Ladies and gentlemen, good morning. Welcome to UBS First Quarter Results 2017 Conference Call. All participants will be in a listen only mode. And the conference is being recorded. After the presentation there will be the Q&A session for analyst and investors. [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, everyone. It's Caroline Stewart here, Head of Investor Relations at UBS and welcome to our first quarter results. This morning Sergio will provide you with an overview of our results and Kirt, will take you through the details. After that we'll be very 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, may be uncertain and outside of the Firm's control and our actual results and financial conditions may vary materially from this belief. Please see the cautionary statements included in today's presentation and the discussion of risk factors in our annual report for 2016 for a description of some of the factors that may affect our future results and financial conditions. With that, I'd like to hand over to Sergio.

Thank you, Caroline. [Technical difficulty] and the profit before tax up in all business divisions. We also saw further improvements in our strong capital ratios. Client activity levels in wealth management were the highest we've seen for some time and this helped our global wealth management and business to deliver pretax profits of 1.1 billion, up 19% from the first quarter of last year and one of the strongest results since the crisis. Personal and corporate banking had a strong quarter and generated its best annualized net new business volume growth and first quarter net new clients acquisition in 10 years, underlying our leading position in a mature market. Asset management had a solid quarter with profits up 12% and very strong net new money primarily in [technical difficulty] space. The investment bank had a very strong quarter and delivered a very high 24% return on attributed equity, even though market conditions were sub optimal in certain areas. UBS is the world's largest and only truly global wealth manager with 2.2 trillion in invested assets. We've grown invested assets by almost CHF 0.5 trillion in four years, with around 40% of the increase from net new money. But most importantly, over the past four years we've grown profit before tax by 8% per annum, despite significant headwinds from low interest rates, low client activity levels and the effects of over 50 billion in cross border outflows. Our focus on lending and mandates has helped to drive higher quality recurring revenues which constitute 80% of total operating income. Our number one objective for global wealth management and for all our businesses is to grow profitably and sustainably over the cycle. That's why we've said many times that gross margin and net new money while important aren't the critical measures of our…

Thank you, Sergio. Good morning everyone. For the first quarter, our results were adjusted for CHF244 million in net restructuring expenses. My comments in the slides will compare year-on-year and reference adjusted results unless otherwise stated. Global wealth management had an excellent quarter with PVT up 19%. We delivered 4% positive operating leverage as income growth outpaced expenses. Net margin was up 2 basis points and we improved our cost income ration by 3 percentage points. Our results demonstrate the value of our global franchise, the inherent leverage in our model and the execution of our strategic priorities. Revenues increased by 5%, almost 4 billion driven by improvements in all income lines. Transaction-based revenues increased by 15% reflecting higher client activities notably in Asia where we saw a 32% increase as clients became more positive after six quarters of risk aversion. The US was the second biggest driver with transaction revenues up 10%, reflecting more positive market conditions and the higher degree of optimism generated by the election. Net interest income benefited from higher short-term dollar rates and year-on-year increase in loans and deposits partly offset by increased funding costs, reflecting the changes in equity attribution and continued buildup of TLAC instruments. Invested assets and mandate growth were the key drivers of recurring fee income, offsetting the cumulative impact of cross border outflows, the shift to retro-free products and client moves in the path of a less risky investment. Cost increased by just under 40 million compared to revenues up over 200 million, the cost increase was driven by higher FA compensation, mostly offset by lower allocated costs and actions taken by our wealth management business last year. We see net margin in efficiency, as well as growth in invested asset, loans, and mandates as the key drivers of our…

So, thank you, Kirt. And in closing, I would like to say a few words on the shorter term outlook. We've clearly seen improved investor sentiment in the first quarter, particularly in the US, but this hasn't yet translated into a sustain increase in activity levels globally and may not, given my current geopolitical uncertainties. Net interest income continues to face headwinds from low and negative rates in Europe and from raising funding cost. But as we saw this quarter, we are well positioned to mitigate these effects. As only a small improvement in market conditions, we'll support continued sustainable profit growth. That's why, as the world only global wealth manager, we are positive about the future. Our world-class investment bank is a perfect complement and we are the undisputed market leader in Switzerland and our asset management business is taking the necessary steps to adapt to an industry experiencing rapid change. These businesses are working together to the benefit of both our clients and our shareholders. Finally, without saying that we remain committed to our strategy and our returns policy while continuing to build capital organically and with that, thank you for your attention and we can now open it up for questions.

