Ladies and gentlemen, good morning. Welcome to the UBS Third Quarter Results 2015 Conference Call. All participants will be in listen-only mode, and the conference is being recorded. After the presentation, there will be two separate Q&A sessions. Questions from analysts and investors will be taken first, followed by questions from the media. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to UBS. Please go ahead.

Good morning. It's Caroline Stewart here for UBS Investor Relations. Welcome to our third quarter results presentation. This morning, Sergio will provide an overview of our results and Tom will take you through the details. Before I hand over to them, 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 may, by their very nature, be uncertain or outside the firm's control and our actual results and financial condition may vary materially from our belief. Please see the cautionary statement included in today's presentation on the discussion of risk factors in our annual report 2014 for a discussion of some factors that may affect our future results and financial condition. Thank you. And with that, I'll hand over to Sergio.

Thank you, Caroline. Good morning, everyone. For the first quarter, we reported a net profit attributable to UBS shareholders of CHF 2.1 billion, which included a net tax benefit of CHF 1.3 billion largely due to the revaluation of deferred tax assets and a provision of CHF 592 million for litigation, regulatory and similar matters. Adjusted profit before tax was CHF 1 billion. This result led to a 5.4% quarter-on-quarter increase in tangible book value per share to CHF 12.7. We also made further progress in our cost reduction program despite the cumulative impact of incremental permanent regulatory costs which annualized - with annualized net cost savings reduction of CHF 1 billion so far. The macroeconomic backdrop for the quarter was very challenging, as events in China and the expectation of a Fed hike, followed by the Fed's decision not to raise rates elevated levels of uncertainty and volatility. These issues added to the typical seasonality and client activity levels, it [indiscernible] particularly in Wealth Management. Given this exceptionally challenging environment, our results were solid. I'm most pleased with our performance because we managed risk effectively for our clients and shareholders, both when markets were booming and also when markets fell. Despite the extreme market volatility that during the summer prompted four times the normal level of margin calls in the quarter in Wealth Management, we did not record credit losses. We remain the best capitalized large global bank with a Basel III fully applied CET1 ratio of 14.3%. Our fully applied Swiss SRB leverage ratio increased to 5% and our BIS fully applied leverage ratio increased to 3.9%. Achieving a 5% leverage ratio under the current rules equates broadly to the requirement under the new rules and underlines our view that we never had a leverage ratio issue, but…

Thank you, Sergio. Good morning, everyone. As usual, my commentary will reference adjusted results unless otherwise stated. This quarter, we excluded an own credit gain of CHF 32 million, a gain of CHF 81 million related to our investment in the SIX Group, foreign currency translation losses of CHF 27 million from the disposal of a subsidiary, net restructuring charges of CHF 298 million, and a CHF 21 million credit related to a change in - to retiree benefit plans in the U.S. Profit before tax was CHF 1 billion and net profit attributable to UBS Group AG shareholders was CHF 2.1 billion, including a net tax benefit of CHF 1.3 billion. Return on tangible equity was 19.5% for the quarter and 14.5% year-to-date. Our Wealth Management businesses delivered another solid quarter with a combined profit before tax of CHF 1 billion, bringing us to CHF 3.1 billion year-to-date at a compound annual growth rate of 14% since 2012. As always, our focus is on long-term profitable growth and we're targeting a combined annual pre-tax profit growth rate of 10% to 15% through the cycle where the combined business is. Wealth Management delivered a profit before tax of CHF 698 million, as continued growth in recurring income was more than offset by lower transaction-based revenues. Recurring revenues increased on higher net interest income, which rose 6% to CHF 600 million on higher lending and deposit revenues. Recurring net fee income declined slightly as the benefits from our strategic initiatives to increase mandate penetration and improve pricing were more than offset by the impact of lower invested assets. Transaction-based income declined to its lowest levels since the financial crisis as high volatility led to a substantial reduction in client activity, primarily in APAC and Europe. The business demonstrated solid cost control…

