UBS Group AG (UBS) 2017 Q4 法說會逐字稿

Ladies and gentlemen, good morning.

Welcome to the UBS Fourth Quarter Results 2017 Presentation.

(Operator Instructions) And the conference call is being recorded.

(Operator Instructions) The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to UBS.

Good morning, everyone.

It's Caroline Stewart here, Head of Investor Relations at UBS, and welcome to our fourth quarter results presentation.

This morning, Sergio will provide an overview of our results and targets, and Kirt will take you through the details of our results.

After that, we'd be happy to take your questions.

Before I hand over to Sergio, I'd like to remind you that today's call may include forward-looking statements.

These statements represent the firm's belief regarding future events that by their very nature are uncertain and outside of the firm's control, and our actual results and financial condition may vary materially from our beliefs.

Please see the cautionary statements included in today's presentation on 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.

And with that, I'd like to hand over to Sergio.

Thank you, Caroline, and good morning, everyone.

2017 was an excellent year for us.

We delivered stronger financial results and met our net cost-reduction target.

Greater regulatory clarity means we can open a new chapter for UBS, allowing us to sharpen our focus on growth across our businesses, make further reinvestment in technology and deliver attractive returns to our shareholders.

Our reported profit before tax rose 32% to CHF 5.4 billion as we expanded our Wealth and Asset Management businesses, which attracted over CHF 100 billion in net new money and added over CHF 360 billion to invested assets.

Personal & Corporate Banking delivered good results despite the unfavorable interest rate environment.

Net new business volume growth was the highest since 2003.

And net client acquisition was a record, underlying our very strong momentum, especially with younger clients via our online and mobile banking solutions.

The Investment Bank once again achieved an adjusted return on attributed equity above its 15% target for the full year as a strong year for CCS offset the pressure from low volatility in ICS.

In Corporate Center, losses were lower as we reduced non-core and legacy and litigation expenses.

As you know, our capital position is very strong, with total loss-absorbing capacity of almost CHF 80 billion.

We are also turning a page on our successful efficiency program that delivered CHF 2.1 billion in net savings.

Gross savings were CHF 3.9 billion and were partly offset by higher spend to grow our businesses and complying with new regulation.

Increase in revenues and delivering on costs allowed us to improve our group adjusted cost/income ratio by 3 percentage points to 78%.

Lower operating expenses and reduced litigation costs contributed to over CHF 570 million to PBT.

We made further progress in resolving legacy items.

We are confident that the remaining matters are manageable, but they are likely to take some time to resolve.

Excluding the effects of the U.S. tax law changes announced in December, net profit was more than CHF 4 billion, up 24%.

And our adjusted return on tangible equity, excluding deferred tax assets, increased to 14%.

Like many of our peers, the new tax law resulted in a write-down of our DTA, but this had no impact on our fully applied CET1 capital and doesn't affect our ability to return capital.

This is in line with guidance provided throughout 2017.

Global Wealth Management had an excellent year, with profit before tax up 14% to CHF 4.1 billion.

Revenues rose in all lines, and the cost/income ratio was down.

Invested assets increased 12% to more than CHF 2.3 trillion, including CHF 1 trillion from ultra high net worth clients.

We had record performances in APAC, the Americas and ultra high net worth, with PBT up almost 30% in Asia and 12% in the other businesses.

We believe these areas will continue to drive superior growth.

But Wealth Management is more than just these 3 areas.

UBS is the only truly global wealth manager with leading and diversified positions across the globe, operating both on and offshore in each region.

Today, we are -- we also want to look at our priorities for the next 3 years.

And what's clear is that disciplined execution remains our #1 priority, and our strategy is unchanged.

Global Wealth Management remains at the heart of our bank, and I will come back to its priorities later.

But UBS isn't just about Wealth Management.

It's also about Asset Management, the Investment Bank and Personal & Corporate, as all 3 are successful businesses in their own right.

Together, they make a significant contribution to earnings, diversify revenues and generate high-quality returns.

Without them, Global Wealth Management would not be what it is today nor could it deliver on its aspirations.

From a geographic standpoint, we have a clear ambition to grow in the Americas and to reinforce leadership in our home market in Switzerland.

In EMEA, we want to leverage our capabilities to grow our share in a market that is more and more likely to consolidate.

In all cases, continued cross-divisional collaboration creates a unique opportunity for growth.

As you know, we are big believers in the Asia Pacific opportunity, especially China.

The number of billionaires in China has exceeded the U.S. for the first time, and the middle classes are growing even faster.

UBS' competitive position here is strong, and we are best placed to capture opportunities in the region across our businesses.

We will also invest more in technology to drive growth, better serve our clients and improve efficiency and effectiveness.

2 years ago, we began to more closely align Wealth Management and Wealth Management Americas.

We have already made good progress, converging our Chief Investment Office, ultra high net worth and family office into more global organizations.

So our decision to combine Wealth Management and Wealth Management Americas is the natural next step.

There has never been a greater need or opportunity to provide our clients with global, fully diversified products and services in a true multi-shore offering.

Shared best practice, greater synergies in investment and technology as well as new products and business lines will benefit our clients and our shareholders.

We can also more effectively leverage the purchasing power of CHF 2.3 trillion of invested assets.

That said, and this is very important, our distinct client service and local adviser models will be maintained.

In the new division, we will integrate control function and operate with single finance, risk and legal organizations.

Middle- and back-office functions will be more closely aligned and integrated.

On the business side, as an example, we will integrate our existing LatAm offshore and onshore operations in the Americas region, which means our clients will benefit from a more seamless multi-shore booking model.

In Global Wealth Management, our priorities are already familiar to you as they are not new.

Increasing mandates, loan and banking products penetration remains important.

We will continue to collaborate across divisions to bring the best of the bank, in particular, to our family office and ultra high net worth clients.

We will also look at ways to further enhance our offering to high net worth clients and, by using technology, to access core affluent wealth pools.

And lastly, to complement our existing portfolio, we will likely make small acquisitions to build our presence in attractive locations and segments.

Moving on to Personal & Corporate.

Here, we continue to aim for sustainable growth by developing existing clients and winning new ones, supporting this through investments in our already leading digital capabilities.

In Asset Management, we will expand our offering of passive and alternative products and continue to invest in unique B2B and third-party platform solutions.

In the Investment Bank, we remain focused on growth in China and the U.S., and we'll take advantage of our top-ranked global equity research and our leading execution capabilities.

Both are critical to succeed in a MiFID II world.

And of course, the IB will remain disciplined in managing its resources.

As I've said in the past, as much of the last 10 years were driven by regulatory change, I believe the next decade will be shaped by technology.