We will now begin the Q&A session for analysts and investors. [Operator Instructions] The first question comes from Fiona Swaffield, RBC. Please go ahead.

Hi. I had questions on two things. The first was on the net margins on Slide 5 and thank you very much that new disclosure. Could you say how confident you are with the sustainability of the very significant recovery in the Asian margin and very strong emerging markets in Q4? How do you see those progressing over the year? And the second one is on risk-weighted assets and that was again better than expected and I just wondered where you saw risk-weighted assets going in future, whether we should still consider them increasing towards your targets? Thank you.

Thank you, Fiona. In terms of that margin and we're glad that you actually pick up on the focus in that margin we do, as we've said before, believe that net margin is a much better metric to the business and gross margin. And as you saw, despite the fact that we had a year-on-year reduction in gross margin, net margin was up 2 basis points to 20 for the global business and net margin was up year-on-year for both businesses, Wealth Management and Wealth Management Americas. Now, in terms of the margins you see by region overall and you specifically highlighted Asia Pacific, I would just note that Asia Pacific is naturally our most volatile region. It's where we have most transaction revenue optionality and I expect that volatility to continue going forward. In terms of, if you look at both businesses, if you look at Wealth Management Americas, we'll see margin is much more consistent. We would expect that to continue to trend between 10 and 13 basis points and I've often said before if you look at our Wealth Management International business, we would expect overtime to deliver north of 25 basis points in net margin for that business and we think both of those are very healthy and we'll translate it into a very attractive bottom line performance. Well, in terms of RWA, what you saw during the quarter is that we did realize an overall increase in RWA that was driven by regulatory multipliers that we've got before and some methodology changes. Now, offsetting that, we had a large reduction in market risk, a reduction of CHF6.7 billion and that was reflecting the fact that we had relatively higher market risk levels at the end of the fourth quarter that we reduced during the quarter and that was consistent with the level, volatility levels that we saw in the market. In addition to that, we also had a reduction in our multiplier from 3.65 to 3. Now, as we move forward, we would expect to continue to absorb the multipliers that we guided on before that we expect to be CHF3 billion for the remainder of 2017, CHF5 billion in 2018 and a little bit less than CHF2 billion in 2019. Now, apart from that, we would actually see that our RWA growth will be commensurate with the business activity and opportunities we see in the market.

Of course, notwithstanding, we have to also -

Before Base-3 or Base-4.

That's finalization. So, we are talking about current regimes.

Absolutely.

The next question comes from Andrew Stimpson, Bank of America. Please go ahead.

Thank you. Good morning everyone. First question on wealth management margins, the second one on hiring in the IB. First one on margins, the net interest margin looked like it was low. Is that just from the TLAC costs coming through or is that the rates fell off? I know you've made some comments, but I am smart enough to do all the sums in my head quick enough. So, I'm just wondering are you rebased down to this level and then we should see some benefit from high US rates coming through or any comments around that would be helpful? And then secondly, I understand there has been some hiring in US credit business. I wonder if you could tell us what the plan is there, whether that just reassure us on what the balance sheet associated with that business would be and it's not going to increase in aggregate, please? That would be helpful. Thank you.

Andrew, I, of course, commented under the previous question on net margin for the businesses. But if you specifically…

That's a net interest margin.

Yeah. We specifically look at net interest margin for our wealth management businesses. First of all, for the combined businesses, net interest income was up 4%. Now, you have to look at both businesses separately. WMA, as you would expect, net interest income was up 17% and actually net interest margin increased on the back of tailwinds from interest rate changes, as well as on the back of increases in our banking products that we saw in that business during 2016. Now, the overall lower levels of and the reduction year-on-year for wealth management was really driven by the deleveraging that we saw during the year. We saw about CHF2.7 billion of loan outflows. In addition to that, that business is also exposed to euro, as well as, Swiss franc in addition to US interest rate, so not as much tailwind there. Now, as we highlighted on page 18 in the presentation, what we would expect going forward is WMA we should continue to see nice growth in net interest income commensurate with the interest rate environment and expectations that we want to continue to have loan growth, whereas wealth management will have some impacts on the, in particular, from the increased levels of funding costs that you see a total of CHF35 million net headwind. Now, we would hope to offset that through some loan growth and some other actions.

