UBS Group AG (UBS) 2015 Q2 法說會逐字稿

Good morning, and welcome to our second-quarter results presentation.

My name's Caroline Stewart and I'm the Head of Investor Relations at UBS.

Before we get started today, I'd like to apologize if we've inconvenienced you by bringing our results forward.

We've done this to be transparent and to counter certain incorrect and misleading information that's become public about the Bank.

But it's business as usual for the results and this morning, Sergio Ermotti, our CEO, will talk you through the highlights of our performance.

And then our CFO and COO, Tom Naratil, will talk you through the results in detail.

After that, we'll take questions from analysts.

Before I hand over to Sergio, let me draw your attention to the slide containing our cautionary statement regarding forward-looking statements.

Now, let me hand over to Sergio.

Thank you, Caroline, and good morning, everyone.

As you are aware, macroeconomic uncertainty and market turbulence increased client risk aversion in the second quarter, reducing overall activity levels.

Despite this, we delivered adjusted pre-tax profit of CHF1.6 billion, and net profit of CHF1.2 billion.

This takes our first-half net profit to almost CHF3.2 billion, up over 70% on the same period last year, and our return on tangible equity was 12%.

Every business in every region delivered a solid performance, demonstrating the resilience and diversification of our earnings and the strength of our business model.

Our Basel III fully-applied CET1 ratio rose to 14.4%.

And our fully-applied Swiss SRB leverage ratio increased to 4.7%; the latter, partially -- partly reflecting a substantial reduction in the leverage ratio denominator for the non-core and legacy portfolio.

Retail and corporate reported its best second quarter since 2010 with pre-tax profit of CHF414 million.

Net new business volume of 3.1% for retail clients was particularly strong for a second quarter.

The business, again, met all of its targets.

Our universal bank in Switzerland is a key pillar in our strategic value proposition, so we are very pleased that Euromoney recently named UBS the best bank in Switzerland for the fourth consecutive year.

So, congratulations to the team in their continued excellent performance.

Global asset management delivered pre-tax profit of CHF134 million, as challenging market conditions for alternatives resulted in lower performance fees.

Net new money was, once again, very strong with net inflows balanced between wealth management and third-party clients.

The investment bank results were solid with CHF617 million in pre-tax profit, as our equities franchise had its best second quarter since we accelerated our strategy in 2012.

Adjusted results in our FX and rates business improved year on year on higher volumes.

The IB delivered an adjusted return on attributed equity of 34%.

Pre-tax profit in the first six months rose by 30% year on year, while the IB operated comfortably within its risk and resource limits, and contributed to provide excellent service to -- continued to provide excellent service to clients.

Recently, the IB was named best equity house in Western Europe, and best flow house in North America, underscoring the success of our client-centric business model.

UBS is the world's only truly global wealth manager, with a strong presence in both the largest and fastest-growing markets.

Wealth management had its best second quarter since 2009 with CHF769 million of very high-quality pre-tax profit.

Recurring income increased reflecting continued success in our strategic initiatives to grow loans; increase mandate penetration; and improve pricing.

Adjusted net new money was robust at CHF8.4 billion.

Wealth management America delivered a record total operating income, and recurring net fee income, and saw gross lending rise by 4% compared to the prior quarter.

The pre-tax profit of $231 million, however, was affected by various increased provisions.

This business, with the most productive advisory in the industry, and the largest market in the world -- in the largest market in the world, and as part of the leading wealth management franchise globally, is critical to our strategy, and to our growth prospects.

Let me also remind you that almost every dollar we earn in pre-tax profit across our businesses in the US is available to distribute to shareholders as we continue to utilize deferred tax assets.

So, it's not so hard to see why this strong business, with its strategic and financial importance, looks attractive to our competitors.

But it's worth even more to UBS and its shareholders.

That's why it's not for sale.

Now, looking at our wealth management businesses combined, together, they are -- they posted strong results for the first half with pre-tax profit of CHF2.1 billion; up 14% annually since 2012.

We were pleased that UBS regained the title of best global wealth manager in 2015; Euromoney awards for excellence.

And we were ranked as the largest global wealth manager, according to the annual Scorpio benchmark.

Importantly, we were also the fastest-growing, large scale wealth manager, and the most diversified.

Establishing UBS Switzerland AG was another critical milestone in improving the Group's resolvability, and we were the first bank to complete this step in Switzerland.

In terms of implementing our overall recovery and resolution plan, having also implemented a revised business and operating model in the UK, as far as UBS is concerned, we are closer to 100% complete than to 50%.

I also like to mention two important steps in this process.

One is the establishment of an intermediate holding company in the US, where we are well on our way and expect to complete the process in July 2016.

The second will take place during this quarter, when we establish a Group service company as a subsidiary of UBS Group AG.

We will then transfer more of our shared service and support functions into entities beneath it.

Looking ahead, I want to reiterate our priorities.

First is to capitalize and build upon our early mover advantage.

It's almost four years since we adopted our strategy to succeed in the new environment.

We are ahead of our capital requirement and are first movers in management of regulatory change.

We have also built a clear execution track record and, now, we need to press home all of these advantages.

We are also firmly focused on improving effectiveness and efficiency.

This is about creating the right cost structure for a 21st Century bank to enable for a long-term growth in the evolving macroeconomic and regulatory environment.

So we remain fully committed to our cost reduction target of CHF2.1 billion and we continue to make good progress in the second quarter.

Improving effectiveness is also critical, and as we simplify our IT infrastructure and re-engineer internal processes, we have a unique opportunity to achieve much greater front-to-back integration.

We are also continuing to invest heavily in compliance and risk control.

As our competitors regroup and focus on rebuilding capital, we've seen an environment where cost will become a key battleground.

For this reason, we need to focus on our strategic efforts with the same intensity and consolidate our position as a well-capitalized efficient organization and growing organization.

That's why our third priority is investment for long-term growth, and to support sustainable returns to our shareholders.

These are in technology and digitalization and in certain regions, such as the Americas and particularly Asia.

We are also continuing to invest in attracting the right people to the Bank, from apprentices to senior executives.

And, we are developing the talent we have to achieve their full potential and to better serve our clients.

On the technology front, we have been an early mover in a number of areas and we will continue to build on this.

Our Neo platform in the IB, our wealth management advisory app and mobile banking services in retail and corporate have won broad industry recognition.

But more importantly, they are used extensively by our clients.

These kinds of investment are not just about defending our position, but they have allowed us to capture share and drive business efficiently into the Bank.

Of the CHF3 billion we are spending to restructure the Bank up to 2017, over 50% represent investments in technology.

Today, UBS enjoys a unique period of strategic clarity, with a capital and execution track record to back it up.

This gives me great confidence in our future.

Specifically, this means that despite expectations for a higher future capital requirement, and macroeconomic uncertainty, our dividend policy is unchanged.

We intend to pay out at least 50% of net profit, subject to UBS maintaining a fully-applied Basel III CET1 capital ratio of at least 13% and at least 10% post-stress.