Thank you, Tom. So the strategic change we initiated four years ago was driven by our desire to focus on our core strength and expectations of more demanding regulation. So having completed our transformation, we have the right business model today with no need for further radical change to comply with the strict new too big to save proposals and with the competitive landscape. This puts UBS in a unique position among our peers. Therefore, we can capitalize on our early mover advantage built on our execution track record and continue to implement our strategy to better serve our clients, drive shareholder value and grow capital returns. In the current macroeconomic and regulatory environment, our commitment to our remaining cost reduction program and our efforts to drive operational excellence remains resolute. But we also have a strategy for growth. We will modestly increase balance sheet capacity for our businesses to support sustain long-term growth in a disciplined way, and we will continue to invest both in technology and digitalization, strengthen our position in Switzerland, Asia Pacific and the Americas, and ensure we have the right people to drive our future success. You will have noticed that we announced changes to our leadership team today. Let me start by thanking Bob, who will continue to play an important role working with clients and on strategic priorities, as well as Phil and Chi-Won, not only for their tremendous contribution to the firm, but also for working with me for the last few months in order to allow me to align the changes to the right time, I believe, is the right one for the firm. I welcome Kathy, Sabine, Axel, Kirt and Christian to the Group Executive Board and Tom in his new role. And also on my side, I'd like to thank Tom, particularly, for an outstanding job he did over the last 18 quarters. Following the completion of our strategic transformation earlier this year and as we continue executing our plans, this team will help take the firm to the next level providing the right mix of expertise and continuity. Back to our results, we reported another set of solid numbers, which once again demonstrated strong risk control and discipline. For the past four years, we have demonstrated that our business model works for our clients and investors, and we will continue with the same determination to execute our strategy in order to create sustainable value to our shareholders. Thank you. And now, Tom and I will take your questions. [Operator Instructions]

The first question is from Mr. Andrew Stimpson from Bank of America Merrill Lynch. Please go ahead.

Good morning, guys. You've said there - on the balance sheet expansion that you've announced, you said there's no increase in the risk-taking or the capital allocation. But it looks to me like you're leaving potentially quite a lot of room there to increase the balance sheet in the IB again. You've got 30% to 35% range, which implies that you could be growing the IB to up to CHF 333 billion in leverage or 15% higher than it is today. And I see on a later slide, you've set about CHF 325 billion, but that's still plus 12% from today. So, why do you think that's the best thing to do for your shareholders? And is that a reaction to the growth ambition of some peers or - and maybe what areas of the IB you think are really attractive for deploying that leverage exposure? And then secondly, you've said in the past you wanted to get ahead of the new rules as soon as possible, and your stock clearly was rerated as a result. So, what - I didn't hear anything there just on what the strategy is to get above this target, the new minimum [indiscernible] as soon as possible this time and when you think you would get there, you said sometime over the next four years, but obviously, that would be vague, maybe something more specific would be helpful. And lastly, client advisors are still getting down in Wealth Management and inflows light of what consensus was going for. So, maybe you could talk around what the drivers were of the advisors going down and also good luck to Tom for the future.

Thank you, Andrew. Let me take the second question first. I think when we look at the new regime and you look at our actual capital position today with a 14.3% CET1 ratio, and you look at inception point, we're going to be well above the 5%. We don't think that there is any value at this stage to accelerate and go at a level that's in any case the 5% qualifies you for a well-capitalized status. It's not a minimum standard. There is no added value at this stage to accelerate like we did in the past. It was a completely different environment that we were starting with a fully applied CET1 ratio of 6.3%, if I remember correctly, and it was clearly our strategic desire to have a very strong capital position. But, today, we already have a strong capital position, and we are compliant from day one, well above the standards, we're going to be north of 5% on January 1. Therefore, we should take a balanced view between growth, fulfilling capital requirements and the ability to have a balanced capital return policy to our shareholders. And so, that's the policy. And we intend to use the maximum flexibility of the four years. And of course, market condition may change, but this is our current plan and we have no hurry to rush into that. I leave it to Tom to answer the second question. I think there is a definition issues you may have on our leverage ratio numbers.