Our focus is on enhancing the client experience, driving product excellence and distribution, and creating a more efficient and effective operating model.

Last year, we spent CHF 3.2 billion on both strategic initiatives and run-the-bank IT programs.

Our investment will add to a total of around CHF 1 billion to our IT cost over the next 3 years, with a growing proportion related to strategic initiatives rather than regulatory projects.

Technology is a means to achieve our efficiency objective, and it's not credible to expect our IT spend to go down.

Therefore, these expenses will remain slightly above 10% of our revenues in the near future.

Capital strength has always been a key pillar of our strategy.

Since 2012, we have increased our loss-absorbing capacity by around CHF 50 billion to around CHF 80 billion while improving the bank's resilience and risk profile.

While we still await further details on the implementation of the final Basel III rules, the December announcement gave us greater clarity on our medium-term capital needs.

We estimate that risk-weighted assets could rise by around CHF 40 billion through 2020, but we will consider a CET1 leverage ratio of around 3.7% to be our binding constraint over the period.

As a result, we intend to build approximately CHF 4 billion in CET1 capital over the next 3 years.

After that, our current best estimate of the impact from the finalized standard is an incremental CHF 35 billion of risk-weighted assets from January 2022, although ultimately, it will depend on mitigating actions and the interpretation of the standards by our regulator.

Once the final rules are known, of course, we will provide an update on our CET1 ratio guidance.

This welcome regulatory clarity also means that we can update our capital returns policy.

Our aim is to further increase returns to shareholders while building on our strong capital position.

Going forward, our priority is to pay an ordinary dividend, growing at mid- to high-single-digit percentage per annum while considering supplementary returns, most likely in the form of buybacks.

At the same time, as I said, we want to operate with a CET1 leverage ratio of around 3.7%.

This means that we can potentially return almost all of our earnings after considering the CHF 4 billion capital buildup I mentioned before, subject to regulatory approval.

When facing adverse market conditions or idiosyncratic events, we could reduce or pause the buyback while, at the minimum, defending the prior year dividend.

Following our strong 2017 performance and in line with our new capital returns policy, we are proposing an increase of our ordinary dividend of 8% to CHF 0.65 per share, which will be paid out of capital contribution reserves.

We are also launching a 3-year buyback program of up to CHF 2 billion, including up to CHF 550 million this year.

Alongside our integration and investment measures, we are setting new targets for the next 3 years.

The group will target an adjusted return on equity of around 15%, excluding DTAs, which, at around 20%, remain a material part of our tangible equity.

Taking into account our planned increases in technology spend and the permanent nature of much of the regulatory cost we have incurred in the past few years, we are targeting a group cost/income ratio of below 74 -- 75%.

Our business divisions are aiming to generate positive operating leverage resulting in a progressive improvement in their cost/income ratios, contributing to our overall efficiency.

In addition to the existing 10% to 15% adjusted PBT growth target for Global Wealth Management, we are setting a 65% to 75% cost/income ratio target range and a 2% to 4% net new money growth target.

For Asset Management, we are targeting around 10% growth in PBT per annum.

The Investment Bank will continue to target an adjusted return on attributed equity of at least 15% and operate at around 1/3 of the group's LRD and risk-weighted assets.

This is consistent with our existing guidance.

As we enter this new chapter, one thing will stay the same: that's our focus on executing our plans with discipline.

In addition, and this is very important, we will focus on investments to drive growth, efficiency and higher returns.

Over the last few years, we have demonstrated our ability to master challenges while capturing opportunities, and I'm confident we will continue on the right path to secure the bank's future success.

With this thought, I'll hand over to Kirt, who will take you through the Q4 results.

Thank you, Sergio.

Good morning, everyone.

For the fourth quarter, our results were adjusted for net restructuring expenses of CHF 381 million, CHF 153 million gains on sales, CHF 29 million AFS gains and CHF 25 million in expenses related to the modification of terms of certain compensation awards.

Over the next several quarters, we expect to see a gradual convergence of our reported and adjusted results as our restructuring declines to around CHF 0.5 billion in 2018 and under CHF 200 million in 2019.

Just a note upfront on today's results, which are now a week earlier than any other major European bank, reflecting streamlining and improving our closing and reporting processes, which gives us an extra month a year to focus on other value-added activities.

My comments compare year-on-year quarters and reference adjusted results unless otherwise stated.

Global Wealth Management delivered strong fourth quarter PBT, up 18% on positive operating leverage.

In fact, all 4 quarters this year have come in above CHF 1 billion in profits.

Fourth quarter net margin increased by 1 basis point from the prior year.

Operating income rose 6%, with all revenue lines up in both Wealth Management and Wealth Management Americas, and also improvements in all regions.

Recurring net fee income increased by 6% on higher invested assets and increased mandate penetration.

Net interest income improved on higher U.S. dollar rates and 9% higher loan balances.

In Wealth Management, strong loan growth led to the highest revenues from lending in a decade.

We also saw the highest deposit revenues since 2011, partly reflecting euro deposit repricing and related outflows of negative margin deposits.

Wealth Management Americas had record loan balances, partly benefiting from our investments in banking products.

Global Wealth Management's transaction-based income increased 4% year-on-year, with increases in all regions.

Overall, costs rose less than revenue, improving cost to income by 2 percentage points to 75%.

The results also include a significant amount of investment in transitioning our operating model in Wealth Management Americas, tech spend and enhancing our product offerings in client service globally.

In many cases, we have -- we are already seeing benefits.

But as always, our objective is to deliver sustainable profit growth.

In Wealth Management, net new money was strong at CHF 14 billion, mainly from APAC and Europe, where we benefited from a few large inflows.

And this is also net of CHF 6 billion of cross-border outflows.

For the year, excluding outflows for cross-border and for the introduction of euro deposit fees, Wealth Management generated over CHF 70 billion in net new money, a 7% growth rate.

In Wealth Management Americas, net new money was marginally negative, reflecting lower net recruiting in 2017 and higher attrition in Q4 related to end of the protocol.

Many of the levers following the protocol exit had recruitment loans that were nearing maturity or had matured, and we see this as an acceleration versus our plan and not as an indication of higher attrition to come.

There will likely be some related outflows in 1Q '18, which we aim to offset with same-store inflows.

As you know, we're focused on boosting retention and productivity through an attractive grid and rewarding FA loyalty through to retirement.

Same-store net new money was strong and rose to around CHF 8 billion this quarter, reflecting the actions we've taken throughout the year.

As we have significantly reduced our recruiting, employee loans are now down 14% year-on-year, with related expenses down 9%.

We expect further reductions in 2018.