In addition, in the third quarter, we expect to pay the supplementary capital return of CHF0.25 per share associated with a share-for-share exchange.

As challenging market conditions continue, and as you have heard me say before, we will stay close to our clients and provide them with the advice and execution they need, while also delivering against the priorities and targets we have committed to.

Thanks.

And Tom will now you take you through the details for the quarter.

Thank you, Sergio.

Good morning, everyone.

As usual, my commentary will reference adjusted results unless otherwise stated.

This quarter, we excluded net restructuring charges of CHF191 million; an own credit gain of CHF259 million; a gain of CHF56 million on the sale of the Belgian domestic wealth management business; a gain of CHF11 million from a further partial sale of our investment in market; and an impairment of CHF11 million of an intangible asset.

Profit before tax was CHF1.6 billion, up 37% year on year, and down 28% from a very strong first quarter.

Net profitable attributable to shareholders was CHF1.2 billion, after a tax expense of CHF443 million and net profitable attributable to non-controlling interests of CHF106 million.

As we've said in the past, you shouldn't multiply any quarterly result by 4. The same is true for the first half of the year, which you shouldn't multiply by 2 as the third quarter is seasonally slower.

We'd also like to highlight a number of financial reporting and accounting changes that occurred in the quarter, as well as others expected in the future.

Consistent with changes in the manner in which operating segment performance is assessed, beginning in the second quarter of 2015, we now applied fair value accounting for certain internal funding transactions between corporate center Group ALM and the investment bank, and corporate center non-core and legacy portfolio, rather than applying amortized cost accounting.

This treatment better aligns with the mark-to-market basis, on which these internal transactions are risk managed, within the investment bank and corporate center non-core and legacy portfolio.

The terms of the funding transactions remain otherwise unchanged.

In connection with these changes, own credit gains and losses are now reported in corporate center Group ALM as opposed to corporate center services.

Prior periods have been re-stated to reflect these changes.

In addition, we expect to adopt to -- excuse me, to early adopt the own-credit presentation requirements of IFRS 9 in the first quarter of 2016, where changes in the fair value of liabilities related to own credit will be recognized in other comprehensive income rather than through the P&L.

Further details on these and other changes can be found in note one of our quarterly report, which we'll publish tomorrow.

Wealth management delivered another strong performance with profit before tax of CHF769 million, its best second quarter since 2009.

Recurring revenues increased in all regions, with increases in both net interest income and recurring net fee income.

Net interest income increased 1% to CHF568 million of higher product revenues from loans and deposits.

Recurring net fee income increased by 3% to nearly CHF1 billion, as we continue to increase mandate penetration, grow loan balances and benefit from ongoing pricing measures.

Transaction-based income declined following a very strong first quarter, partly as a consequence of the Swiss National Bank's actions in January.

Expenses were broadly unchanged at CHF1.3 billion, while our cost/income ratio was 62%, within our target range of 55% to 65%.

For the first half of the year wealth management's profit before tax rose by over CHF570 million compared to the first half of last year and by CHF221 million, excluding charges from litigation, regulatory and similar matters.

This reflected strong growth in revenues, which rose by CHF268 million, and good cost control with costs increasing marginally on an underlying basis.

These results demonstrate not only the high-quality growth we're capturing, but also continued benefits from efficiency measures within wealth management and the cost savings delivered by the corporate center.

As announced on the fourth quarter results call, we've acted on a number of fronts to optimize resource utilization and to ensure that our products and services are appropriately priced, relative to the resources they consume.

Last quarter, we said we'd be executing a balance sheet and capital optimization program in wealth management in the first half, with assets and scope of around CHF30 billion.

The program was focused on clients with high balance sheet usage.

We've discussed a variety of options with affected clients, which include cash alternative; investment products; extension of maturity on deposits; or repricing.

With the majority of the program complete, we can confirm it's been a success.

We've had lower outflows than expected and the program has had clear benefits.

Of the clients' assets shifted into investment products, the largest shifts were into mandates, which increased by more than CHF1 billion from the program.

We've already reduced both LRD and LCR outflow assumptions by CHF7 billion.

In the third quarter we expect an additional LRD reduction of around CHF3 billion and a further LCR outflow assumption reduction of around CHF2 billion.

In terms of profitability, the clients who withdrew all or part of their balances with us, in aggregate, were not economically profitable.

However, economic profit on retained relationships has significantly improved.

We believe that the program is not only accretive to economic profit, but to total profit as well.

Net new money was CHF8.4 billion adjusted for the outflows associated with the balance sheet and capital optimization program with only CHF1.1 billion contributed from Lombard lending.

Our net new money growth rate was 3.5%, within our target range of 3% to 5%.

Mandate penetration increased 80 basis points to 26.3% of invested assets as the business added CHF9.2 billion of net new mandates, bringing our total mandates to nearly CHF0.25 trillion.

Over the past year, we've seen signs that our clients' risk appetite has picked up slightly.

For previously existing mandates the most common shift we've seen year to date is a one-notch step up in risk.

Net margin was up year on year for the fourth consecutive quarter and month-to-month swings in our gross margin were limited.

Adjusted net new money was positive in all regions and was particularly strong in APAC in Switzerland with significant contribution from ultra-high net worth clients, where we saw inflows of CHF7.1 billion.

Emerging markets' adjusted net new money was positive, but continued to be impacted by geopolitical and economic challenges.

Operating income decreased across the regions on lower transaction-based income, mainly due to lower revenues from portfolio rebalancing and more limited FX volumes.

Revenues were down across all products with the exception of cash equities, which increased due to strength in APAC.

APAC's performance in the quarter was extremely strong and first half profit before tax is up nearly 60% year over year to around CHF450 million.

That's nearly 75% of the full-year profit before tax the business delivered in 2014.

Profit before tax has grown at a compound annualized growth rate of 65% since the first half of 2012.

We're the largest wealth manager in the region and we're outgrowing the market in ultra-high net worth.

Over the last three years total invested assets have grown over 50%, adding nearly CHF100 billion to our asset base.

Our platform provides access to a full suite of CIO products, as well as innovative solutions from our leading investment bank and global asset management businesses.

Our global capabilities and insight benefit our sophisticated clients as they increasingly look to diversify their wealth.

Our brand is highly valued and desired in the region, especially by the clients that we target.

We're honored that the majority of the APAC billionaires bank with us, seeing us as a valued partner in helping them to achieve their aspirations.

Our success is built on multi-generational relationships which we've developed in over 50 years of unbroken commitment to the region.

Wealth management America has delivered record operating income of $1.9 billion.

Increased recurring income was driven both by record net interest income, which rose 9%; and record recurring net fee income, which increased 3% on continued growth and managed account fees.

These increases more than offset lower transaction-based income which fell 2% on lower client activity.

Profit before tax was $231 million and was impacted by a $71 million increase in charges for provisions for litigation, regulatory and other matters, as well as a $21 million increase in legal fees.

Our underlying profit before tax, excluding provision charges, was $318 million and we're pleased with the continued growth in top-line performance.