Okay. Thanks, Andy. Thanks for the question. On the LRD target for the Investment Bank, previously, we had a funded asset target of CHF 200 billion. And what we found is that since LRD has become the binding constraint, we think it's more appropriate for us to have a public expectation for the IB on LRD. Previously, we've been operating the IB that CHF 200 million funded was roughly around CHF 300 million in LRD. So, the increase is from CHF 300 million to CHF 325 million. If you look at where FX levels were back when we announced the acceleration of our strategy that roughly adds about CHF 13 billion to the CHF 300 million. So, the real growth is about CHF 12 billion in leverage ratio denominator. I think if you look at some of the transactions that Sergio highlighted in his remarks earlier where we've been able to do a very good job for our clients with prudent risk-taking, I think that gives you the best example of how we might use that to LRD in the future. Going to your question on client advisors account, I think one of the consistent themes that hopefully you're hearing from us around wealth management in all of our metrics is that we believe in quality, not quantity; quality not quantity on net new money, but also quality not quantity on advisors. And so, we do take the time to make sure that we're looking to prune the lower-end of the spectrum and also look to recruit advisors that have the capacity to deliver strong results for us. So, it's a productivity-based strategy and approach.

Thank you.

The next question is from Fiona Swaffield from RBC. Please go ahead.

Hi. I have a couple of questions. Just going to the RWA CHF 250 billion versus your current number, when you say short to medium-term could you be a bit more specific on where we could get there? And then on operational risk, I had thought that there could be potential for the FINMA multiplier to come down over time. Are you just saying the operational risk will stay where it is today? And then lastly, how does the CHF 250 billion look under Basel IV? Is there anything baked in there at all or do you think some of the CHF 30 billion multipliers already takes potential Basel IV effects into account? Thanks.

Thanks, Fiona, and Happy birthday, by the way.

Thank you.

So, on risk-weighted assets, the CHF 250 billion target short to medium-term, by that we mean one to three years. On the operational risk question, what I would say is that our expectations have changed around that FINMA add-on. And at this point in time, the visibility that we see based on the trends that you know of in terms of move towards standardized OR approach is that that is not going to be coming down. Finally, last on your question what does CHF 250 billion look like under Basel IV. I think in the same way that as the TBTF 2 debate was unfolding, we refrained from speculating on what the results would be. I think it's really premature to try to do that on Basel IV as well. I think it's outside of the range of the short to medium-term expectations when that will finally be implemented anyway.

Thanks. And all the best in your new role.

Oh. Thank you.

The next question is from Mr. Andrew Lim from Société Générale. Please go ahead.

Hi. Good morning. Thanks for taking my questions. And good luck for the future, Tom. Thank you for your help as a CFO. So my questions are regarding slide 23, first of all. You've given an indication or an illustration of 150 basis points impacts on the RoTE from the additional CET1 capital requirement, but your - you're already at 3.3% CET1 leverage ratio. So, I'm wondering how come you guide to such a large impact here even if it's illustrative and you get from 3.3% to 3.5%? And then, just following on from Fiona's question on the RWA inflation, we've had some pretty hefty RWA inflation guidance from two competitors of yours, and a big chunk of that is from implementation of [indiscernible] and I'm just wondering how that comes into your guidance and where that actually - if we think about the longer-term asset as to how this might be then implemented, say 2019, 2020, whether in fact we should be looking towards that 250 actually going up even more as we get towards that timeframe? And thanks.

Thanks, Andrew. So, first on your slide 23 question around what does this represent, it's just to make sure that we have it clear. This isn't an illustration of impact on UBS, this is a - if you take TBTF 1 to TBTF 2, what would be the impact on a bank that was running to a 15% RoTE target if it chose to run at the regulatory minimum, so that's why you see such a big cost related to the additional CET1 capital. It's obviously not the move from 3.3% to 3.5% in our CET1. The second question, continuing on with Fiona's question on what about - what's beyond the short to medium term, what about Basel IV? I think what we should note here is that we're in a series of QIS processes and the purpose of a QIS process is to gain an understanding of the impacts of new regulation. And so, to some extent, you could run your QIS process and say, well, if these were implemented at this level, this would be the impact. But the point of the QIS process is to point out some of the weaknesses and some simplistic assumptions on regulation. So, there's a whole process to go through and it's just our view that it's premature to speculate when you haven't gone through that process and have the normal type of regulatory dialogue and discussion that you'd have around the introduction of new regimes.

Okay. That's great. Thank you very much, Tom.

Thank you, Andrew.

The next question is from Huw van Steenis from Morgan Stanley. Please go ahead.