[Indiscernible]

Overall hiring for our credit business, was that the question and?

Yes. In the US, yes, please.

In the US?

I think it's - I can address. I don't think there is any - Kirt addressed in his remarks and he said very clearly that we had a good big cap in our credit business activity, whatever - we have to look at the net impact and the most important issues that we are very happy with our business mix FRC and our strategy is not changing. Our capital allocation strategy at a group level and within the IB is not changing. So, there is nothing really to comment on that. So, it's not an event, Andrew.

Okay. Perfect. Thank you.

The next question comes from Andrew Coombs from Citi. Please go ahead.

Good morning. One on new money and then one on the corporate center revenues. First in terms of net new money, you've had a very strong result, not only in wealth management but also in the asset management business in the first quarter. I know you talked about cross-border outflows being more heavily weighted towards Q4 and wealth management - and nonetheless in both divisions, it looks like you are well on track to meet or even beat the 3% to 5% net new moneys on the guidance. So, I would like to know was there anything one-off in nature about the net new money flows in Q1 or is this a more sustainable trajectory? And then shifting to the corporate center, there you seemed you got a very strong revenue result on ALM, which attributed to HQLA management. It's also very difficult for us to analyze the revenues coming from the corporate center. Is there any additional guidance you could give there as well? Thank you.

Yes, Andrew, just to comment on new net money, first of all, I will reiterate what both Sergio and I highlighted during our speeches. So, net new money is inherently volatile. We don't think it's something that should be focused on to the level that it is. We certainly don't. We look much more at the underlying growth in our invested assets. You saw that invested assets for both of our businesses that were up 1% year-on-year. And also we focus on quality and to make that point very directly, you saw that we had net outflows in the fourth quarter, strong net inflows in wealth management in the first quarter, but as I mentioned in my speech, we're taking some actions that will result some push out of current assets based on the fees that we are charging on some euro deposits and also some other actions that we are taking to address unprofitable and low profitability assets that will be accretive overall. Also, as we've commented on, of course we do expect some continued cross-border outflows. We highlighted CHF14 billion for the full-year and we just saw CHF1.4 billion during the first year. Yeah, finally, if you look back at our Wealth Management Americas business, again there the quality is what is important. We were very pleased with our increase in net new money outflows from same-store, but we actually had net outflows from net recruiting given the cost of bringing FAs in, again the economic accretion of that takes a while to actually realize in the business and we'll focus much more on retention. I also highlighted the fact that tax payments during the second quarter will likely result in somewhere between CHF3 billion to CHF4 billion of outflows.

Maybe Kirt to add on that money side, the real life on the new money was the return of some leverage, if you look at the last few quarters, we still climb the risk up at leverage being very correlated with client risk appetite and transaction volumes. As you could see this quarter there is a pickup in lending, and that that's a real I like that we want to focus on because as we say many times you know getting in cash particularly if you pay for deposit, like U.S. is very simple, I mean I don't think that we should really focus on this kind of business.

Just mention as the management, you asked about asset manage as well very strong in CHF12 billion to CHF20 billion that was very much as I highlighted in my speech that was very much focused around ETS particularly in equity in to those products there was one very large employer CHF12.7 billion that was in the press around an Asian client and again that was that with an employer based on our passive capability. We do think our passive capability should continue to help us as we go forward with our net new money dynamics and asset management. But generally that's much lower margin, of course than active. Now our Corporate Center the way to look at asset liability management we provided guidance previously is the line that is rest met - risk management net income after allocation that should trend around negative CHF50 million a quarter. The reason why we had a positive performance this year is, because of the game that I referenced that we took on the mark-to-market our fair value portfolio high quality liquid asset portfolio. And we expect that actually to revert back as we go through the next couple of quarters. Everything else below that line is accounting asymmetries, which tends to mean revert to zero and you'll see volatility there, but over the course of the year it should net off.