Net new money was a solid $3.2 billion, excluding outflows from record seasonal tax payments with strong inflows from advisors who've been with the Firm for more than one year.

Reported net new money was negative $700 million, including an estimated $3.9 billion of outflows related to seasonal tax payments.

Invested assets were down $5 billion with the decrease mostly due to market performance.

Gross margin increased 1 basis point to 74 basis points on our record operating income and net margin decreased 2 basis points to 9 basis points on higher operating expenses.

FA productivity remained industry-leading as annualized revenue per FA rose to a new record of over $1.1 million.

Consistent with our strategy, we continued to grow lending balances with total loans growing 4% to $47.3 billion.

Average mortgage balances increased 3% to $8 billion and securities-backed lending balances were up 3% to $29 billion.

Our focus on banking and lending is a key pillar of growth for future profitability and we're well positioned for any future Fed moves this year.

Retail and corporate delivered another strong quarter, with all KPIs within their target ranges.

Profit before tax was CHF414 million; the highest it's been in a second quarter since 2010.

Operating income was CHF 952 million, down 3% on lower transaction-based income and net interest income.

Following elevated client activity and gains from macro fair value hedge ineffectiveness in the prior quarter, transaction-based income decreased.

Net interest income declined 1% on lower income from the investment of the Group's equity.

Net interest margin decreased by 1 basis point to 164 basis points.

Net credit loss expenses decreased to CHF4 million from CHF21 million as credit losses for new cases were stable and releases and recoveries increased.

The stronger Swiss franc is expected to have a negative effect on the Swiss economy, as seen in economic data for the first quarter of 2015.

To date we've seen limited effects of the stronger Swiss franc on small and medium-sized enterprises which we attribute in part to existing order books.

However, with the average order period of three months now passed, we would expect to see a deterioration in the results of these enterprises over the next 12 months, particularly for export-oriented entities.

The tourism sector has been largely protected during the 2014/2015 winter season, due to pre-existing bookings.

We, therefore, anticipate seeing a fuller impact on the industry through extended hotel closure in the off-peak season and into the 2015/2016 winter season.

To date, we've seen a limited decline in credit quality.

However, we expect that any negative effect on the Swiss economy will impact some of the accounting priorities within our domestic lending portfolio and lead to an increase in credit loss expenses in future periods from the low levels observed in the past two quarters.

As we said previously, for 2015, we expect more-normalized and slightly increased credit loss levels compared with 2014.

We actively manage our portfolio and we perform detailed reviews on a client-by-client basis.

We continue to closely watch the broader portfolio for signs of deterioration and don't see credit losses exceeding expected levels for the portfolio.

Operating expenses were broadly unchanged at CHF538 million.

Net new business volume growth for our retail business has remained solid at 3.1%, as strong net new client assets more than offset slightly negative net new loans.

We continue to invest in e and mobile banking technologies.

During the second quarter we successfully launched the UBS payment app in Switzerland, which allows users to send and request money through their smartphones; quickly, securely and conveniently.

The app has had over 70,000 downloads and it has received an average 4.5 star rating on the Apple app store.

Our clients who utilize [EN Mobile] continue to show higher income per client account, return on business volume and higher net new business volume per client account.

In global asset management operating income decreased 7% in challenging conditions for alternative managers.

Performance fees decreased to CHF20 million, as late quarter performance in the alternative industry was subdued, including for O'Connor and A&Q.

Net management fees increased mainly in traditional investments and global real estate, driven by capital increases in listed funds, as well as new commitments into an infrastructure and private equity product.

Expenses were CHF342 million, up 5%, on higher personnel expenses and higher technology charges from corporate center services.

Net new money, excluding money market, continued to be very strong with CHF8.3 billion in net inflows; was positive across all capabilities; and well-balanced between our wealth management businesses and third parties.

The investment bank delivered another strong quarter with profit before tax at CHF617 million.

Performance was very good in APAC where the business delivered double-digit growth, both in the quarter and year on year.

Investor client services revenues were solid at CHF1.5 billion with a strong performance from equities.

Revenues were up 22% year on year with increases in both equities and FX rates and credit.

Equities revenues were strong, increasing 30% year on year to CHF1.1 billion, the highest second quarter since the acceleration of our strategy in 2012.

A large majority of the increase was driven by APAC, mostly in financing services and derivatives.

FX rates and credit revenues increased 4% year on year to CHF402 million with strong performance in FX and rates on increased client volumes.

Corporate client solutions revenues were down 16% year on year, mainly in DCM, where leveraged finance revenues have decreased, and the market fee pool declined 35%, year on year.

Revenues increased in advisory and risk management.

And although revenues declined in ECM, this was to a lesser extent than our peer group.

Operating expenses increased 3% year on year.

Higher variable compensation expenses more than offset lower general and administrative expenses.

Our cost/income ratio was 73%, within our target range of 70% to 80%.

We continue to maximize resource efficiency, through optimal use of the business' allocated resources, which were roughly unchanged in the quarter.

Revenue per unit of VaR increased to a record of CHF214 million.

Profit before tax in corporate center services was negative, CHF253 million, compared with negative CHF222 million in the prior quarter.

Operating expenses before allocations, increased, mainly due to higher marketing costs, as well as higher professional fees associated with ongoing changes to our legal entity structure.

Profit before tax in corporate center Group asset liability management, was negative CHF127 million, compared with positive CHF91 million, in the prior quarter.

Gross income decreased to CHF70 million on lower growth income from hedging activities and balance sheet risk management.

Central funding costs retained in Group ALM increased slightly, to CHF180 million, and continued to be a drag to the Group's earnings, at CHF349 million, year to date, compared with nearly CHF800 million in 2014.

We're ahead of our debt issuance plans, particularly with regard to AT1.

However, we continue to expect these costs to decrease significantly by the end of 2016.

As a result of our ongoing efforts to optimize our legal entity structure, we anticipate that some foreign currency translation gains and losses, previously booked directly into equity, through OCI, will be released into our P&L, due to the sale or closure of branches and subsidiaries.

In the second half of 2015, we expect to record net foreign currency translation losses of around CHF120 million, related to these disposals, although gains and losses could be recognized in different periods.

Consistent with past practice, these losses will be treated as adjusting items.

The release of these FCT losses to the P&L will have no impact on our equity, and regulatory capital.

Profit before tax in non-core legacy portfolio was negative CHF132 million.

Operating income of CHF35 million included a gain of CHF57 million, related to the settlement of two litigation claims, which was partly offset by valuation losses.

Operating expenses increased by CHF7 million, on higher charges for provisions for litigation, regulatory and similar matters.

We've made significant progress reducing the non-core and legacy portfolio LRD, which decreased CHF14 billion, to CHF70 billion, on continued unwind innovation activity.

RWA also decreased CHF4 billion, to CHF32 billion on lower credit risk and market-risk RWA.

Since the inception of the non-core and legacy portfolio, we've reduced LRD by over CHF220 billion.