Last quarter, we highlighted our increased investment in Wealth Management Americas to position this business for continued growth.

Apart from investment in retention and productivity, we continue to build out our banking products and have launched our public finance business.

We are seeing early returns, with mortgages up 4% in the quarter, improved deposit margins and initial munis deal flow.

These benefits should accelerate in 2018.

In Wealth Management, the completion of our cross-border and voluntary compliance programs was a critical milestone for 2017.

Since 2012, we've had around CHF 70 billion of related outflows, which has impacted our profitability.

The outflows from Q4 are likely to have a slight dampening effect on recurring net fee income in first Q '18.

After which, we should see a more normal recurring revenue trajectory quarter-on-quarter.

This substantially ends the largest headwind faced by this business.

The cost actions we took in 2016 helped fund some of the investments we've made, notably into One Wealth Management Platform, which now covers around 80% of Wealth Management invested assets.

We will continue to invest in Global Wealth Management to position the business for sustainable growth, including accelerating technology investments, as Sergio highlighted.

Personal & Corporate delivered strong PBT of CHF 428 million, up 8% year-on-year and our best 4Q since the crisis, benefiting from management actions taken throughout the year and strong client flows.

Recurring net fee income increased 19%.

Transaction-based income rose by 11%.

And while net interest income from deposits improved, it was more than offset by higher funding costs and lower banking book income.

Higher expenses were driven by Corporate Center services.

Personnel costs were down due to a one-time adjustment, and we'd expect them to return to a more normalized run rate in the first quarter.

As we highlighted last quarter, we expect the buildup of expenses related to our client experience initiative, focused on fully digitizing our leading Swiss Universal Bank, which will continue over the next 3 years, with benefits starting in 2019.

We saw CHF 4 million net credit loss recoveries this quarter.

The adoption of IFRS 9 on Jan 1, 2018, may introduce greater volatility in our credit loss expense.

On October 1, we completed the sale of our fund administration business, resulting in a gain on sale of CHF 153 million included in the reported pretax result of CHF 238 million.

Therefore, the fourth quarter results don't include the roughly CHF 10 million quarterly PBT we have seen from the business historically.

Adjusted PBT decreased to CHF 116 million, partly due to around CHF 20 million of one-offs that [flattened] the prior year quarter and the sale.

Excluding these items, operating income was slightly up, as net management fees increased on good market performance with positive net new run rate fees for the second quarter running, but we had lower performance fees mainly in real estate.

Expenses increased on higher personnel costs and allocations from Corporate Center - Services.

Asset Management recorded excellent net new money of CHF 10 billion, contributing to a full year record of CHF 59 billion, including money market flows and taking invested assets to a 9-year high.

We're pleased with the full year performance in the IB.

However, as you've seen, for us and our competitors, Q4 was particularly challenging due to continued low volatility levels.

The IB delivered CHF 168 million in PBT in the fourth quarter, including CHF 79 million in credit loss expenses, mostly due to a write-down on a margin loan.

In Corporate Client Solutions, debt and equity capital markets performed well, but overall revenues declined, mostly due to a 20% drop in the market fee pool for M&A as well as the strong prior year revenues from advisory.

Within ICS, Equities held up well, particularly in APAC, with good performance in cash and derivatives more than offset by lower Financing Services revenues in the low volatility environment.

This also impacted FRC, driving a significant reduction year-over-year.

That said, our performance in FX recovered somewhat, particularly in our e-trading business, reflecting investments we made earlier in the year.

Earlier, Sergio mentioned that we are well-positioned to succeed under MiFID II.

However, we may see some short-term impact on recognizing research revenues of around CHF 50 million in the first quarter related to timing of billing, mostly in equities.

Costs were down 4% due to actions taken in 2016 and good discipline throughout 2017.

The U.K. bank levy was also around CHF 10 million lower than last year.

The Corporate Center loss before tax was CHF 515 million.

Services PBT improved by CHF 116 million.

During 2017, we retained less of the Corporate Center services costs centrally, mainly related to the elimination of the cost guarantee during 2017 and the change in funding cost allocations as a result of revising our equity attribution framework.

Group ALM's loss before tax was CHF 213 million, with increased losses mostly due to lower rates, increased debt issuance and mark-to-market losses on our high-quality liquid assets.

Non-core legacy portfolio posted a lower pretax loss at CHF 142 million, mainly as litigation provisions and other operating expenses, including the U.K. bank levy, decreased.

LRD is now down to CHF 15 billion, less than 2% of total group.

And RWA ex [op-risk] is only CHF 6 billion.

Over the past 4 years, we have substantially reduced the drag on group PBT from Corporate Center.

Excluding litigation, we've gone from a loss of CHF 3 billion to CHF 1.3 billion in that time, mostly driven by reductions in NCL but also related to lower retained cost in Corporate Center - Services.

We expect Corporate Center losses, excluding litigation, to continue to reduce over the next 3 years.

In the fourth quarter, we recorded a net tax expense of CHF 3.2 billion.

This includes net DTA write-down of CHF 2.9 billion following the enactment of the U.S. Tax Cuts and Jobs Act.

This was in line with our guidance throughout 2017 of roughly CHF 200 million net reduction for each 1 percentage point of tax rate decrease.

The impact on fully applied CET1 capital was negligible, and there is no impact on our dividend paying capacity.

The U.S. tax law changes also introduced the Base Erosion and Anti-abuse Tax, or BEAT, which could increase our tax liability by up to CHF 60 million in 2018.

However, we are exploring potential mitigation, and we'll update you when we have clearer guidance.

For 2018, we expect a full year tax rate of around 25%, excluding any effects from revaluing DTAs.

Our capital position remains strong, with TLAC above CHF 78 billion, and our fully applied CET1 ratios are comfortably above the 2020 requirements.

Of the CHF 20 billion RWA increase we expect from regulatory changes over the next 3 years, we anticipate about CHF 15 billion in 2018, including CHF 5 billion in the first quarter.

Despite this increase, as Sergio highlighted, we consider the leverage ratio to be our binding constraint over the period.

As we adopted IFRS 9 at the start of 2018, we recognize a roughly CHF 0.7 billion reduction in equity and a CHF 0.3 billion reduction in CET1 capital on the 1st of January.

This morning, we announced measures to support the long-term stability of our Swiss pension fund, including payment of up to CHF 720 million in 3 installments from 2020 to 2022, which will reduce our fully applied CET1 capital in each of those years, with no impact on P&L.

Short term, these measures will result in a PBT gain of around CHF 225 million in first quarter '18.

The gain will be treated as an adjusting item in personnel expenses with no impact on equity or CET1 capital.

