lower rates. What we've indicated is that in the quarter, the business has been very successful, offsetting that through some of the product results, including continuing to look at pricing and other actions on deposits and loans. And obviously, the business will continue to face those headwinds going forward. They'll do - to the extent possible, they'll continue to pursue management actions to try to stabilize that margin as well as they can, given the headwinds.

Your expectation then is that, we should still see some modest pressure going forward?

I'd say we still have headwinds going forward. Yes.

Next question comes from Stefan Stalmann, Autonomous Research.

Two questions. First one, approaching the dividend angle from a slightly different perspective. Your net profits after nine months is up 32% year-on-year. Do you think it would be reasonable to assume that your dividend could grow in line with this at the end of the day and assuming there are no big surprises in fourth quarter profits? And the second question is, you mentioned that you're thinking about re-launching the public finance business and Wealth Management Americas and I was wondering if you could elaborate a little bit on what you're planning to do here, whether that would be a joint venture with the investment bank and maybe also what kind of balance sheet capacity you would have to set aside to restart this business again? Thank you very much.

Yes. Thank you, Stefan. No. It's not reasonable to expect that we will increase our dividend by 32%. I think that we have a clear policy that we say we want to have a progressive, yet sustainable increases of our cash dividend. And then of course, over time, we need to also consider share buyback as a complimentary action on capital returns. But at this stage, it's not credible to do that.

So, in terms of public finance, I think this is a sector that we are keen to reenter to re-boost because there is a high affinity and high penetration of this product with our wealth management clients in the past. We used to also do a lot of activity through joint ventures with other major US banks, but I think that if we look at the demand and also in a rising interest rate environment, this kind of product will become even more important. We think it's time for us to build up our own capabilities, so that we can have more direct service and keep more of the profitability for us. This is going to be a fairly plain vanilla business. We're not going to enter into derivative contracts with municipalities or I think that we all know how they end up and we stay focused on the velocity of our inventories and facilitation. So, origination and facilitation, very low capital consumption and of course, when we do that, we try to leverage as much as we can the infrastructure and that we have in the ID, the risk management engines and supervisory is the same as we have in the ID. So, I'm pretty comfortable that this is an important initiative that can be sustained with an appropriate low level of capital in a profitable way.

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. Thank you.