As you can see on slide 29, in the appendix, over 40% of the remaining LRD is expected to decay naturally by the end of 2018.

We'll continue to seek opportunities for active acceleration, where we believe the trade-off between cost of exit and the cost of capital, and other operating cost is reasonable.

However, these opportunities may be more limited in the future.

We achieved an additional CHF100 million of annualized net cost reduction in the corporate center, bringing our total annualized corporate center cost reduction to CHF900 million, based on the June exit rate, versus full-year 2013.

The additional CHF100 million was driven by decreases in IT, operations and corporate real estate and services.

The annualized cost to regulatory demand has increased to around CHF1 billion, of which around CHF400 million is of a permanent nature.

Increased regulatory burdens continue to present significant headwinds to our targeted cost reductions.

We'll continue to remain focused on overcoming these costs, to achieve the net cost reduction targets we've set out.

Our fully-applied CET1 ratio increased 70 basis points, to 14.4%, and remained above 10% post-stress, while our fully-applied Swiss SRB leverage ratio increased 10 basis points, to 4.7%.

CET1 capital increased, largely on higher retained earnings, partly offset by the impact of a stronger Swiss franc, and accruals for capital returns for shareholders.

Risk-weighted assets declined by CHF7 billion, to CHF210 billion, below our yearend target.

This was driven by a CHF4 billion reduction in the supplemental operational-risk RWA, mutually agreed by UBS and FINMA, as well as lower market risk and credit-risk RWA, in non-core and legacy portfolio.

Our Swiss SRB, LRD, decreased by CHF33 billion, to CHF944 billion, largely due to a substantial reduction in non-core and legacy portfolio, as well as corporate center Group ALM.

CHF139 billion of our leverage ratio denominator is from our high-quality liquid asset portfolio.

Since the fourth quarter of 2012, we've reduced Group LRD, by CHF262 billion, despite growing our high-quality liquid asset portfolio LRD, by CHF9 billion.

Our fully-applied BIS Basel III ratio increased by 20 basis points to 3.6%.

As a result of the progress we've made in reducing our LRD, and with updated market share information for 2014, provided by FINMA, our progressive buffer requirement for 2019 has been reduced to 4.5%, from 5.4%, bringing our total capital requirement for 2019 down to 17.5% from 18.4%, in line with our previous expectations.

In the third quarter, we intend to issue AT1 capital, to further improve our Basel III leverage ratio numerator.

In addition, we intend to issue TLAC eligible debt, out of a special purpose vehicle of our Group holding company.

We'll treat our TLAC in AT1 issuances in the same manner we've treated other regulatory matters, by addressing them early and decisively, and staying ahead of the minimum requirements.

Consistent with past practice, we expect to re-measure our deferred tax assets in the third quarter, based on a reassessment of future profitability, taking into account updated business plan forecasts.

As mentioned in our 2014 Annual Report, we'll also consider a further extension of the forecast period, used for US DTA recognition purposes, from six to seven years.

In the event the forecast period is extended, we estimate that the effect, combined with the updated business plan forecasts, could lead to a net upward DTA revaluation of around CHF1.5 billion.

We expect any DTA revaluation from this year's reassessment to be recognized 75% in the third quarter, and 25% in the fourth.

The US DTAs have been recognized principally on the expected future profits of Wealth Management Americas.

We'd expect WMA to be the main driver of any future recognition of the remaining CHF15.8 billion, of US DTA that are currently unrecognized.

In conclusion, our results for the quarter were strong, with good underlying performance across all of our businesses.

We continue to reduce costs and improve effectiveness and efficiency.

In non-core and legacy portfolio, we've made material progress, in reducing LRD.

We've also further improved our resolvability, by implementing UBS Switzerland AG.

UBS represents a truly unique and attractive investment proposition.

We're the world's leading wealth manager, and we're a growing business with a clear strategy, a strong capital position, and a first commitment to deliver attractive capital returns to shareholders.

Thank you.

Sergio and I will now take your questions.

(Operator Instructions) Andrew Lim, Societe Generale.

I'm just wanting to get a bit more clarity on your cost reduction story.

You've got a slide on your progress on page 33.

The pace has reduced somewhat, versus the first quarter, and I was just wondering if you'd give a -- could give a bit more color on why that is; and whether we should still expect that CHF600 million reduction for the second half of this year, in order for you to reach your target of CHF1 billion, in the services and Group ALM subdivisions?

And then just referring to your slide on page 30, given your sensitivities to an interest rate increase, if I read the bottom correctly, am I to understand that if you had 100 basis point increase, in US rates on a parallel basis, then we should get about CHF600 million extra NII?

Many thanks.

Thanks for the questions.

On your first question on the cost reductions, referencing both slide 33 as well as the other slide that we had in the presentation.

The pace was, I think, quite quick in terms of our cost reductions of 1Q; we had achieved about CHF800 million out of the CHF1.4 billion targeted.

And if we look at where we are in the second quarter, we're at about 64% of the CHF1.4 billion that we need on an exit-rate basis.

So although we did slow a little bit, in the second quarter, we still have the visibility on how we get ourselves to the CHF1.4 billion in exit rate, by yearend.

As I mentioned, we've got to overcome some of the permanent regulatory cost headwinds that we see.

But we think the teams are focused on achieving their targets by yearend.

You asked a question on slide 30, on interest rates sensitivities.

So if you had 100 basis point parallel instantaneous increase in rates, then you would see an increase of CHF600 million in NII in wealth management: about CHF200 million in wealth management Americas, and about CHF100 million in retail and corporate; so total to the Group of plus CHF900 million.

But that's all currencies right?

What about if it was just in the US?

The US, sorry.

The US is CHF700 million -- CHF600 million to CHF700 million.

Right, I see.

But if you had an instantaneous increase or, let's say, a quick increase, presumably your deposit costs would increase higher than your -- sorry, your net interest costs would increase higher than you interest income initially?

Well, there's also some deposit pricing efficiency that we think we'd see.

Also, if you look at the money market funds, for example, in the US, where we've been waiving fees since late 2008 or early 2009, we would begin to stop the fee waivers.

So that would actually increase profitability immediately.

Great, thank you very much, Tom.

You're welcome.

Kinner Lakhani, Citigroup.

So my first question was on DTAs, where I just wanted to get some guidance on what part of the CHF1.5 billion relates to the extension of the horizon and what part on the updated business plan?

I may have missed that.

And also, your recognized DTAs have come down from CHF7.4 billion at the end of 2014 to CHF5.9 billion.

Am I right in thinking that suggests CHF1.5 billion utilization in the first half?

All of it seems to be driven by Switzerland, no utilization in the US.

So wonder if you could give us some color on the geography.

Just on your interest rate sensitivity disclosure, thanks for the update.

Just wanted to understand the OCI impact on regulatory capital, which I think you previously disclosed as a CHF0.2 billion hit and now you've got a range of positives.

There's also maybe a decline in the positive in terms of the NII compared to your last disclosure.