Good morning and, Tom, many congratulations. Two questions, one, could I just come back to the operational risk? If I understood your guidance correctly and the extra CHF 20 billion plus CHF 75 billion you've already got, operational RWA as the percentage of the total would be about 38% or the highest of any bank on the planet. Is this just a reflection that UBS just had a really bad crisis and, therefore, this is the sins of the past? Or are there something specific about current and foreseen processes that are causing FINMA to be much more aggressive on you than any other bank on the planet? I'm just trying to understand, because normally with op risk you'd imagine over three to five years, some of these issues would start to fade from your models, but obviously maybe you're signaling to us that there are other bigger issues that we haven't thought about so far. And then second in the Non-core portfolio, I think I saw - noticed that RWAs were actually up in the Non-core Legacy Portfolio probably for the first time in 16 quarters. Could you just maybe talk us through what's going on there and whether that's also a taste of things to come as well? Thanks very much.

So, Huw, let me take that first question and then - so, first of all, I think that when you go back into the regulatory issues that - and find we had over the last few years, time has been demonstrating that this was not an idiosyncratic UBS issue. I think if you look at the time series of every other global banks and which kind of operational risk issues they had over the last four years, you will find comfort in that number. The second issue that I want to highlight is the fact that as we are running a low-risk model, of course compared to our credit and market risk utilization, because we have a different business model, the percentage of risk goes up to a level which I would agree is higher in percentage and we still have expectations that could be mildly corrected. But the fundamental delta of CHF 20 billion is coming from the fact that when we set the target of CHF 200 billion, that was before the add-on. And as this add-on is not disappearing at least completely, hence the adjustment. It's not a further new CHF 20 billion, it's the one that we have embedded in our actual numbers versus the 2012 announced targets.

Yeah. Thank you, Sergio. Huw, if I could just continue on just on Sergio's part and then I'll move into the NCL portion of the question, we're currently at CHF 216 billion versus the CHF 200 billion target. When we looked on this on a month by month basis, there was a point at which we actually, using the same measurements we had back in 2012 when we set the targeted RWA levels of CHF 200 billion, there actually was a point when we achieved that on a same-store basis. I think, as Sergio said, you've just seen the inflation. And our old view on - we agree with you, we thought our density on OR was extremely high relative to our entire risk-weighted asset base. We thought over time we'd converge closer to others in the industry. Unfortunately, for the industry, I think we're all going to be converging at a much higher level in particular under some of the standardized approaches. Your question on Non-core and Legacy, if you go to page 108 in the report, there's a delta on the quarter-on-quarter for our Corporate Center Non-core and Legacy. The two biggest upticks that we had were on central counterparties on the standardized approach and then an add-on for risks not in VaR. And then if you look, I think you'll find that most of the downticks that get it to the net of the half are really continued reductions and exposures. Now, I do think the other important thing to remember too as we go forward bringing back to that topic of OR, out of our CHF 32.1 billion of risk-weighted assets, we have CHF 20.4 billion in operational risk. So, that's clearly very sticky. The other component of that, I think that we need to remember is, as we continue to have settlements of litigation in those areas, in particular related to RMBS, you'll continue to see that OR component tick up in the NCL Portfolio based on the experience.

That's very helpful. Can I just ask one clarifying question, because I think it's quite important in terms of delta? Sergio, mentioned of the CHF 20 billion increase in operating risk is really versus your old target. You've currently got CHF 13.3 billion as the incremental add-on out of your CHF 75 billion. What we're really saying is that CHF 13.3 billion doesn't now go, maybe there's another X billion more for - once you've settled the DOJ mortgage and so forth, so you're really going to be running CHF 75 billion, CHF 80 billion rather than CHF 75 billion plus CHF 20 billion. Would that be the right way to interpret what you were just saying?

I think the right way to interpret it would be that the CHF 13 billion doesn't go away and based on the experience that we've had since 2012, we've actually had the uptick of a CHF 7 billion already, so the CHF 20 billion is already baked in. The incremental pieces mostly come from the multipliers.

Okay. Super. That's very helpful.

Almost entirely, Huw, from the multipliers.

Almost CHF 196 billion - if you looked at our - at the current quarter, we would be on a pro forma without operating risk adjustment at CHF 196 billion of risk-weighted assets.

