Good morning. It's Caroline Stewart here, Head of Investor Relations. Welcome to our second quarter results presentation. This morning, Sergio will provide an overview of our results, and Kirt will take you through the details. 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 belief. Please see the cautionary statements included in today's presentation on the discussion of risk factors in our Annual Report 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 let me first touch briefly on our strong performance this quarter, and then I'll cover some highlights of the first half of the year and our plans for the future. Q2 net profit increased 9% to nearly CHF 1.3 billion, with strong growth in Global Wealth Management and the Investment Bank. In Personal & Corporate, momentum was good as profit increased. Reported profits in Asset Management were impacted by a business disposal in Q4 '17. Kirt will cover the quarterly results in detail later. Strong performance in Q2 contributed to a very good first half with net profit up 15% to CHF 2.8 billion. Global Wealth Management's reported profit reached CHF 2.2 billion, the highest in 10 years. The Investment Bank was strong across the board with 24% adjusted return on attributed equity. Personal & Corporate maintained its good business momentum despite interest rate headwinds. In Asset Management, we saw a rebound in normalized profit, and invested assets reached a decade high. To conclude, we had two consecutive quarters of returns well above the 15% return on tangible, and we brought down our cost/income ratio by 240 basis points. We have generated around CHF 3 billion of CET1 capital in the first 6 months, the most in any first half since we began the implementation of Basel III. We added CHF 1.1 billion to our capital base while accruing for the 2018 dividend, in line with our dividend policy. In Q2, we also bought back CHF 550 million worth of our shares, achieving the target we set for 2018. Any additional share repurchases this year will depend on business and capital development. So now on our strengths and plans for the future. As you know, UBS is the largest and the only truly global wealth manager,…

Thank you, Sergio. Good morning, everyone. As usual, my comments will compare year-on-year quarters and reference adjusted results, unless otherwise stated. This quarter, we have adjusted for restructuring expenses of 114 million and 15 million of foreign currency translation losses. Taxes for the quarter include a reversal of the provision of 13 million we took last quarter for BEAT. As following a continuing assessment of the new laws application, we no longer expect a material impact this year or for the foreseeable future. I would also note that we are currently reviewing our DTA remeasurement process and expect to make any adjustments in the fourth quarter this year. Global Wealth Management had another very good quarter with 10-year record performances in net interest income, recurring net fee income, strong invested asset growth and record lending volume and mandate penetration. We delivered 18% PBT growth on a reported basis or 7% on an adjusted basis despite lower client activity. On the efficiency side, our reported cost/income ratio improved by 280 basis points or 50 basis points on an adjusted basis. At the same time, we have absorbed material increases in incremental investment and regulatory-related spend. This year, we have been investing in technology, building out our product suite in the U.S. and hiring advisers in APAC, resulting in over CHF 175 million in incremental expenses compared with the first half '17. In addition to this, we spent an incremental CHF 90 million for regulatory developments. As Sergio mentioned, we have implemented a number of initial efficiency measures in the quarter, which we expect to result in a reduction of over CHF 100 million by year-end compared with the first half annualized. Operating income increased by 5%, with 83% of our revenue recurring in Q2. Net interest income and recurring net fee…

The first question from the phone comes from Andrew Stimpson from Bank of America. Please go ahead sir.

Two questions from me, please, one on the Wealth Management division and one on buybacks. It's been a few quarters since you announced the GWM merger, so I'm just wondering when you think we'll have some tangible numbers to give the market on synergies. Presumably, there are some, and I think those may well be reinvested. But I was expecting, at some stage, to hear a number put on those because it's a discrete project. I know there's ongoing, permanent cost cutting, but this is a discrete project. I think the market would appreciate an actual number put on that. And then secondly, on the buyback, obviously, very impressive and quick execution, so well done on that. But as you know, all the analysts, we're all an impatient bunch. So I'm just wondering, what happens now? Can you increase the 2018 buyback? Now that's presumably gone better than you had initially expected, do we have to wait until 2019? Or what does the decision process look like there? Do you need to speak to the regulator? Or does is it just up to you guys?