Is there any change in the way you're positioning yourselves ahead of the third cycle?

And then thirdly just on WMA.

If you could share some thoughts on the proposed DOL fiduciary rules; how you're thinking about that impacting your budget going forward.

Thank you.

Thanks, Kinner; thanks for those questions.

So first on the DTA, I didn't mention it in my remarks, but I would say right now, back of the envelope, out of the CHF1.5 billion, assume roughly half from a business plan roll and CHF1 billion from an extension, give or take.

Second, your question on DTA utilization, I believe that -- and we'll get back to you with the details after the call.

I believe we also had -- we might have had a reclassification from net operating loss DTAs to temporary difference DTAs, but we'll follow up with you on the call on that one.

To your question on what changed in our interest rate sensitivity analysis, you actually noted a few of them; so let me go through them.

First, one of the effects, you're correct, the net interest uplift effect, is actually lower than we saw in the past, in particular, in wealth management and retail and corporate, because of the flooring of deposits rates at zero in Switzerland.

So on a rise in rates from a negative rate environment, we wouldn't get deposit pricing efficiency at first.

So that's what's missing in that analysis.

And then you also flagged the OCI impact.

There actually has been a methodology change.

Previously, we did not include the pension fund effect; we've now included that.

So what we see as rates rise is actually the DBO effect, as the defined benefit obligation drops on higher rates.

So although there are certain cappings on the amount of benefit that you can get from that, this is our best estimate of the total OCI impact of a change in a change base to higher rates.

We have to answer the WMA question.

Sorry, the WMA one, sorry.

On the DOL fiduciary, I think the first thing on that, when we look at our position on the DOL rule, one of the things that we'd like to see remain is client choice second and also, a level-playing field in terms of different business models.

In terms of what would the impact be for the way advisors do business on a daily basis, quite frankly, we don't think it changes the advice that our advisors will give to their clients on an ongoing basis.

It's largely this definitional difference between what is in treating a client fairly versus in the best interests of a client.

We think we meet, on a client conversation and execution basis, that standard currently.

Where the biggest change would occur is actually in the monitoring and compliance activities that you have to complete in order to prove that you're meeting that standard, which would bring to us some increased regulatory cost burden as well as some process burden.

But we'll have to wait to see.

The comment period is still ongoing for the new regulation.

We'll see what comes out of the comment period and then we'll adjust to it, but there's nothing that we see in the business plan which is a reduction in our revenue lines due to the fiduciary standard.

Thanks, Tom.

Sorry, if I could just ask one more thing.

Any incremental cost related to so-called Basel IV, that you cross down here flagged quite heavily; lost under your reported?

In the comments that I made before about the CHF1 billion that we have in headwinds currently, do we see maybe some uptick?

There are a lot of QIS exercises coming up in the next year.

We're also doing our own modeling and looking at how that affects us.

But I think we have some built in already.

We may see some slight upward pressure on the temporary side, but I don't think that would come in the permanent costs side.

Thanks very much.

Appreciate that, Tom.

Fiona Swaffield, RBC.

I had two questions.

Firstly, on the RWA and the FINMA incremental risk add-on that's gone down CHF4.2 billion, could you talk about the potential for timing issues, and maybe some op risk coming in from the AMA model or due -- over time, due to the settlements, or do you think that that step change will hold?

The second issue is on Asia-Pac in wealth management.

There's obviously been some jitters in the market, particularly in China.

Could you talk about how that could affect your business in the third quarter or effects you've seen, maybe anything on margin lending, some update there?

Thank you.

I can take the questions.

On the AMA model I think that, as you know, there is an industry-wide exercise going through in revising the AMA model, and we do expect this to translate to our higher capital requirement.

Having say that, we feel pretty comfortable that we will be able to manage this additional potential requirements within the existing capital we've set aside, including the supplementary portion, which we also expect to come down slightly between now and yearend.

So overall, I think that should be a net slightly positive improvement of our op risk capital and risk-weighted assets allocation.

In terms of China and the developments there, of course, in the third quarter we cannot expect to have the same kind of vibrant and positive volume and activity we saw in the second half -- in the second quarter.

But our -- and when you look at our exposure in terms of lending, we are not lending money in onshore in China.

We are very selective in the way we also do Lombard on Hong Kong listed shares.

We haven't suffered any loss -- or credit loss in the second quarter and we don't expect this to be the case also as we move forward.

So our secular commitment to Asia and China is there so those kind of movements are part of a journey of growth and we are not concerned at all about what's going on there.

Thank you.

Jeremy Sigee, Barclays.

Could I ask three specific questions please?

Firstly, Wealth Management Americas, the G&A costs stepped up and you gave some reasons why.

Just reading those, do they fall away again?

Do we normalize back down again, Wealth Management Americas' G&A cost line, or is this some kind of new heavier run rate that we should expect going forward?

Second question in retail and corporate, net interest income was kind of sideways and I think we might have been expecting slightly positive trends from loans, deposit pricing, after we saw from Credit Suisse the other day, it seemed that they were getting some benefit from mortgage floors, in particular.

I just wondered if you could comment on why we're not getting that in your case.

And then last question, I just wondered on the FINMA loan risk-weighting floors that you told us about last quarter, I think you said some was impacting already; some was coming in 2Q; and there'd be more over time.

Against that, the RWAs are coming down nicely here.

So I just wondered are you absorbing that impact or are there any step-ups to come that we should just be wary of from that effect.

Jeremy, thanks.

Thanks for the questions.

In Wealth Management Americas on the G&A line, what I'd highlight are a few things.

We had CHF71 million in the quarter of higher charges for provisions for litigation regulatory and then also some other matters, not litigation and regulatory; as well as an increase in legal fees, so the cost associated with that litigation.

So that's about a CHF92 million uptick in the course of the quarter.

Now, we may see some elevation related to some of the Puerto Rico matters, in particular, as we start to process through some of the arbitrations that are scheduled.

But eventually, those costs will fade away.

Second, we did have a slight bump in the personnel costs, which are just a seasonal slight uptick, I think a number of around CHF9 million or so in the course of the quarter.

That's a seasonal uptick related to strategic objective awards that are booked in the quarter.

On the NII on retail and retail and corporate, I think I'll just focus on explaining our results.

I think, from a timing perspective, we saw good results in 1Q from some of the pricing moves and I think those pricing moves were early enough in the quarter that we saw almost all the full benefit in 1Q.

So I don't -- we don't see the second quarter as anything beyond what we would have expected coming out of 1Q.

On the RWA pieces, that upticks and multipliers that we flagged, slide 27 gives you the breakdown of the different RWA movements.

I think if you look in the section on the left-hand side of the slide, you'll see the methodology-driven components where you see a CHF1.8 billion increase in credit risk RWA for one of the multipliers on investment bank exposures to corporate and income-producing real estate.

You do see, if you look at the business division breakdown on the right-hand side, you can see how that's split between the investment bank and retail and corporate.

So I think we have another similar size uptick in the investment bank coming in 3Q.