Yeah. That's another way of looking at, absolutely.

So this is - okay. That's super helpful. Thank you.

The next question is from Mr. Jon Peace from Nomura. Please go ahead.

Yeah. Thanks for taking the question. In the longer term, how much of your earnings do you think you need to keep back to support growth of the business, sort of 20%, 30% what sort of ballpark do you imagine? And what I'm trying to get backwards towards is on a longer-term basis, I know your dividend policy is greater than 50%, but how high might that reasonably go? I can see that consensus expectations of payouts in 2016-2017 are in the range of 75% to 80%. And is that a level that's maybe a little but imprudent by the analysts? Thank you.

Yeah. I think that clearly it's anything between 49.9% and zero since our dividend policy is above 50%. So, I would say that as we face the implementation of the new regulation, we take in account growth for the business, we take in account cyclicality of the environment, and we take in account potential other risks associated with our business, and we determine how much we need to keep for the bank and accruing book value rather than returning capital to shareholders. So - but it's not appropriate for us to comment on your job. And you do your job, you come out with your own forecast. And we deliver based on what we believe is the right thing for the firm. But, clearly, we want to have a capital return policy that is predictable based on our baseline dividend that should grow over time. And then, we enhance this baseline dividend policy with appropriate other forms of capital returns depending on the market environment and what is the best for shareholders.

Okay. Thank you.

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

Good morning. Thank you. Firstly, just a clarification on the Basel IV risk-weighted asset inflation question and then a couple on Wealth Management. So, on the Basel IV point, your comment was that you didn't think RWAs would become the binding constraint even with that. Is that comment based on the 10% minimum? Because if I use your 13% target, RWAs would become binding at about CHF 256 billion. So, actually, there isn't much headroom at all if I'm using your 13%. So, is your comment based on the 10% regulatory minimum CET1 ratio in RWAs is question one. And then two questions on Wealth Management, one is could you talk a bit more about further flow impact, whether European regularization or whether your own optimization, how much more impact should we expect in the next quarter or two? And then, final question again on Wealth Management, could you talk a bit more about Asia? The gross margin was weak in Asia in the quarter, but you've been making some comments that remain confident about Asia, and I just wondered if you could talk what we're seeing there in terms of client behavior in the near term.

Okay. So, Jeremy, thanks for the questions. Going back to your first question, I'll give you two answers on the RWA inflation. But the first intent of my comment was to point out that in the short to medium term, the binding constraint will continue to be leverage ratio, so that's pre-Basel IV. As you start to get to Basel IV, I think your [indiscernible] exercise that you've gone through shows - if you're changing your measurement from Fahrenheit to Centigrade and you're not changing any of the risk that you're taking, in our view, there may be a point in time at which you have to take a look at whether you're basing that judgment on a 13% or a 12.5% or 12% or a different number. But that's a decision that's out beyond the range of the short to medium term. Your next question on the flows, our net new money target for Wealth Management is 3% to 5% and includes all the effects that we've spoken about. Any further work we do on improving the quality of deposits that we have or deployment of the balance sheet in the business or any further regularization related to automatic exchange of information. But as exactly as Sergio said and that's the same as the way we treated in the past. If you then take a look at APAC, I think it's important to separate comments that we might have about short-term fluctuations in markets or in client sentiment in the region versus our long-term bullish view of the APAC region for Wealth Management. Certainly, if you follow a quarter like the one that we saw, and our outlook statement reflects this, clients do have caution on their minds. However, as we look out in any of our planning, one of the reasons why we've been able to develop the number one Wealth Management business in the region is the fact that we've been consistent in our commitment over five decades. And that's the way we view the business over the longer term and we'll continue to invest for the long-term in Asia.

Thank you. And sorry, just on the middle bit, the optimization, are you likely done? So we had two quarters of impact, is that largely done on the planned optimization that you had launched?

Yeah.

Yes. The program is complete.

Great. Thank you very much indeed, and congratulations on your new role.

Thanks, Jeremy. Thank you.

The next question is from Al Alevizakos from KBW. Please go ahead.