So first of all, I think, Andrew, the integration of the two businesses, as I mentioned in the past, is a really natural evolution of our business model, and it's all about creating growth dynamics. There are, of course, cost synergies. And as Kirt just outlined, we have already executed and we are executing plans that will deliver around 100 million of cost savings on a fully annualized basis into 2019. So there are things that we can do better. But the emphasis of the integration is not to create massive cost synergies, but it's to create a different momentum, a different offering to our clients. And therefore, we need to balance those issues. Of course, as I just mentioned, in October, we will be able to go maybe deeper into some dynamics. So Tom and Martin will outline some more concrete plans. But essentially, Andrew, this is not a cost exercise. It's about creating better growth trajectory and dynamics. So regarding the buyback, I think I fully appreciate I also joined the team of inpatient people, but we have to really look at where we stand. I'm very pleased that we took the opportunity to fully execute our target for the year. And so having as a base today a 13.4% CET1 ratio, a 3.75% leverage ratio, we have a base where we can look into the next six months based on -- the potential of doing further buybacks is going to be based on clients' requirements and dynamics in terms of capital deployment, can we deploy capital at a better returns and create and serving our clients. We need to look at the economic outlook. We need to look at the environment. But as I said in the past, we will not retain surplus capital. It is not strictly necessary from a tactical standpoint of view or a macroeconomic standpoint of view. In respect of regulatory approvals, our capital plan has been approved by our regulators. And therefore, if we stay within the approved targets, there is no limitation in that sense.

And there's no, like, CET1 hurdle that you would look for? Is it fairly fluid?

No. No, the hurdle are what we showed on slides -- remind me guys...

Slide 4.

Four? At the bottom right, you can see around 13% and around 3.7% is what we expect our ratios to be at year-end or fluctuating during the years. I mean it's very important to understand that those are not firm numbers. We may have, like we have right now, a 13.4%. Last quarter, we had a 13.1% or 13.2%, so that we basically fluctuate around those numbers. It can go to 12.8%. And this is not going to change our philosophy that we stick to those numbers as a base. And as you can see, we have sufficient AT1 outstanding instruments. We have plenty of TLAC instruments. We have a very solid capital base. And this is what we believe is very important going forward. We will, we want to keep our solid capital position. And we want to have also financial resources to serve clients and deploy capital where necessary. But if it's not the case, we will adjust our capital returns policy and/or, I would say, implement our capital returns policy in a more faster way.

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

Two questions. The first one is, can we talk a little bit about adviser hires or reduction going forward? And in what segments, i.e., in what geographic areas do you expect adviser numbers to change? And the second question is relating to Page 26 and 27. How should I think about the Corporate Center service reduction staffing? I mean, how far can you actually go over the long term? I don't mean next quarter or even next year. And how does that square this, the CHF 2 billion on Page 26 that you roughly spent? I know there are some offsets, but how should we think about the CHF 2 billion service cost before allocation on a longer-term basis?

Yes, we're up. Kian, I can answer your second question first. In terms of what you saw on the headcount slide that we showed on Slide 27 that you referenced, we do expect to continue our overall workforce strategy of in-sourcing previously outsourced headcount, particularly in technology. And so we would expect, as a consequence, to continue to see the growth in internal staff along with reductions in external staff over the next couple of years while we complete that program. Now beyond that, if we look at the trajectory of our headcount, it's also very clear that part of our strategic focus in investing in technology is to automate and to deploy robotics. And we do think, over time that should continue to benefit our overall headcount in personnel expense numbers. Now regarding the overall Corporate Center expense number that you referenced, the around CHF 2 billion, first, again, I would just re-highlight the fact that if we exclude technology and we are committed to continuing to invest in technology, that, along with the increase in amortization, should result in a continued increase in technology expense over the next several years. In addition, we had higher-risk management expenses, and that relates to our regulatory requirements. So the trajectory there will depend on what we actually have to address from a regulatory perspective. But beyond that, our anticipation is all other costs should continue to come down over the next couple of years, both through continuous improvement, tactical actions as well as strategic actions. And I would remind again that 95% of these costs are allocated to the business divisions.