And now your question was so outside of the schedule how are you responding to it?

I think that businesses are continuing to be very focused on how they drive the efficiency of their resource utilization to counteract some of the multiplier increases.

Thank you.

That's very helpful.

Kian Abouhossein, JPMorgan.

First question is relating to the A Tier 1. Could you give us an idea of how much you're thinking about issuing and in what category, upper or lower trigger?

The second question is just coming back to Asia.

Is there any risk more from a structuring perspective and maybe you can briefly talk about how you'd do your equity structuring?

Is it mainly third party that you sell?

Is it mainly your own products, UBS Investment Bank, that you sell?

And if so, is there any risk to being short volatility short correlation, which normally happens with structured products?

Is there any issue that we should be aware of, considering the recent spikes in these areas?

And the third question is related just to standardized Basel III capital ratios, which seems to become the binding constrain or becomes one constrain rather than advanced in the US.

Now, that you will have to give that to the market, is there any discussion with the regulator that ultimately fully-loaded Basel III standardized will be the constrained for you in terms of capital ratios and, hence, for payout or would you say that it's very unlikely?

And will you have to make this number public or not?

Thank you.

Kian, I'll take the first one and Sergio will address the second two.

On the first one on the AT1 issuance we'll sound out the market.

As I said, we would like to issue this quarter.

We'll sound it out in terms of size and structure and we'll see what kind of execution that we're able to get off.

But I think it's premature for us to comment on either the size or high or low trigger.

On structured products in Asia, I think that a big chunk of this activity is in UBS products, but if you look at the risk profile and you mentioned correlation any big exposure, [gam] exposure, they are quite well-edged and it's also well reflected in our resource utilization in the second quarter in the EBIT.

In general, we keep a very close eye on managing tail risks.

I can say that we are very proud about how we manage the very high volatility ups and downs in the Chinese market and in the Asian markets in the last few months.

So I don't expect any outcome or any particular consequences of the higher volatility environment we are experiencing right now.

And may I just follow up on that?

Is it actually possible that this is an opportunity historically when there's been sell-offs in Asia?

You actually, I would say, got more net new money, for example, as people looking for the safe havens.

Or is that something that you're seeing already; i.e., this is more of an opportunity?

I think right now we see still a fairly constant growth in our activities there.

We are not obsessed of going out and grabbing assets just for the sake of increasing our asset base.

Also, you saw it also through the exercise we did in the quarter.

Actually, we were doing exactly the opposite: focusing on quality of assets.

So I think as I mentioned before, we are in Asia for the long run; we have been there for a long time.

These ups and downs are quite usual and that we can stick with it; so no particular trend.

I think the real growth and aspirations we have is clearly onshore, domestic, and there is a huge opportunity for us.

We have been there for a very long time.

We are well positioned to capture that opportunity and that's something that we will focus on.

And since we are in Asia, if I may, just one more quick one.

Private banking adviser cost base is that -- the search for talent, is that something that you see creeping up in your expense line, considering everybody seems to be now wanting to be in Asia private banking?

Or is it too early to tell?

How do you see that?

Kian, you saw those ups and downs in Asia of people trying to go in and search for growth and making investments and then running businesses with in excess of 100% of cost/income ratio.

I think that I can consider ourselves an employer of choice when we talk about wealth management and Asia in general.

I think that we are able not only to give a good platform to our colleagues, but also they are able to serve their clients with a very comprehensive offering.

So it's not just about people being able to move from one bank to the other; it's also being able to fulfill the expectations of clients there.

I think that we have a superior proposition there and we continue to invest in it.

So, of course, we are not complacent, but I think that what you will see, as more people focus on Asia, I believe that the third and tier players will suffer the most.

I think it's probably a little bit of concentration -- further concentration in the larger players over there.

Very helpful, Sergio.

Answering your -- not shying away of your question on standardized models?

Yes.

I think that, of course, we are in discussion about this idea to basically publish standardized model higher of everybody else.

I think that as your question is rightly pointing out, it's going to create a lot of confusion, because if we are the only one having to disclose standardized model, people will jump into the conclusion: is this the new way to measure capital requirements?

A clear understanding we have, and also I believe regulators have, is a so-called transparency, which the transparency could only be created if you have everybody doing that and not only one or two banks in Europe doing that.

But having said that, we do not expect this -- a standardized model to be used to drive capital requirements.

But it means that it will be made public most likely, as was lined out, before everybody else does it.

Well, that's what -- and you saw it in public in a standard disclosure by the Swiss National Bank in the past and that's -- but we are still in discussions with regulators about exactly how it will work.

But at the latest it's going to be at the end of 2016; everybody will be required to disclose the standardized calculation, which is not even clear, which one is it.

Is it the existing one or is the new to be determined?

In any case, we are working on those aspects, but the most important issue is that I don't believe that any regulator that doesn't want to create another pro-cyclical aspect in -- pro-cyclicality in the economies, particularly in Europe, will come out with the idea to translate capital requirements under standardized as a new benchmark.

That would create a huge shortfall, I think, overall in Europe for capital levels.

I think that even in the worst case scenario UBS would be extremely well positioned.

I'm not concerned about that, but I would be concerned about what are the consequences for the European economies and the banking sector, for sure.

Very helpful, Sergio, and apologies for taking so much time.

All right.

Jernej Omahen, Goldman Sachs.

Three questions please.

The first one is on slide 10, and if I'm reading this slide correctly it basically shows that 85% of net new money is now pulled in through the ultra-high net worth segment, so the CHF7.1 billion.

But you also show that the margin obviously here is lower, around 55 basis points.

I was just wondering, so how should we think about this?

Should we say 80% plus of net new money comes in through this segment, therefore there's natural pressure on the margin going forward?

If you could help me think through this?

The second question is on the equities figure on page 17 of your slide pack.

Obviously, you show an extraordinarily strong equities result.

Can I ask you the following question; on this number, the CHF1.128 billion, how much of this number do you estimate is driven by the higher activities of your private banking clients, i.e., because I think, with your private banking competitors as well, the resilience of this figure is much greater if you look at it in a sector context.

I was wondering whether there's a way to quantify that effect.

And the final thing I wanted to ask you is on capital and I guess somewhat in conjunction with the previous question.

UBS has a very strong core equity Tier 1, as it's currently reported, but the leverage ratio is not great.

If somebody came to you, let's hypothetically assume, and said we need your leverage ratio at 5%, how quickly and how painfully, or in a painless manner, could that be achieved?

Thank you very much.

Tom, I mean you can go on and take the first question, and I'll take the last one.

Okay, fine.

So I'll take one and two.

So your question on slide 10, and doing some interpretation from what about net new money flows, concentration in an ultra-high net worth, where we did actually have a strong contribution during the second quarter.

And then the question about the margin; is that going to lead to a dilutive effect on margin that you have to model in?

Yes, that's the question.

Yes, well, I would say that I think we've actually seen this trend going on for quite a number of years.