Hi. I've got a quick question for you. It's regarding the new profitability target that was moved from 2016 to 2017. What I'm trying to understand is you reduced the target for 2016 because you're thinking that you're going to have additional expenses for the debt issuance that you need to meet the new Swiss leverage target. Because you said effectively that you're going to be waiting for the existing to mature before [indiscernible]. You say that it's going to be lower than that 15% and it's going to be probably in line with the 2015 target. But where do you think it's going to be between 10% and 15% in terms of the final target? Then also, do you kind of take into account that the market is probably going to be weaker compared to when you first announced the target?

Yes. Thank you, Al. I think that you are right. And as part of - what we are saying is that we expect our RoTE for next year to be at around the levels we had this year. And what is contributing to that is clearly the cost of issuing additional high-trigger Tier 1 instruments as we start to absorb the cost of the already-outstanding TLAC bonds and the one we issue more. That's clearly a new target. We have been making a re-evaluation of deferred tax assets in the last two years, this year last Tier 1 and this year as we just announced three quarter of what we're going to do this year about. So, as we take into consideration that plus the fact that the consensus on forward rates, you look back into a year ago and this year, forward rates consensus on U.S. dollar alone is 120 basis points lower than last year. So, if you add on all those costs and changes in regulation and the macroeconomic environment, and, last but not least, remember that we still have euro/Swiss franc at around 5%, 6% lower than we had last year. So, we have higher costs also due to forex translation. So, all those factors are really putting headwinds to RoTE targets.

And, Al, if I could just add to Sergio's comments, I think there are a few of couple other things to think about. One is as you look at - when you look on slide 19 which is the DTAs, we included in our return on tangible equity that we've achieved so far for the year is the DTA write-up of CHF 1.5 billion, and then we have the other half that's coming in the fourth quarter. Next year, we've guided you only for CHF 0.5 billion write-up during the DTA, so, obviously, since we're going to be steady on the return on tangible equity, we're obviously making that up somewhere. And one of the places we make that up, restructuring charges are only going to be CHF 1 billion next year versus CHF 1.5 billion that we expect for this year. And obviously, then there's the - they're both the beta analysis assumptions that are in the business. But I can only emphasize Sergio's comments about the differences between when we set that target for 2016 and that changes that we've seen and implied forward across all currencies and market levels as a whole. Finally, you asked, well, where is it going to end up between 10% or 15%? I think if you look at consensus implied for the fourth quarter that gives you a reasonably decent way to estimate it.

Yeah. Let me also a quick comment since the topic of targets is a very popular one nowadays. I like to point out that we have changed four targets out of 21. And we achieved the vast majority on all other targets over the last few quarters. So, I think that is very important to put what we described changes driven by alpha and external factors versus what we believe - sorry, yeah, that in our control versus the beta factors that are external, like rates like the one we just mentioned. So, we will really want to stay accountable and focused on mandate penetration increase the lever on cost savings, and do everything we can control, and a bit transparent about changes that we do due to market conditions.

Okay. Thank you very much. And thank you, Tom, for all the help that you've given us the last few years.

Thanks, Al.

The next question if from Amit Goel from Exane BNP Paribas. Please go ahead.

Hi. Thank you. I've got a question relating to the competitive environment, in particular, on the ultra-high net worth space. So obviously, with one of your key competitors recapitalizing and looking for significant revenue growth and client advisor growth, just wondering whether that impacts the way you think about your strategy and whether you think that has any bearing on margins going forward? Thank you.

Well, first of all, let me tell you what you already know that we are the preeminent wealth manager in the world. We have an outstanding and leading position in Asia, and we are not complacent about anything that goes around us. And so, we have been there for 50 years in Asia, for example, but also across the board we have a very successful business model and we are very determined to keep our status going forward. So we are making investments as we have been doing in the last three to four years to organically grow and balance growth with appropriate metrics of a sustainable profitability. It's very important for us to do that. And in general, those new competitors are not new competitors. I mean, are existing; very strong and credible competitors. I do believe that a combination of maybe a renewed focus by some competitors and the macroeconomic conditions may put more pressure on second and third tier players. Then, it will down to the leading players. So I think that's - by the way, Wealth Management is a business that is forecast to grow 7%, 8% in the next decades, and there is a lot of growth potential available. So I think we are staying very focused and not being complacent but also confident about our capabilities and market position.