It's very helpful. Thank you.

The next question comes from Stefan Stalmann of Autonomous Research. Please go ahead.

Yes, good morning gentlemen, I have two questions please. The first on your interest rate sensitivity to rising rates you say you have actually reduced the guidance a little bit for 100 basis point impact of rising rates. Could you please maybe add a bit of color on why that is, and maybe also talk about what kind of deposit beta you have seen over the last couple of months and your U.S. business rates have started to rise? And the second question regards compliance expenses Credit Suisse disclosed this week that they have about 2000 headcount and about CHF500 million annualized expenses in what they call compliance and regulatory affairs. Could you maybe hint whether your numbers in this area would look similar or what they would be in? Thank you very much.

Just in terms of your first question, I wouldn't read a lot into the change from CHF700 million to CHF600 million that you saw in our guidance, it was really just, first of all there's rounding involved, secondly it's just an update that we do on a quarterly basis, so I wouldn't read a lot into that. In terms of your question of compliance what we've said before we do have substantial resources naturally that are focused on compliance efforts overall. Now we have in particular an also lot of resources in investment that are partly as in the temporary capacity to address a number of our legal entity built out to meet our ability requirements as well as a number of our strategic regulatory initiatives of our around prudential around CCAR. We've said before that overall there's about CHF700 million of expense that we defined as temporary although a part of that is likely to become permanent as we go forward.

Okay, thank you.

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

Thank you. SO my first question is on leverage, you're still quite some way from your CHF950 million short and medium term target, it's that for still the right number and what do you think of the target CT1 leverage ratio and what sort of management profit you think is appropriate over the 3.5%. My second question is just on the gross margin by region, I know you prefer to focus around net margin, so I'm sorry if I missed the disclosure, but do you have the gross margin on a regional basis? Thank you.

It terms of the first one I just to clarify importantly we've never set that CHF950 billion is a target we mentioned that is expectations, and what we've also highlighted is that under the normal market conditions where there are opportunities to put balance sheet at work that would achieve our target hurdle rates, we would expect to see commensurate growth in balance sheet levels. Obviously with the market conditions that we saw last year and we'll continue to see now the opportunities aren't there to that extent, and so we're operating that low LRD and lower balance sheet levels. And I think as we go forward you should see a similar dynamic, well we'll manage the business in a very disciplined way that ensures that we ploy as and when we see opportunities that are created to shareholders. In terms of gross margin in fact, you won't find gross margin by region in the presentation and that's five and 10 as we highlighted before we really believe that you ought to be focusing on net margin, is that net margin drives pretax and that's what drives pretax growth and that's really what we can lost about.

Right I mean as I don't know if you don't want to focus, but we are focusing on creating pretax profit and for shareholders. We want to create a bottom line value, not top line value that's always I mean of course you can focus on and everybody can focus on, but the nature of our business and particularly if we go back to the point that with the exponential growth that we had in ultra in the last four or five years as I mentioned before, you have a natural dilution of ROI and the most important issues for us is always a loop how this plays out into the bottom line. So it's an interesting KPI to look at like the new money we look all KPIs but depending on the timing and you know those KPIs may lose importance in relative terms to others, but our fundamental strategic KPI is profit for those.

And maybe just to emphasize I think as Sergio mentioned in his speech, I think if you look at if you look at Slide 3, you see that dynamic. Net margins down 84 to 75, gross margin up by one basis point, that's what drives probability. And importantly our cost to income ratio which of course is directly correlated with pretax profit growth down from 78% to 75% and as Sergio mention if you look at our focus on ultra high net worth and I would ask that you turn to Slide 6, you'll actually see that the cost to income ratio for that business is 69% which is below the overall average for global wealth management, despite the fact that that segment has lower gross margin.

So probably we would we missed the answer on the buffer that you mentioned. I think that one as I cannot reiterate what we've said in the past, I think that 0.2, 0.3 whatever I think that that we do have a clearly a buffer about 3.5% and above the 5% in order to be comfortably within the target which is not a minimum, but is actually a level in which you would be categorize as well capitalized, and of course, we need to see what are the future regulatory developments, but as we speak all things being equal. We are running the firm based on risk sensitivity so our focus is still the one of looking at risk adjusted returns and risk good assets is important. The second leader is to run the firm its stress and the backstop is leverage ratio. We do really believe that any other ways to run a bank particularly in Europe, Switzerland and Asia is totally the wrong way around, and we are - we still believe this is the right way to go for us.