As I mentioned in my remarks specifically when I talked about APAC, we have been outgrowing the market, in particular in the ultra-high net worth segment.

However, I think there are some other things that you need to consider when you think about gross margin development.

I think the first one is, as we've talked about the different pricing initiatives that we have in place and that we've put in place and that we continue to work on, clearly, we don't believe that the gross margin that we're currently earning on ultra-high net worth client base is where it actually could be in the future.

So, one, we think the established base gross margin actually has more potential to the upside.

Second, if we think about development and focus, we'd like to see a more balanced mix between the high net worth growth and the ultra-high net worth growth.

We've really been working on our segment initiatives in the high net worth area in the course of the past quarter or so.

As we start to work on that initiative we think we'll start to see a pickup in the growth in that area, which will change the mix a bit from what you see here, maybe to a more balanced mix, as well as focusing on improving that gross margin as well.

And then finally, if you think about the net interest slide that we have in the back of the pack, obviously as the FED starts to move and then other economies and central banks begin to follow, we'll start to see a net interest margin benefit, which is something that we haven't had for over six years in terms of a tailwind.

When you ask about the strong performance in equities and the importance of the wealth management franchises to our order flows, although that is certainly an important component of our business, at the same time I don't think it's what explains the performance in the quarter and how well we performed in this quarter on a relative basis.

I do think that we had a much stronger performance in APAC, both in derivatives, as well as in our institutional flow businesses in APAC.

So a great performance, but I don't think it's related to the private banking or wealth management business lines.

So Jeremy let me take the last question.

Of course I'm not going to go into hypothesis of -- hypothetical requirements for any numbers, because I think that we have to keep it a fairly realistic level.

So let me try to tell you what our approach, and when you talk about our leverage ratio being -- your description was it's frankly low.

If you look at leverage ratio, it's well ahead of minimum regulatory requirements at 4.7%.

We have CT1 ratio at 3.2%.

We have Tier 1 ratio of 3.6%.

If you take in consideration the business model we have; if you take in consideration the liquidity buffers we have in our balance sheet; if you take in consideration the business model in Europe versus the US; and if you take into consideration that we are just continuing -- as Tom mentioned before, we're going to go ahead and keep going with our AT1 issuance, I feel pretty confident that we will be able to fulfill a reasonable adjustment to the leverage ratio requirements.

So numbers that -- are always difficult to comment, because there is still, in my point of view, also sometimes a confusion or lack of clarity about when people describe a number -- a 3%, a 4%, a 5% or 6%, what do they mean?

A CT1 or is including AT1 or any further contingent capital portion?

So, in any case, we will be able, for sure, to adapt to any regulatory change.

To the extent that this will become economically costly, we will have to pass the cost to the clients which is quite clear.

I don't think that we have room to absorb a further increase in capital requirements without, unfortunately, to pass the cost to the economy and to clients.

All right, this is very helpful, thank you.

Maybe just if I can, now, on page 17 again; Tom, my last sub-question was how do we think about the proportion of equity revenues that is driven by the private bank?

Is there just a general steer that you can give us?

No, not really.

But for the second quarter, for sure, Tom, we can say that clients' risk aversion and activity wasn't high.

I mean if you look at the transaction line, it's a good indication.

So I think it was really an APAC and institutional China and APAC dynamics that were affecting our business in equities, rather than wealth management clients, I can say.

Correct.

Perfect, thank you very much.

Al Alevizakos, KBW.

I've got a couple of questions if I may.

First question is on asset management.

I can see, once again, the performance fees were not great and you've actually said that only 60% of the funds actually now meet the high water mark.

I'm just wondering, how could we think about the future of the business, because I remember that the medium-term target is still a PBT of CHF1 billion and I'm wondering if that's still applicable.

And the second question is on the IB.

On the first part of that question, I would like to ask, would you consider to up the investment bank RWAs above the CHF70 billion target that you have?

And secondly, would you allocate more capital on the IB generally, because it seems like the return on equity that you post is much higher than all your competitors?

Thank you.

Thanks for the question.

I think I'll take the second one and Tom will go on the first one on the margins, since I didn't catch the first part.

So on the IB, I think that as you could see in the last 10 quarters, the IB was able to comfortably work within the resource limits that we were granting.

I think by doing that, we are able to translate into these very solid and strong numbers.

I would argue that by increasing resources, you would see probably a dilution of returns.

At this stage, for sure, I don't see any reason why we should increase resources.

I think that we have a very clear defined business model, which is focused on flow business, serving clients and enhancing our advisory capabilities.

Of course, should we have a change in regulation that we may need to evaluate at Group level, our risk-weighted asset target, but it's not going to compromise the fact that we believe that having one-third of our capital allocated to the IB is the best way for the IB to continue to be a great contributor to the Group profitability and value proposition.

Now, going back to your first question on asset management, I think if we look at the performance, we've been very happy with O'Connor and A&Q.

At the end of the first quarter we had 90% of their assets under management at or above their high water marks.

If you look at industry performance, in particular in the month of June in the second quarter, you did see some challenges in that month.

Although we fell back to 60%, I would say our high water marks are still reasonably in sight.

So one, we still feel good about, first, the path of progress to moving towards that CHF1 billion target that we've set in the medium term for this business; and second, the target still holds.

Okay, and if I may just add one more question to you, Tom, on the IB.

I know that Deutsche Bank has given us an indicator about the RWA inflation that they expect from all the new regulation with the -- that's coming from the Basel committee.

I know that you've already started putting in the FINMA multipliers.

But do you have any number for us in terms of what do you expect as a first kind of bet on the RWA inflation?

Yes, on that one, Al, I think Sergio's markets were pretty expansive on that question before.

I would just add to it by saying there are a lot of discussions and a lot more clarity that'll be coming out as we approach yearend, and I think that'll be a more appropriate time for us to see where things stand.

All right, thank you very much.

Amit Goel, Exane.

Most of my questions have been asked already, but just one I want to check.

In terms of litigation and the working group, RMBS, just want to check what stage you guys are at relative to some of the peers.

Obviously, we saw Goldman's taking a charge in Q2.

So any guidance there in terms of whether that's likely to be a 2015 or 2016 cost for the Group.

Thanks.

On that one, I would say that you've obviously seen our development in litigation provisions in the quarter.

For an individual matter, we'll recognize the provisions in line with when they're estimable and probable.

Obviously, they weren't in this particular quarter.

Okay, thank you.

(Operator Instructions).

Moritz Kaufmann, Blick.

I was just wondering now that Tidjane Thiam has taken office in Zurich and he has announced quite some changes, are you afraid of the competitor in your own country?

Well, first of all, I welcome Tidjane to Switzerland and I think that Credit Suisse is a competitor that has been out there for decades and a long time.

So we are very -- we will continue with the same focus to compete and we are confident about our capabilities.

I think that we have a clear strategy.

We defined the strategy early enough.

We are executing our strategy.

We are very confident that we can spend time with our clients now.

Also, we are confident that the resources that we are freeing up are also invested to grow our business, including Switzerland, which is a key pillar in our strategy.