To wrap up, with fourth quarter PBT up over 20% despite challenging market conditions, we delivered a strong quarter to conclude an excellent year.

With that, Sergio and I will open up for questions.

(Operator Instructions) The first question comes from Magdalena Stoklosa from Morgan Stanley.

They're both kind of broadly strategic.

So my first one is about your kind of view as -- getting a little bit more of a view regarding the sharpening focus on growth, which you've mentioned literally in your starting remarks, Sergio.

Because, of course, over the last kind of 12 months, we have been kind of talking about how constraining the regulatory uncertainty, particularly of the Basel IV was from a perspective of being able kind of to look forward not only from the capital optimization perspective, which you have announced today, but also about how the growth going forward is likely to be delivered.

Now when we look at your kind of management targets, though, for the next 3 years, they are broadly unchanged to what we have seen you talking about with the kind of -- with your previous medium-term targets.

And I'm just -- and I would just love to hear your top-down thoughts about how that kind of newly found clarity allows you to potentially maybe increase those going forward, I think, to a degree, particularly given how the business was tilting much more towards the Global Wealth Management and the results that you have been delivering there.

I think that some of the expectations may have been higher for those 3-year targets going forward.

And my second question is very much about your thinking about the combining of the Wealth Management divisions.

And particularly, what are you kind of aiming to achieve with the combination?

Because to a degree, we have seen some of the kind of underlying operating and investment platforms already kind of acting as a unison.

So we have seen the One Wealth Platform already with the 80% of business on it.

So I just kind of wondered, how are you thinking about that kind of divisional restructuring?

Thank you, Magdalena.

Yes, I think that you picked up this issue about sharpening our growth.

And of course, beside the fact that having a less -- having very little visibility on capital in the past also somehow was limiting our ability to think about how much we can invest and how much we need to put aside for further investments.

I think that having reduced substantially our litigation portfolio in 2017, it's also freeing up everybody's time in management, including myself, to look about how to help to sustain growth going forward.

If I look at the targets, confirming that we are able to grow double-digits in Wealth Management, in an industry that's likely to grow 2x GDP in the next few years, and we are aiming to deliver almost twice as much as that or at least 50% of that, it's, I would say, confirming those targets after coming out of years of growth at this level.

In my point of view, it's both ambitious and also realistic, considering also the lack of real visibility we have from a macroeconomic standpoint of view and geopolitical standpoint of view.

So I do think that we want to keep an ambitious target that is credible and sustainable.

And that is also a target that allows us to continue to invest in our business because it's going to be a journey.

It's the constant ways of growing the business, creating operating -- positive operating leverage but also, at the same time, focusing on reinvesting some of those profits.

So in a nutshell, I do think that we execute this strategy going forward, we will be able to unlock the full potential of our franchise.

I think you're right that we have been, in the second question, we have been already converging in the last 2 years our capabilities in family office, in ultra and our CIO operations.

But moving to the next level is going to help us to also create a new client experience, facilitate those internal dynamics in sharing best practices in terms of product capabilities, efficiency and effectiveness.

I mean, I mentioned a couple of examples.

We're going to have a co-leader in the business.

But if you look at the organization below Martin and Tom, they're going to have one legal support, one risk, one Chief Operating Officer.

They will also look at streamline their capabilities as much as we can in order to free up resources to reinvest in our business and deliver bottom line to our clients.

Also, our client base is going to benefit from that.

I also again quoted the Latin American business is a good example.

There is no reason for us, after having completed our restructuring growth strategy in the last few years in those 2 segments, to have 2 different -- 2 Latin American businesses being managed by 2 different divisions.

So we are unifying those operations in one seamless operation.

So I do think that also bringing everybody under the same umbrella, which reinforce the internal dynamics and also the external perception, and which, at the end of the day, will translate into good returns.

The next question comes from Stefan Stalmann, Autonomous Research.

A couple of questions, please.

The first one, on your new return on tangible equity target.

Now that you exclude the DTAs, it's still 15% as the old target.

And it looks a little bit unambitious compared to the fact that you were actually generating more than 14% already in 2017.

Could you maybe talk a little bit about how you look at this return on tangible equity return potential going forward?

The second point, regarding your IT investment budget, more than 10% of revenue.

That's around about CHF 3 billion of spending a year, and that is about 13% of your expense base.

Some of your competitors at the end of last year have talked about their IT spending and have suggested it's more in the range of 15% to 25% of the cost range.

SocGen, which is not a direct competitor for you, might say is spending more than 20% of its cost base on IT.

Could you maybe also add a bit more color on how you look at this discrepancy between your spending plans and what a lot of your peers are spending apparently?

And maybe the final question, on the performance of the business Wealth Management Americas.

In U.S. dollar terms, revenue is up 8% for the whole year, but the cost/income ratio has only improved by 50 basis points.

And I assume you can attribute most of that to the fact that your recruitment loans and the amortization of these recruitment loans is declining.

And then, obviously, it's a very different performance to what you have seen in the Wealth Management business, in the Global Wealth Management business, where your revenue has been plus 5%, but your cost/income ratio has improved by 300 basis points.

Also, compared to Morgan Stanley, I think the profit margin looks relatively underwhelming.

Could you maybe explain why you're happy with the performance of the Wealth Management Americas business?

And by combining this business with the other Wealth Management business, the global business, are we losing reporting granularity going forward?

Okay.

Stefan, I will let Kirt to answer the third question.

I just want to maybe anticipate part of that question is that you will not lose granularity because transparency.

I think I hope you appreciate that in the last 5 years, we aim to be very transparent in the way we communicate any kind of operations.

And that I would say that it's a little bit, I think, interesting observation to compare a monoliner competitor in one market with CHF 2 trillion of assets to somebody who has a global franchise and is operating in also with different views on segmentation from the business.

But I'll let Kirt to answer a more -- in the more details part of the equation.

Now to your question about our return on tangible equity, excluding DTA, I would observe that we are not saying that we want to achieve a 15%.

We say that we are not really capping our upside potential if it's possible to achieve more.

I do think that since we started to develop those targets on return on tangible equity, one thing is clear that we have -- which was around 2012, we then adapted.

We have been growing substantially.

Basically, the cost of equity went down.

The cost associated with regulatory requirements has been much higher than anyone could anticipate for the industry, both in terms of run-the-bank cost and also funding costs related to TLAC.

So I think that's -- of course, there is always a level of subjectivity.

I think having a range of return on attributed equity in this industry looking also, as you mentioned, our peers, interesting.

So if I look around, I wouldn't call a 15% return on tangible equity ex DTA, which accounts -- the DTA accounts for us around 22% of our tangible book.