That's great thank you.

The next question comes from Al Alevizakos, HSBC. Please go head.

Hi good morning, thank you for taking my questions. I've two questions on wealth management. Question number one is, obviously I can see that the integration of wealth management and Wealth Management Americas has continued and that's probably why you started providing this combines life. But I was wondering whether you can give us any concrete numbers in terms of how much of the cost cutting has already happened, and whether you can give any indication of how much you expect and the combined net margin to improve? So that question number one. Question number two is I can see that you are focusing a lot on the ultra-high net worth individual because that's you provision. But at the same time would not issue that you spend a lot of time and resources for investing in the advisors, a few other expect other side of the spectrum, both in the U.S. we're six again in the non-U.S. with smart wealth. Some I was wondering whether you see any actual traction and how does it fit with the overall ultra-high net worth individual strategy and how will it impact your overall margins? Thank you.

So let me take the second one on the strategic element, I think that the ultra is really where we can say we have a clear differentiating factor, but it doesn't mean as I pointed out in my remarks that's the high net worth space is not important, and actually the high end of the affluent is very important, actually our high net worth individual is a big chunk of the business, I mean just put it the other way around is the delta, is CHF1.2 trillion of assets, so it's a very important business for us that we will grow and we'll continue to focus on particularly when you look at Asia, where the numbers of high net worth individuals that will you know be generated and they already there will expand over time. In respect of our - it's not really robotics, but we are using technology across the board being in outside the U.S. or in the U.S. Our view is that by using those kind of technology that are leveraging order existing technology within the group. We can expand and exploit those channels and those segment different segments at in an efficient way. But you know we do still believe by the way that there is no way you can approach high net worth individual or a higher end mass affluent individual robotically. So I don't think that is really you know you're always going to see an element of human touch and desire to interact, because this is what we believe it's setting us apart from the rest of the industry. So we are in respect of seeing the results, we for sure see the results of deploying those kind of technology in the day to day work of our client advisor and financial advisor, because they are becoming more efficient, but also more effective in the way they can communicate and translate our content and communicate our content to clients. And as we speak, we are clearly trying to test ways to go down to mass affluent, high end mass affluent and see how we'll work, but it's premature, is going to be is going to take sometimes to see the results.

Now maybe to answer your first question, first of all we wanted importantly to highlight the fact that we are global wealth manager, and that was really the primary impetus behind present in the business on a consolidated basis, because what you see there is the value of diversification, the value of consistency you saw in 2016 it was our Americas business that was performing quite well, whereas we had some more challenges related to client trends and risk conversion in our international business, if you would have dial back to 2014, first half to 2015 actually our international business was play much more strongly with a lot of the underlying growth measure Pacific. And so over time we just think the uniqueness of our leadership position in the U.S. but also a dominant position in other markets is what separates apart. Now in terms of the business is overall clearly we continue to look for areas of centers in some those in clear we commonly used the CIO the CIO is a capability that we use across both businesses. We obviously leverage research across both businesses. We have a common global approach to GFO family offices. We also have only recently announced the combined management for our investor product solutions organization and that's something that should lead to more synergy opportunities as we go together, as we go forward.

Great. Thank you very much.

The next question comes from Magdalena Stoklosa, Morgan Stanly. Please go ahead.

Thank you very much, good morning. I've got two more structural questions. First is about your lending activity, we've talked a lot about and I had to call but the wealth management has seen a very strong numbers long for up about 10% kind of year-on-year and also in the international you have seen 2% long growth again kind of year-on-year. This is very kind of highly dollar rate book, as I understand of course if you mentioned the European component to it too, but if we strip out Europe, and do we continue seeing kind of similar levels of lending activity would you say that if we look at your revenue mix over the next three years, the NIA should actually see quite a nice increase in terms of weight in your kind of overall revenue mix, would you say that that's where your structurally heading. So that's my first question. And my second question is about the operating leverage, because we have of course seen the results of your focus on cost that 75% cost income ratio in the quarter, but how should we think about your non-comp kind of cost base over the next couple of years, when we think about the regulatory cost the underlying digitalization, which should provide some benefits also against your investment in the distribution sales and so forth, how would you see that kind of non-comp base evolving again structurally over the next few years? Thank you.