And you could see it also in the results that we have disclosed in the last few quarters.

So I think that the competitive nature hasn't really changed so much compared to the recent past.

Lorenzo Bonati, SDA.

There were speculations in the Swiss Sunday press about a further sharp reduction in investment banking for Switzerland; the number was named of 1,000 jobs that should be cut by the end of the year.

Is that number for Switzerland correct?

And can you clarify, in general, your plans in terms of job reduction?

As we mentioned in the past, we are not commenting on headcount numbers or reduction.

For sure, I would have a full-time job in trying to respond to every Sunday speculations.

So I think that I wouldn't really take those kind of information for good or spend too much time on it.

I think that we have a very clear defined strategy.

The investment Bank, as you can see, is performing extremely well.

The Group is performing extremely well.

We are executing our cost-reduction plans, which may have some repercussions on headcount, but they are not anything new compared to what we announced in the last few years.

Thank you.

Laura Noonan, Financial Times.

I just had two very quick questions for you.

The first was in terms of your overall capital base and your dividend.

I know you said dividend policy remains unchanged, but your current CET1 ratio of 14.4% is very far above the 13% at which you will pay out over half of your earnings in dividends.

So is there any scope to increase that further?

And then the other question was in relation to the investment bank.

In terms of what you said about possibly increasing the risk-weighted asset limit and the capital limit, because of regulation, could you give us any color about which kind of regulations you're talking about there?

Are we looking at the fundamental review of the trading book, or are there other regulated in particular, which you're thinking about?

Thanks.

When we look at payout, I think the policy is the one that you stated and we confirm that.

When we look at the capital levels, we need to look at a capital levels measure against risk-weighted assets.

We also look at requirements against leverage ratio requirements.

We look into stress requirements.

We also anticipate any further needs for capital in respect of cyclical needs or changes that we can see potentially affecting our ability to keep a base line dividend payout that is sustainable over time.

So that's the way we determine our payout ratio and it's something that we will do at the end of the year, based on how the year progresses.

So it's premature to talk about the absolute amount of dividend we will pay out.

But what I can tell you for sure is that we will continue to deliver on our existing policy and in terms of capital return.

In terms of future requirements for capital, I think that this is an -- industry-wide and international regulators are going through the process of redefining potentially risk-weighted assets requirements across different activities in the banking and that may lead the entire industry to have to reconsider and review risk-weighted assets target.

But it's totally premature to talk about it, because, in any case, it won't be an idiosyncratic move by UBS.

It will be something related to an industry-wide change in regulation.

Frederic Papp, Finews.

I've got a question and I'm interested in when does UBS display the results separately for the UBS Switzerland AG?

Can you give me a bit more color on that?

And then I have also a question about net new money.

For Switzerland and the emerging markets, the second quarter was quite strong, but comparing to the second quarter 2014 for Switzerland now, it was rather flat and even not so good in emerging markets, as well as the gross margin.

Maybe you can give me some more information on that?

Thank you.

So on your first question, when do we publish the legal entity results, that will be concurrent with the publication of the report tomorrow morning, so 6:45 Zurich time.

Tomorrow morning?

Tomorrow morning, yes, correct.

Actually, that's one point we should point out and I think it's especially important as you go through what we call the yellow pages in the report where you actually have the listed separate legal entities that we disclose, there are different accounting treatments by entity.

In the case of UBS Switzerland AG, that is on Swiss GAAP.

So trying to do comparisons to the Group results from Swiss GAAP to IFRS it's actually not a meaningful comparison, so you should just look at them on a standalone basis.

Your second question just about the net new money performance in different areas on a year-over-year basis.

I think in emerging markets, one of the things that we should note, there certainly has been a fair amount of volatility in emerging markets in the previous quarter; concerns about the effect of the Federal Reserve raising rates; also questions about geopolitical instability, issues related to Greece and impacts on other countries.

So I would say that we're not disappointed in any way with the net new money performance in EM.

Conversely, I would say we're actually quite happy with the net new money performance in Switzerland in the quarter.

So I think it's more a good performance out of Switzerland than it is bad performance in EM.

Thank you.

Joshua Franklin, Reuters.

I just have a couple of questions, again touching on capital.

First of all, UBS has said in the past that it can meet a TLAC requirement of 20%, which is the upper band of what's being proposed at the moment.

I'm just wondering if you think there will be regulatory and market pressure on banks going forward to show they can meet that TLAC requirement sooner rather than later?

I'm also, wondering if you can give any color on where you expect the FSB to land on the 16% to 20% proposal of risk-weighted assets that they proposed at the moment, where you see that final figure landing?

Thank you.

Joshua, thanks for those questions.

So, first, I think in my comments, where I talked about our issuance plans, we're going to start issuing TLAC in the current quarter, in 3Q.

So we're obviously not waiting to see the final regulations.

That's the way we've dealt with all of our capital requirements.

We've looked at what we see as the direction intendancy and we've built our capital well in advance of the regulatory requirements.

So, for us, it's more about the way that we've conducted our strategy around capital, rather than what we see others doing.

So we'll be acting with the issuance in 3Q on TLAC.

The question on the FSB, where will they end up in the 16% to 20% range?

There was obviously a reason that there was a range.

There are different views on the issue.

As we've indicated previously, it doesn't really matter where it ends up, we feel that we're well prepared to be able to address even the higher end of that band.

Thank you very much.

Jeffrey Voegeli, Bloomberg.

Just one more.

You mentioned earlier in the analyst call that the wealth management Americas unit is not for sale.

And just because you mention it, I have to ask: has there been any kind of advances towards you?

Has anyone tried to buy it from you?

Have you received offers for that unit?

And then maybe turning the whole thing around, can you say whether there are any areas/regions where you'd consider buying maybe even actually in the US to increase the scale of the business?

Yes, thanks.

Yes, thank you.

Jeffrey, I think that the remarks were due mainly to the fact that during the second quarter in the last few weeks, we heard a lot of rumors in media blogs in the US.

And also, we know for a fact that in private conversations, some competitors are hinting at this as being an option.

I think I took this opportunity to clarify that an option is an option when something is for sale.

Therefore, I would consider a total waste of time also discussing about those kind of topics.

Frankly speaking, I think that's not only the strategic relevance to us, but also, as Tom pointed out in respect of the ability we have in the US to activate and use our deferred tax assets, makes it a total financial nonsense.

So adding the two, and I just took the opportunity to clarify this matter.

So in respect of futures, I think that we are -- we said in the past, we are not complacent or arrogant to say that we don't need to grow inorganically, but I'm very happy with the fact that we are able to show that we can grow organically.

For sure, if I look around at this stage, broadly speaking, I don't see anything that would add to our business proposition that is priced correctly to what I would consider a fair pricing.

So I don't think it's the [time] for us to talk about M&A at this stage and no matter which region we are talking about.

Okay, thank you.

We have no more questions at this time.

Okay, thank you.

We can close the call and enjoy the rest of the summer.

Thank you.