So I think it's also a fair and transparent way to represent our true like-for-like comparison, because I think that there is only one peer that has a substantial DTA in equities.

It's the right way to measure our success.

And obviously, we are running a business that is set to grow over time.

There are no shortcuts.

And going out with unrealistic targets with the level of visibility we have on the macro picture and the geopolitical picture out there, we need to set standards that are achievable, ambitious but also sustainable.

The second point is on -- yes, Stefan, I think that probably with my colleagues, we can take up further details of the aspect.

I mean, our benchmark somehow seems to indicate that our spend is aligned to industry standard.

Of course, we have a choice of -- we do believe it's the 10% to 15% target rather than the 15% to 25% target, which seems to be a very high number.

So but -- I guess we have a, probably, methodology that we need to clarify.

But let me tell you that, of course, we do believe that, naturally, it's like when we talk about cost/income ratio, we are willing to sacrifice top line in order to create a value accretion at -- on a return on equity basis -- on a return on tangible equity basis.

So looking at spend in percentage of revenues, which we do, it's our benchmark.

It's only to give you an indication.

And we should always look it on a peer-to-peer basis in a little bit of -- in a careful way.

So I -- but I'm more than happy to ask my colleagues to follow up with you on this one.

But I do think that our technology spend is important.

It's quite -- I see it as a way for us to invest in our future and to allow us to take down other costs in the organization over time rather than a way to cut costs.

And be assured that I hope we can shift how we spend money within technology from regulatory and remediation to forward-looking, but the amount of spend needs to be sustained over the next 3 to 4 years.

And with that, Stefan, let me address your third question.

If you look at our Wealth Management Americas business, and we've been very, very clear over the course of the year that we're investing in that business to drive the next phase of growth.

And we've been investing in a couple of different areas.

The most substantial one that I highlighted in my speech is to focus on the retention and productivity of our FAs and to reduce our reliance on recruiting, because recruiting over time is very, very dilutive to shareholders.

You have the combination of very expensive packages, along with the burden of the loans that you build that have a capital burden as well as a drag on overall profits.

And we've achieved that.

We've reduced our recruiting during the year.

We've improved the productivity of our FAs.

You've seen that our FA's same-store net new money was CHF 8 billion, up substantially year-on-year.

We've reduced the level of attrition, particularly for our more productive FAs.

And we've accomplished that with spending more during the year.

But at the same time, we've seen a reduction overall in employee loans.

They've come down 14%.

Those expenses have come down 9%.

We anticipate those to come down substantially more as we go forward.

So what you'll see coming into the year will be a tailwind, as we get into next year.

Secondly, we've also invested in building up banking products because this is an area where we feel we're underpenetrated, we have further growth opportunity.

And also, those products generate the revenue that's most accretive to bottom line, because the payout grids are less.

And finally, it's the investment in the munis business.

Munis business has already started to generate some flow, some deal flow, and will become very accretive next year.

I think, therefore, if you think about the trajectory of the business, we're very confident that year-on-year comparison will turn very favorable as we get into '18.

Also I would just note, if you compare our performance with competitors, our average revenue growth is at the top of the industry, our average invested asset growth is at the top of the industry.

So you can see that on a top line basis, we're actually performing very, very well on a comparative basis.

And I think you'll see us compare very well on a leverage and also on a pretax basis, as we get into '18.

The next question comes from Jeremy Sigee from Exane.

I've got 2 quite specific sort of numbers questions, please.

The first one is in your full Basel IV estimate.

I wondered what you're assuming on operational risk, RWAs, because it looks like those should come down eventually.

And I just wondered if you made any assumption about that or whether you've just kept them unchanged.

So that's the first question.

Second question is on the tax rate outlook.

You're talking about 25% for 2018.

It was previously 20% to 25%.

I guess BEAT is 1% of that.

But I wondered what else is pushing up your 2018 tax rate guidance.

And relating to that, I sort of wondered why it's not much lower than that, given that you're reporting U.S. profit is tax-free.

Given that you're paying something like 22% in the rest of the world and Switzerland, I wondered why we shouldn't be expecting something like a 16%, 17% group tax rate and/or when we might come down to that level if that is a reasonable expectation.

(technical question) question.

If you look at the increase of CHF 35 billion we've reflected, there is an op risk component, we're not providing the details.

But the 2 largest components in terms of the increase is FRTB and op risk.

Credit is less of an impact, because we've already been absorbing a number of the credit requirements in advance of Basel III as a consequence of the multiplier that we've referred to.

Now in terms of the tax guidance overall, you're right, the 25% tax rate is at the upper end of what we have previously guided, and that really is just a consequence of the mix that we expect next year.

There are also some amortization of DTA expenses that we anticipate during the year, which pushes the tax rate above what our normal steady state tax would be, and so that adds a couple of percentage to the overall tax rate going forward.

But I think the guidance holds over time.

We still expect to be between 22% and 25%.

And that's with the U.S. profits coming in tax-free, it's still a group level of 22-ish?

Yes, that's correct.

And it's a combination of the current taxes that we're paying.

But also remember, if you look in the details of our tax note there's a fairly large component of DTA amortization in our overall taxes, and that pushes up the effective rate without necessarily driving cash tax outflows.

The next question comes from Anke Reingen from Royal Bank of Canada.

I've 2 follow-up questions, please.

The first is on new cost/income ratio target guidance of below 75%.

I just wonder why you really can't -- if you can please explain, why you can't do better.

It just seems quite a significant downgrade from the 60% to 70%.

I understand there's an element of investing for growth.

But still, I was wondering why you're not thinking you can do better.

And then a follow-up question on the capital slide, Slide 10.

You say in the footnote, assumes removal of FINMA multipliers.

I just wondered, basically this means you have confirmation any regulatory inflation will be offset?

And are you willing to give us some indication of what the magnitude is?

So thank you, Anke.

I'll take the first question.

I think that I do believe that aiming to be below 75% cost/income ratio, it's, I would say, as I mentioned before, a realistic target.

Let me tell you that if only by taking the unexpected regulatory cost that we're anticipating back in 2012 as being of temporary nature.

And unfortunately, they are not of temporary nature, as we all experienced in the industry, and the additional cost for TLAC that were not known at all back then.

Those 2 factors accounts for almost 5 points of cost/income ratio.

So in essence, we are confirming [the fact that] our targets, excluding only those 2 items, and we will drive [the factual pro forma] of below 70%, if you're counting in that way.

So I understand the point, but maybe with this clarification, I hope it helps to clarify a very important item of how we come to those targets.

Yes, Anke.

Let me address your point on FINMA multipliers, since we confirm we expect a total of CHF 20 billion increase due to regulatory as well as accounting changes.