So Magdalena, in terms of your net interest income question and also the impact of run and I guess I would refer back to the question that I answered earlier that you really have to work at both business a little bit separately in the case of WMA with interest rate movements we'll continue to see positive trajectory there that the business will benefit from also until this quarter where we saw a very slight decrease in loans in that business. We actually added to 26 consecutive quarters of loan growth and we would expect to continue to see positive loan growth in our WMA business, and that is a very important part of the strategy conversely in that wealth management over last year and really for the six quarters prior to the first quarter of this year we actually saw net loan outflows. In last year in aggregate, we saw CHF2.6 billion about close. So now in the first quarter that turned around we had positive influence the CHF2.5 billion that partially reflects the fact that our clients were active they were more risk on. Having said that that is an area of focus for us going forward you should expect to see us actually generate particularly is our client need to evolve loan growth in both businesses going forward and that should benefit that interest income. And have a final comment there also is if you look back on the slide where we highlighted the overall net interest headwinds again I would just remind the wealth management and Wealth Management International that stays negative CHF35 million of headwinds from increased funding costs that they would expect to offset, but that creates of course a little bit of a drag through some of the lending growth in the other actions that they're taking. Now on non-comp cost stay you know obviously the dynamics there on the one hand as we continue to complete our net cost reduction program you should see benefit to then net non-comp cost base line as we focus on areas like consulting cost, like contractors, and like what we're doing with our technology platform to modernize it, what we're doing with wealth management to consolidate platforms globally. And so that on the one hand should create positive trajectory there. On the other hand we do continue to invest where we're investing in technology Sergio highlighted what we're doing the digital, we highlighted are our private and corporate our Swiss business in fact that they're a digital leader, they're going to continue to invest in digital, and we think that that's important for positioning those business over time. So we would hope on that wind to be able to fund our investments without having a significant increase in our not complying as we go forward, and one module late that will do that in a responsible way as we manage pretax profit and cost to income.

Thank you very much.

The next question comes from Kinner Lakhani, Deutsche Bank. Please go ahead.

Yes good morning, so I had one question and one clarification, and the question was again coming back to WMA. And I noticed you had removed reference to U.S. investor confidence improving and the outlook statement, and particularly I noticed that the fee margin that you have is the lowest that I can see in my model even and sold by three basis points sequentially. So just curious as to what's going on with the kind of recurring fee margin in WMA. And the clarification was just on PCB I think I probably missed something, but did you provide some quarterly guidance on that on TVT apologies if I completely misunderstood them.

Just in terms of your first question we do quarterly surveys on client confidence and we actually did and just recently completed our updated survey you might recall from our last quarter where we highlighted the fact that we saw a significant increase in optimism and willingness to invest with a little bit of caveat there was a bit of wait and see with the updated survey actually that that optimism has not abated in fact it's actually increased a little bit although there still is some indication that any lack of progress on the administration's agenda could result in some abatement of that confidence, but we still see that confidence flowing through to the second quarter for WMA. In terms of our fee margin if you look at recurring theme margin in WMA there were a couple of impacts, first of all there were a couple fewer trading day. Secondly actually if you look at the way that we accrual and we charge on our invested assets, it's actually in a rear, so the charge base was based on the fourth quarter and invested assets, and these assets grew during the quarter that resulted in a drag that you're seeing you should see some catch up and in margin as we get into the second quarter. Now in terms of your PVT…

No he is asking if you basically have been giving guidance on that.

Guidance on corporate banking.

Yes we actually did a provided specific guidance, we said as a consequence first of all if you look at the quarter we highlighted the onetime CHF20 million item from the loan sale there also s there was actually a net credit loss expense release of CHF7 million we did have seasonally lower expenses and also we expect intensification of headwinds from net interest come we talked about a total of around CHF160 million year-on-year drag on net interest income for that particular business. And so we've said with all of that that over the short to medium term, we would expect PNC'S average quarterly PVT to be in the region of CHF350 million.

