2024-02-06 11:36:03 ET
UBS Group AG (UBS)
Q4 2023 Earnings Conference Call
February 6, 2024, 3:00 AM ET
Company Participants
Sarah Mackey - Head, Investor Relations
Sergio Ermotti - Group Chief Executive Officer
Todd Tuckner - Group Chief Financial Officer
Conference Call Participants
Kian Abouhossein - JPMorgan
Chris Hallam - Goldman Sachs
Jeremy Sigee - BNP Paribas Exane
Andy Coombs - Citigroup
Anke Reingen - RBC
Alastair Ryan - Bank of America
Giulia Miotto - Morgan Stanley
Stefan Stalmann - Autonomous
Adam Terelak - Mediobanca
Ben Goy - Deutsche Bank
Tom Hallett - KBW
Andrew Lim - Société Générale
Nicolas Payen - Kepler Cheuvreux
Piers Brown - HSBC
Presentation
Sarah Mackey
Good morning, and welcome, everyone. Before we start, I would like to draw your attention to our cautionary statement slide at the back of today’s results presentation. Please also refer to the risk factors filed with our Group results today, together with our additional disclosures in our SEC filings.
On slide two, you can see our agenda for today. It’s now my pleasure to hand over to Sergio Ermotti, Group CEO.
Sergio Ermotti
Thank you, Sarah, and good morning, everyone. 2023 was a defining year for UBS as we acquired Credit Suisse in one of the largest transactions in banking history, setting a new long-term trajectory for our franchise. It was also an intense year that required exceptional focus from all of our colleagues during periods of significant change and uncertainty.
We stayed close to our clients, helping them manage a rapidly evolving geopolitical and macroeconomic backdrop, as well as the turmoil that occurred in the financial system last March. The strength and stability of UBS provides is a direct result of our decade-long sustainable strategy, an unwavering commitment to maintaining a balance sheet for all seasons and a focus on risk and capital efficiency.
For these reasons, clients reward UBS with their extended trust and confidence during periods of volatility and market uncertainty. And it allowed UBS to credibly step in and stabilize the Swiss and wider financial system by taking over Credit Suisse.
We have acquired an enterprise that has suffered from many years of unsustainable capital allocation and underinvestment in its businesses and control framework. This resulted in cost and capital inefficiencies, significant losses, and ultimately, substantial franchise erosion.
However, the acquisition accelerates our strategic priorities by providing UBS with a complementary client base, stronger regional presence, more products and services, as well as many talented people. This gives us great confidence in our ability to meet our ambitions and deliver long-term growth and consistently higher returns.
We made great progress on our plans in 2023. We successfully won back, retained and grew clients’ assets while beginning the restructuring phase. We have also substantially reduced funding costs and run down non-core books.
In our first full quarter as a combined firm, we stabilized Credit Suisse’s client franchises and achieved underlying profitability. This permitted us to pay down the extraordinary liquidity support and voluntarily terminate the loss protection agreement guaranteed by the Swiss Government.
We also provided important clarity for all of our stakeholders as we finalized our target operating model. Notably, we established the perimeter for non-core and legacy and moved forward with fully integrating our Swiss domestic operations.
Our progress continued in the fourth quarter. We maintained momentum with our clients with $22 billion in net new assets in GWM, bringing our total to $77 billion since the closing of the acquisition. In the quarter, we also cut another $1 billion in exit rate gross costs as we move forward on our restructuring plans. Nearly 80% of non-core and legacy $12 billion decline in risk-weighted assets in the second half was driven by our active wind-downs.
We achieved all of this while maintaining our capital strength. Our CET1 capital ratio increased to 14.5%, helping us to build capacity for higher capital returns, while at the same time, preparing to absorb integration charges and tax inefficiencies.
A great and often overlooked measure of the Group’s resilience and self-sufficiency is our total loss-absorbing capacity, which now stands at $200 billion. Given the ongoing debate following the events of last March, this is particularly relevant to me.
Lastly, let me highlight some things I’m especially proud of and which I believe is the essential driver of what will make this successful journey a great story. Our people have embraced both our culture and the opportunity ahead while collaborating on the integration. This will allow us to continue to serve clients and fulfill our growth initiatives....
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UBS Group AG (UBS) Q4 2023 Earnings Call Transcript