CHF 15 billion of that is really related to regulatory changes, the majority of which is additional multipliers.

There's also a component that is related to risk not in VaR.

And that CHF 15 billion will come next year.

We'll see an additional CHF 5 billion this year, additional CHF 5 billion in the first quarter of 2019 related to the adoption of IFRS 16.

We expect to be able to absorb that with the CHF 4 billion of capital accretion we mentioned.

And we also expect, as both Sergio and I mentioned, that leverage ratio will still be binding even with those increases that we have visibility to.

The next question comes from Andrew Stimpson from Bank of America.

So on Slide 10, you've shown that you'll be willing to put more balance sheet to work across the firm, with CHF 80 billion extra leverage by 2020, SO that should lead to some better earnings.

But then if I add up the CHF 4 billion CET1 buildup that you also show on the Slide 10, on top of the CHF 2 billion buyback and then some growth in the ordinary, it probably means that you see CET1 growth or, let's call it, reported net profit of something just above CHF 14 billion, which seems quite a bit lower than what consensus is looking for.

So I'm just wondering if I've got that right or if I'm missing anything there?

So I understand the demand from the business for more balance sheet, but I'm just confused why that doesn't end up leading to better profits, especially when inflows and AUM levels have finished the year so strongly.

Yes.

So Andrew, I think if you look at what we announced, firstly, importantly, of course, the first priority is the dividend growing at mid- to high single digits.

Secondly, we're just initiating our buyback program, so the announcement of the up to CHF 2 billion is really just the first communication we're making around buybacks.

We would expect to continue to assess that each year and to come out with further announcements.

And as we look at the trajectory of our earnings, certainly, we think and we aspire to repurchase well above that CHF 2 billion over the next 3 years.

The next question comes from Andrew Coombs from Citigroup.

Yes.

Well, I think mine have been answered, but perhaps a couple of follow-ups.

One on the return on tangible equity target on Slide 13, and second, just to follow-up on previous question on Slide 10.

Starting on the ROTE target, you alluded to DTAs being 22% of tangible book.

When I look at the exact wording of how you described that ROTE, you say, excluding any DTAs that do not qualify as fully applied core Tier 1 capital.

So [also is] CHF 9.8 billion of DTAs of tangible book, I just want to check, I think it's less in the quarter on capital, you've got CHF 5.8 billion [to CHF 6.8 billion].

So if you could just clarify exactly what you are implicitly suggesting is in the denominator there of that target?

Second question, in terms of coming back, very explicit on your communication on the buybacks there.

When you think about the reconciliation between your CHF 4 billion capital generation and the attributable net profit, I just want to check if there's anything else that we should think about within that aside from dividends, buybacks and the IFRS 9/pension adjustment.

Or is it a case of one should be a proxy for the other?

Yes.

Andrew, just -- so specifically on ROTE, actually, you're absolutely correct, the DTA is approximately 20% of our tangible equity.

So your calculation is right.

In terms of the buyback, I think as we clearly state here, the other potential trajectory that could impact how we look at buyback and shareholders is obviously our outlook on the market, anything that should change in terms of cyclicality in addition to any idiosyncratic requirements that we might have over the next couple of years.

But in terms of the CHF 4 billion capital generation that you mentioned, is that assuming that CHF 2 billion buybacks?

Or are you explicitly saying that actually in your internal workings, you'll factor in more, because you're saying that's just the first communication?

So just to be very clear, the CHF 4 billion is the capital that we need to accrete in order to underpin the growth that we've highlighted.

On top of that, we would expect to -- in addition to accrue for a dividend that's growing at single to -- mid- to high single digits.

And then on top of that, we would expect to have additional available excess capital that will go towards the buybacks.

Understood.

So essentially anything above CHF 4 billion of capital generation could in theory be a buyback in addition to the CHF 2 billion you've announced?

That is -- no, on top of the CHF 4 billion, we would have the entirety of our buyback program.

Which to date is just the CHF 2 billion?

Yes, correct.

The starting point is CHF 2 billion, but we would expect to, of course, consider more going forward.

So sorry to labor on this point.

So the CHF 4 billion that you are saying for capital generation is post your existing distribution plan, which is for the high single digit (inaudible) and plus the CHF 2 billion?

So my point is that anything you can generate on top of the CHF 4 billion then becomes incremental opportunity?

Exactly right.

The next question comes from Jon Peace from Credit Suisse.

Thank you for clarification again on the buyback.

So my question was on the net new money target for the combined Global Wealth Management and Wealth Management U.S.A.

and the fact that you set it at 2% to 4%, which was the lower of the 2 targets.

I mean, I can see that Wealth Management U.S.A.

is the larger business, so that is going to be a little bit dilutive.

But given you had such a strong finish to the year in terms of net new money, how should we think about that target?

Is it just reflecting some of the near-term realities of a slightly slow start to 2018 before we accelerate?

Or how should we think about that?

Thank you, Jon.

No, I think that it's reflecting a more important realities that we are operating in, in many of our businesses in a negative rate environment.

We are focusing on quality of net new money.

We are focusing on -- also on retention and, therefore, same-store net new money.

And I do think that when you look at also the base is increasing.

I mean, as I mentioned during my remarks, our asset base has increased by CHF 360 billion this year.

And of course, if you combine a focus on quality of growth in net new money, so profitable net new money and the asset base, I do think that's aiming to grow at those range, it's a credible target for us.

So it's not at all an indication on how the year has started.

I think you will appreciate that we are planning a little bit longer term on those kinds of metrics.

The next question is from Andrew Lim from Societe Generale.

First one is on the Corporate Center.

Could you give more guidance there on how you expect the operating metrics to develop, especially with respect to TLAC costs that you talked about earlier?

And then the second question is regarding Wealth Management Americas.

When you talked about your net new money outflows there due to relationship managers being lost, and this comes at the same time that you're investing in remuneration cost with a change in the payment grid.

My question is, is your relationship manager payment structure -- is that materially lower than it is for competitors?

Is that why you're suffering these issues.

And perhaps you can give some context of that.

Andrew, just in terms of your first question, and I guess I would just reguide you to Slide 20, and you see the reduction in the Corporate Center drag from about CHF 3 billion to CHF 1.3 billion -- CHF 1.3 trillion -- it's billion.

And as I said very clearly, I expect this to come down further over the next 3 years.

I would hope to have some additional guidance at some point in the future, but we would expect that to continue to come down, barring litigation.

That's very important, because we do book litigation in Corporate Center.

Yes, in non-core Legacy in Corporate Center.

In terms of your second question regarding outflows.