Okay. Thank you.

The last question is from Jeremy Omahen (sic) [Jernej Omahen] (01:09:51) from Goldman Sachs. Please go ahead.

Good morning from my side as well. Can I just ask this question on - I'm looking at page 16. Can you just remind us how the CHF 7 billion of capital attributed to the Investment Bank is calculated?

Sure. [indiscernible] and then I'd also refer you to the annual where there's some very detailed disclosures, detailed...

Yes. I know you put it out and I looked at it before. But anyway, I'll wait for your explanations because it's quite possible I'm confused.

Yeah. So we use a multi-factor model to allocate equity to the business divisions. It's based on risk-weighted assets, leverage ratio denominator and risk-based capital. There's a 50% weighting on risk-weighted assets, a 25% weighting on leverage ratio denominator and a 25% weighting on risk-based capital. To that, we add any goodwill and intangibles that are related to acquisitions that the business has done. As you may remember, when we changed our strategy in the Investment Bank back in 2011, we wrote-off all the goodwill in the Investment Bank. So there's currently de minimis goodwill intangibles [indiscernible] the tangible that we allocate. Risk-weighted assets, we allocate at a 10% of utilization. Leverage ratio denominator, we actually allocated 3.75% common equity Tier 1. We actually do it on what we would call a broader array of competitors rather than the regulatory minimums. And then RBC is based on the output from our internal RBC model.

Okay. But if I take the CHF 7 billion and I look at the risk-weighted assets, so 68%, so that's roughly a 10% core Tier 1, but the leverage exposure of 2.90%, so that gives me on CHF 7 billion roughly 2.4% leverage ratio. Right, Tom?

But if you look at the weightings and you look at the individual components, the leverage ratio - so if you were to say - if you were to look at what the gross up numbers were before you weighted them, LRD is the highest output then risk-weighted asset. RBC; and I think this is a particularly important point, RBC is substantially lower than the other two because of the way we manage all of our businesses to a liquidity adjusted stress limit. So if you look at - depending on your views on RBC, you would say that's actually the real amount of capital you need to support a business...

Right. Thank you.

... regulatory perspective.

Right. The reason why I'm asking you is on page four. So when you say that the group resource allocation going forward, I guess, which is attracting a lot of attention today. So the Investment Bank is 30% to 35%. Does that assume that UBS keeps the current way of allocating capital to the Investment Bank?

So, let's separate research utilization from attributed equity allocation. So, on research utilization, which is what the graph on four notes, RWA and LRD will continue to be 30% to 35% - 30% to 35% of the group's target will be allocated to the Investment Bank and the balance of 65%-70% to the other business divisions. Attribution of equity calculation, right? So if you were to say, well, what does that mean for the IB going forward? Obviously, as usage goes up from 70% to 85% and from 2.90% to 3.25%, the calculation of the attributed equity allocated to them will, of course, go higher as it will go higher with the other business divisions as they increase the utilization as well.

All right. And just finally, not to bank on this point, but why does it make sense to have a very complex capital allocation model to the Investment Bank and why is it not the right thing to do to just say, the Investment Bank should have enough capital to meet the core equity Tier 1 and the leverage ratio targets, which we've set for the group?

Yeah. So, one, the way we attribute equity to every business division is exactly the same. So, it's the same methodology. It's not for the Investment Bank. Number two, it's our view that a multifactor model produces a better result in terms of thinking about your business across multiple divisions because you have different constraints on different divisions at different points in time. So we found over a long-term time period using multifactor approach, we believe actually produces a better decision-making process for us. The way we check that, we review this every year and we compare it to benchmarks for our multiple competitors. As you know, sometimes, it's a little bit hard because not everyone discloses the details of their methodologies. We then check that versus regulatory capital and others. And we think the methodology that we're using is producing the right result for us. It is the methodology that we use to change our strategies in 2011 and accelerate in 2012. And also, we use that to make some of the decisions that we announced today.

Thank you very much.

Thank you.

Ladies and gentlemen, the Q&A session for analysts and investors is over. Analysts and investors may now disconnect their lines. In a few moments, we will start the media Q&A session. [Operator Instructions] Please hold the lines. The media Q&A session will start shortly. Thank you.