Definitely, thank you very much. Appreciated.

The next question comes from Kian Abouhossein, JPMorgan. Please go ahead.

Yes just take one question in respect to you talk Sergio about a little bit of pick up and market environment has already helped you quite significantly on your EPS growth or earnings growth, I just wonder let's assume there is no market pick up what is it that you are doing the management team to generate ongoing earnings growth?

Thank you, Kian. Well you know I think that I guess, yes, I mentioned that the reason there was a pickup in the in wealth management transactions, But if you look at the idea as you know this institutional space has been a little bit more subdued in terms of and on even in terms of activity. So in general we would continue to do what we have been doing the last four or five years so basically work on or our alpha leaders i.e. enhancement that penetration review pricing just make sure that as we Kirt mentioned before look at ways to turn around asset base that is either structurally not profitable or at the margins and try to make it profitable, work and continue to deliver on our cost initiatives that as you know we've not finished. So I guess we're going to continue to work on to those levers and while we expect over the long term to see a normalization of this environment. So I don't think the story in the foreseeable future to be honest is much different and what we have been experiencing the last two to three years, but still going to see high degree of volatility in sentiment in market activity, and that's the reason why the diversification itself being of a lot.

Thank you.

Next question comes from Andrew Lim, Société Générale. Please go ahead.

HI, morning, thanks for taking my questions. Can appreciate it bit more on the high costs in WMA, so I mean your revenues are higher in large part due to high net interest income, but your personal cost of course resulted in the cost income measure deteriorating quarter-on-quarter and the net margin going down. You might have read this to faster say hiring, but your financial advisors have actually gone down 2% year-on-year and 1% quarter-on-quarter. So perhaps you can give a bit of color there are you paying more per advisor. And then the second question. Perhaps I can offer a bit more clarity on the capital situation, so you've talked about 20 basis points, 30 basis points about to 3.5% regulatory minimum, but at the same time your leverage exposure your LRD CHF881 billion, which is some way below your CHF950 billion target, so I'm wondering what happens when you get to 3.7% to 3.8%. Would you see excel capital building up above that as contributing towards the higher dividend or do you seek expansion in your LRD as a priority before you consider that how does that where you on your mind? Thanks.

Let me speak up the second question and Kirt will take the first on, I mean when you look at again as Kirt just mentioned before CHF950 is not a target, is what we think in our capital planning in our forward looking statement and we see that we believe that there is capacity and it's correlated to all our other capital targets to go up to CHF950, if there is a constructive market environment in which clients are demanding capital being deployed, and those capitals deployed would generate very similar returns that you have been seeing in the last few years. Okay, so as we do that we are happy to deploy more capital, because we believe those capitals deployment translate down to the bottom line, and helps us accrue more pretax profit. That pretax profits actor operates once we reach that our target you know I have to go back to our capital return policy. Our capital return policy is clear, we are committed to return at least 50% attributable to shareholders and the delta between the 50,51 and 100 is driven by the cyclical consideration about where the economy is outstanding litigation matter, and an ability to redeploy capital that is a creative to shareholders in terms of value creation. If those three conditions are fulfilled and we feel comfortable of course every excess capital then will be return and we will not keep capital if it's not strictly necessary to fulfill they say and business or regulatory requirements.

Can I ask in the current market environment and what you see going forward? Do you see opportunity to expand the average ratio denominator or you quite comfortable would be to level as it currently stands?

I think yes, but you know we would see opportunities to deploy more capital, but as my colleagues at tells all the time particularly in the AB and also in certain years of the wealth management, not necessarily these deployment good translate into a creative value creation on a capital basis. So the problem here is that we see a lot of business being done below cost of capital. And I don't think that we should you know basically use our boots at this stage for this kind of business when there is a constructive and sustainable demand for capital deployment by clients we want to have the capacity to do that and not dilute our returns. I mean if you look there is no way, we could achieve a 24% return on allocated capital, if we would just do certain businesses, we see been done, I mean it's very so good.