Firstly, to be very clear, actually, the change that we made in the pay grid, what that does is we actually pay our more productive FAs more.

And in fact, those pay grids are among the most attractive in the industry, and that allows us to focus on retention.

And indeed, if you look at our attrition levels, they've come down considerably year-on-year.

And also what you see in terms of the outflows, that's more reflective of the fact that we're recruiting less, and we brought down the packages that we're paying to those that we are recruiting, considerably.

And so with that, we've seen some more net outflows from recruiting.

Also, as I highlighted in my speech, since we exited the protocol, we saw an acceleration of some FAs that left that otherwise would have left during the course of 2018.

[Much more] stringent conditions.

Yes, well, that's why they left early.

The next question comes from Kinner Lakhani from Deutsche Bank.

Apologies for circling back to the capital generation versus usage debate, where clearly Kirt, you mentioned that surplus could be utilized by way of additional share buybacks, which I can see.

I guess the part of the puzzle that is missing for me is litigation.

Given that I think UBS still has some quite substantial issues outstanding, whether it's U.S. RMBS, the French cross-border issue, I understand a DOJ investigation into Puerto Rico, FX, et cetera.

So in giving the guidance that you think the risk is on the upside on share buybacks, are you also saying that you're very comfortable with the existing reserves on litigation?

So that's the first question.

And the second question is just a small technical one.

Just in terms of the kind of Wealth Management gross margin guidance, especially kind of post the CHF 6 billion regularization that we had in Q4, should we expect any kind of follow-through in Q1 like we had a year ago and then, obviously, a rebuild as you increase mandate penetration?

Yes, thank you, Kinner.

Let me tackle the litigation part.

I think that in order to avoid any misunderstanding, I would only refer and ask you to look at our litigation reports so that there is no confusion about which matters are open and which matters are of relevance for our litigation.

I do think that it's true that we still need to resolve a couple of important matters.

As I mentioned in my remarks, it's likely that it's going to take time to resolve them.

We are confident that we will be able to master those challenges in line with what we just communicated in terms of its impact on our capital generation and our ability to return capital.

And in that sense, when we talk about our dividend and capital return policy being linked to the outlook for -- in general, it's also including resolving those issues.

But again, litigation has been part of the journey in the last few years, to a lesser -- much lesser extent, will be part of the next couple of years.

And I don't think it's putting in question what we just communicated in terms of capital buildup and capital returns.

Kinner, just to reiterate, we actually have no gross margin guidance, and we haven't had gross margin guidance for some time.

In fact, we have no net margin guidance.

The only target that we have for the Wealth Management business is cost to income, and we think that's the most critical driver of the performance of the business.

And just to put that into context, if you just take the Wealth Management business, in the fourth quarter, they reduced year-on-year.

Our cost/income ratio came down from 71% to 66% despite the fact that our gross margin actually came down from 73% to 68%, or 5 basis (sic) [percentage] points.

Our net margin went up from 17 to 23 basis points.

So what we would expect going forward is the combined businesses currently have a cost-to-income ratio of 74%.

We've indicated a range of 65% to 75%, and so you should expect to start to see us improve and begin to push towards the middle to the lower part of that range over time.

That's clear.

Maybe just to ask the same question slightly different way.

Should we expect any impact on fees from the CHF 6 billion regularization?

Or is it just a rounding error these days?

Well, no, I think as also I've indicated, there should be a slight dampening in our recurring fees into the first quarter.

But then what you should see is a quarter-on-quarter more normal trajectory of recurring revenue for Wealth Management.

I think we also saw for the first time in this quarter a strong recovery of recurring revenue for Wealth Management, up 7% year-on-year, and that's the first time it's been up sharply.

So I do think that trajectory of that part of the business will be much more positive going forward.

It's a consequence of substantially completing that program.

The next question comes from Al Alevizakos from HSBC.

So my first question is regarding the DTA on Page 29.

You say at the bottom that you will review your approach to periodically remeasure the U.S. DTAs and the timing for recognizing the deferred tax in the income statement.

Does that mean that you potentially looking to get an extension into using your existing DTAs?

And is that even possible?

And the second question, much more relating to the fourth quarter.

When I look at your divisional numbers per geography, I noted that the IB revenues declined primarily in Europe and Switzerland.

However, after seeing U.S. peers, last week, we thought that the big issue was the U.S. What do you think happened here?

Yes, Al, in terms of your first questions on DTAs, no, that absolutely does not mean that we're looking for any extension.

In fact, it's not a possibility.

There was some anticipation that perhaps there would be an ability to do so, but it wasn't part of the tax law change.

What that says specifically is, during the course of the year, we will look at how we measure DTAs, and we will consider whether or not there should be a change at all in methodology of how we recognize DTAs.

And I think as usual, we'll, of course, have more clarity around that later in the year.

I think -- Kirt, I think that the next one is on segmentation.

Of course, if you look at the IB, a big chunk of this variance is also to the fact that we are running our FX and -- a big chunk of our FRC business FX out of Switzerland, so that's one of the reason of the downturn.

So big part of our FRC operation are the fact of between Europe and London and Zurich, and therefore, you've seen that representation I think, if I understood correctly the question.

Yes, it was just on the underperformance of Europe and Switzerland versus peers, including IB.

Yes, that's due to the fact where is our, basically, center for managing certain businesses is -- that's probably the reason why is clearly a difference between us and U.S. peers.

Yes.

I would also note that last year, we had an outstanding fourth quarter in advisory and in CCS.

In fact, it was our best fourth quarter since Accelerate.

And some of that performance certainly came in the Americas and Europe, and so you also see that, that comparison contributing to the overall reduction year-on-year.

But we can get back to you.

But we'll get back to you with some details.

The next question comes from Piers Brown from Macquarie.

A couple of follow-ups from me.

Just first of all, coming back to the performance in the Investment Bank, the IBD revenues.

I mean, you mentioned the Q4 last year was pretty high base, but you're still down 40-odd percent in advisory.

And I think the overall Corporate Client Solutions is down about 9% year-on-year, which is considerably weaker than what we've seen from peers.

So I just wondered whether you could talk to pipeline and outlook in that business.

We've heard from a lot of peers some fairly positive outlook comments just particularly in terms of the business trends in the U.S., so I wonder if you could talk to that.

And then secondly, on the -- just coming back to the buyback.

I mean, committing to a program for 3 years, I'm just interested in terms of the thinking behind that.

Because, obviously, one of the reasons for going for a buyback over special dividends is to give you flexibility, and that flexibility, I guess, would be -- maybe a little bit more constrained, if you're talking about a 3-year program rather than just looking at this on an annual basis.

And related to that, I wonder if you could just tell us, when you comes to reassess the level of the buyback annually, what are going to be the key factors you're looking at that may lead you to either, well, I guess to increase the size of the program.

And is litigation one of those key factors?

Thank you, Piers.

Let me address your second question first.

Basically, the 3-year period is, essentially, the current, [fixed] legal framework in Switzerland, they grant you 3 years for a buyback.

So hence, we announced the 3 years, with the initial target of CHF 550 million, but the total amount of CHF 2 billion.

We'll reassess that every year.

And that will be based on what we anticipate in terms of excess capital available in the following year during which we make the buyback.

And at that point, if we feel confident about the amount of excess capital, we potentially might revise that CHF 2 billion amount going forward.

I think on the question on CCS.

I think, first of all, of course, we are very pleased with the progress we have been making in CCS over the last year.

I think that is quite clear during the year and in this industry that each player has different pipelines and they may cross quarter-on-quarter, so it's very difficult to do a comparison quarter-on-quarter.

As you know, the overall fee pool in the industry was down 20%.

We were down more than that.

And also, there is a high degree of activity levels in the U.S., which -- if you look at our portfolio, we always say, in the U.S., we are underweighted in part of our CCS business.

We are more weighted towards EMEA and Asia, and that's something that we want to correct in a sustainable way without rushing it.

And of course, as long as you have CCS activities are being driven by U.S. activity, we will somehow always have to take into consideration a relative underperformance.

But at the end of the day, we are very focused on advisory, giving the best services we can without deploying and having to deploy capital or grant loans and balance sheet in order to achieve those kind of mandates.

So I do think that our business model is also very disciplined in that front and explains some of our performance.

The next question comes from Kian Abouhossein from JPMorgan.

Just coming back to CHF 2 billion buyback question and the process around it, thanks for clarifying the 3-year process.

But what I try to understand is, is it going to be purely mathematical?

So if it's -- that if you're making more than CHF 4 billion of retained, can you pay that out right away?

Secondly, is it related to any other aspects that you can discuss?

And in that context, what is the process in terms of FINMA sign-off?

Is there any sign-off from the DOJ?

Is it related to any way to any of your litigation cases at this point?

And the second question that I have is just on Page 10, on the capital, CHF 35 billion.

Can you specify exactly what that number of risk weighting would be ex the multiplier -- including the multiplier effect, i.e.

the growth number rather than the net numbers that you're giving me.

What is the process around the multiplier decision-making?

Are you confident you can get to that net number?

And is this a fully loaded number or a phased-in number?

You actually don't say that in this report.

Thank you.

Let me tackle the first question.

I think it's what we needed.

Of course, we always need regulatory approvals in the respect of our capital plan.

And our capital plan would include both the element of growing our base dividend and any programs we have to buy back shares.

So if we have capacity, as I mentioned in my remarks that once we build up the extra CHF 4 billion Kirt and I mentioned about, the excess capital is there to be returned to shareholders, unless we have any consideration about the outlook for the business, and the outlook may include litigation.

So -- but the only thing -- I don't understand what you mean by the DOJ signing off on our capital return plan, so what we need is our regulator's sign-off.

Yes.

And Kian, just to address your second question, so the CHF 35 billion we calculated off of the projection of where we anticipate that we will be, including the existing regulatory multipliers increases, as we've highlighted on Page 10, and the business growth, and that is inputs floor related.

Frankly, the output floors are not really much of an impact for us over time.

It is the input floor that is going to be 95% of the impact for Basel III that we currently anticipate.

Now beyond that, what we also highlighted is that this is before any mitigation or any other changes that we might make internally.

Just to clarify, so the CHF 35 billion is a net number?

I'm interested in the gross number, if you could give it.

Or if you don't want to give it, you must feel extremely confident that the FINMA multipliers will fall away.

So the CHF 35 billion is after we absorb.

I highlighted the CHF 20 billion on the page.

CHF 15 billion of that CHF 20 billion.

So we're -- basically, if we had not absorbed CHF 15 billion of that CHF 20 billion, that could have been additive to CHF 35 billion.

And so we're confident that this is the gross amount, including the multipliers that we expect to have to absorb from FINMA between now and when the Basel III rules come into effect.

And this is fully loaded, the CHF 35 billion?

I'm not sure what you mean by fully loaded.

Basel IV fully loaded rather than phased.

Yes, this is the input for upfront.

But then the output for phase in through 2027.

As I mentioned, the output floors, we don't expect to be a major or significant impact for us.

Okay.

And just on the dividend.

Why do you state up to then?

This is -- I think that's a confusing part.

You're saying we're going to pay dividend of up to, why the up to?

I think that's what -- it looks like that's a maximum.

No, to be clear, our dividend is CHF 0.65, it's not up to, it's exactly what we pay.

The up to is...

I'm sorry.

I mean the buyback.

Yes, the up to refers to the buyback program.

But we're acknowledging is that there might be things that are introduced in the market, things that happen that we're not aware of now.

And so naturally, it's a flexible program.

It's what we intend to do.

The next question comes from Amit Goel from Barclays.

So most of my questions have been answered, but just one, I guess, on the targets.

So this is Slide 13.

And maybe one part of that's clarification, but it seems like the Investment Bank return on attributed equity stays the same.

Or is it going up on a net basis, where the group return on tangible is still coming down to that 15%, excluding DTAs?

So I just wanted to understand a bit more in terms of for the Wealth Management business, because the IB is seeing some of the FRTB impact in terms of the structural profitability going forward.

It feels like we've been getting some downgrades over time.

How you're seeing that?

And is it more a cost issue in terms of the cost/income ratio going up or what are the kind of structural parts of that?

And how do you see the profitability of that type of business evolving as you go forward?

(inaudible) the Investment Bank target of greater than 15%.

And We're comfortable that, that's nicely above their cost of capital, which, of course, we expect from all our businesses.

I think, overall, the structural performance of the business is going to be very much in line with the targets we've indicated.

Importantly, what we expect over the next 3 years is our businesses to show positive operating leverage, and that's going to contribute overall to the group bringing down its cost/income ratio below the 75%, and for us, improving our return on tangible equity, excluding DTAs, to what we would anticipate and aim, of course, to be eventually above that 15%.

We have now come to the end of the questions.

As you're aware, this morning, I sent a note out to the analysts this morning.

Kirt will be hosting a meeting for you tomorrow morning at 10:00 in London.

So hopefully, we will see a lot of you there.

Thank you very much.

Ladies and gentlemen, the Q&A session for analysts and investors is over.

Analysts and investors may now disconnect their lines.

At 11:00, we will start with the media press conference and the media Q&A session.