Great, I think that's very clear. So it sounds what you're saying is that you don't see any higher ROI business return on capital businesses versus what you've got right now, so if you have keep things as they are and so any build up about 3.7%, 3.8% would be good?

Well, look I think that I don't want to comment, but in generally I look from an industry standpoint to view this rally it is bonanza on uncertain part of the businesses doesn't seems to translate into bottom line creation of in returns on capital. So I don't feel that both intuitively also looking at what clients are telling us, but also if I look at results in the industry, it doesn't look to me like we are missing anything.

Okay thanks.

Yeah Andrew, I just want to address your first question, I guess if you look at the cost income efficiency ratio of our Wealth Management Americas business and to compare us to other players there are two reasons why we operated a relatively higher ratio. The first is lower penetration of banking products. We don't tend to be the primary back to our wealth clients in the US, whereas others like Morgan Stanley, Wells Forgo, Bank of America actually do tend to have a much larger penetration of banking products. Secondly, it's a higher concentration of recruitment loans that we build up after the crisis when we had a high degree of recruitment. Now, as we go forward we're doing a number of things to address that. In terms of banking products, there's been emphasis on increasing our banking product penetration, you've seen that in terms of the gross of our loans and we expect to continue to do that. In terms of the recruitment loans, we've focused on retention than net recruiting, that should result - and actually if you look at our quarterly disclosures, you'll see that those loans on our balance sheet have already come down to below 3 billion and you'll continue to see those volumes come down. You'll see an actual benefit to our expense line that will start to show up in the fourth quarter of this year and that will be quite an attractive benefit. Now, if you look at the year-on-year trajectory, first, I would ask you to focus on year-on-year because there are seasonal differences. Our cost income ratio is down from 87% to 84% and you'll see that that's the highest level of improvement across the industry. So we made the most improvement of any of our competitors. Secondly, you'll see that the increase in personnel cost is really driven by FA comp and its payments off the grids. It's not really driven by any other increase hiring levels within the business. I would finally just note that we continue to have the highest level of productivity amongst our FAs in the industry and we expect to continue that as we look at focusing on productivity of our FAs rather than the number of FAs we have deployed in the business.

Okay, that's great. Thank you very much for that.

The last question for the analyst and investors Q&A session comes from Patrick Lee, Santander. Please go ahead.

Hi and good morning. Thanks for the presentation. I just want to go back briefly to your wealth management margin excluding America. I noticed that the recurring component of your income was 75% of total which I believe is quite a bit below the usual level of 80%. And while a prettier part of this is driven by very strong transaction revenue this quarter, at the same time I think the fact that the recurring component of yield are also bit flat. But I guess from a broader level and in the context of the changing business mix towards Asia, towards ultra-high net worth, should we expect this recurring component to get gradually smaller and just accept that wealth management is maybe something more of a marginally and more volatile business going forward or is this something you actually care about or is it just a function of where your business is growing? Thanks.

So if you look at the dynamics of our recurring revenue in wealth management and we've indicated before that actually tends to fluctuate between 75% and 80% or it has historically and the fluctuation is really driven by volatility around transaction revenue. So we had a better transaction revenue quarter, it dipped down toward 75. The transaction revenues are not so elevated that you actually see that drift up a bit. Secondly, strategically we're very focused on increasing the overall recurring component of our revenue across both of our businesses. And we're doing that through one of our major areas of strategic focus which is mandate penetration, which of course provides stability to margin and we highlighted the fact that we actually have seen 100 billion increase in mandates over the past year. And we've also seen increase in mandate penetration within our wealth management business and we expect that to continue as we go forward, that allowed to increase stability in that recurring margin and revenue line. Now, important to note one of the reasons why you've seen less growth in that line is the cross border outflows, a reduction in retro session, principally impacts the recurring margin line. So that's why we've been working with mandate penetration to partially offset that, but that's a dynamic that we're going to continue to face this year, but that should abate as we go into 2018 and we no longer see the cross border outflow levels, so the year-on-year comparison should start to become more favorable in that line in 2018.

Okay, thanks.

Ladies and gentlemen, the Q&A session for analysts and investors is over. Analysts and investors may now disconnect their lines. In a few moments we will start the media Q&A session. Thank you.