And if I may just follow up. So the way -- just to -- for me to think about my -- kind of how this number progresses, on the one hand, consultants are, let's say, 20%, 30% more expenses, plus you're actually reducing net staffing, so there's a cost savings, and then you're spending on the other side. So should we think about the CHF 2 billion more like an ongoing run rate, i.e., whatever you save, you have to invest and you want to invest?

No, I mean, I would just refer to the dynamics that I highlighted. You're right, if we think about our total workforce, we are managing the total cost of workforce. So where appropriate, we're replacing consultants with internal staff. But I wouldn't gleam any conclusion about the specific trajectory of a number. I would just reflect on the comments I made about our commitment to continuous improvement and strategic investment. And that continuous improvement, as we would expect to see, excluding technology and risk, is the remainder of cost with Corporate Center come down 2% to 3% a year.

So Kian, on headcount, and so, first of all, I think that if I look at the overall financial client adviser -- financial and client adviser dynamics, I would say that the net number is quite flat. But if you look at the underlying trends, of course, we have a slight reduction in the U.S. where, as you know, we are not focused on quantity but quality. Our client adviser, our financial adviser in the U.S. are the one who have the highest level of asset for a financial adviser, the highest productivity. And what we tend to do is to really focus on this high-end client base. When you look at the dynamics outside the U.S., we clearly see almost a double-digit increase in advisers in Asia. We are also seeing an increase in Europe, in EMEA, as we invest more particularly in the ultra space and -- which is also a big driver of growth movement in the ultra space between the Americas and APAC. So overall, if you look at the net numbers, they are not really changing by a lot. If you look at the underlying growth movements between hires and terminations and transfers, I think that we have a very healthy dynamic where we focus more and more on quality of people, and we keep investing where necessary. But also, it's very important for us that deploying technology, our focus, over time, is to make our adviser more productive as well, giving them the tools that allows them to be more productive. So number of headcount is important, we want to grow, but it's not the only levers we need to have to grow because productivity through technology has to be part of the solution going forward.

And if I may ask, is there some kind of net adviser target for Asia in particular, percentage wise?

No, as I said, we hope we can grow adviser at a lower pace than we're going to grow our profitability as a function of enhanced productivity.

The next question comes from Andrew Coombs from Citi.

If I could ask one on deposit and then one on net new money in GWM. Starting with the FRC business, it seemed to me there was positive momentum there for the first time in a couple of years. So I think if you adjust for the accounting change, you're up about 37% year-on-year, materially outperforming your competitors. You said that's more based across product and regions, but I would love if you provide a bit more detail about what is driving that strength and whether that improvement is sustainable from here? And the second question, which is beyond the GWM, net new money. I appreciate there's a couple of large items in the U.S., even if you were to exclude those, I think you'd be at about 8 billion net new money that's about 1.3% annualized, so it is slightly below your target. Within that, it's APAC and EMEA, it looks slightly weak than we might have anticipated, so would love if you could elaborate a bit more on the drivers there as well, please.

So thank you, Andrew. On the IB and FRC, first of all, we have to go back. You spoke rightly about momentum and you remember that Q2 last year was not necessarily a good market environment. For a franchise like ours, who is heavily skewed in that area towards FX, but here, we had very low, very low, extremely low volatility in the FX market, very low turnovers led by clients, and that's also a reflection -- the momentum is also a function of the underlying market dynamics and our business mix. We are heavily skewed towards FX. Now the investments we made over the last couple of years and particularly in the last 12 months to improve our engine in FX algorithm and its execution has helped us to create, to gain market share and to capture more normalized market environment. And -- so that's the reason why we believe it's quite sustainable going forward. So year-to-date revenues are up 27%. And as I said, we also gain market share, and it's clear that we are gaining -- we have a good momentum. So I'm quite optimistic about the fact that despite the market conditions, we should be able to stay -- to keep that share of wallet intact for the rest of year. In terms of net new money, I think, let's make no mistake that we -- it's clearly not a quarter where I categorize us being happy. And having said that, we are coming out of a very strong Q4. You remember, Q4 last year was extremely strong. Q1 was fantastic. And this year, we had almost a perfect -- this quarter, we had almost a perfect storm in terms of what happened. We expected seasonal outflows in the U.S., it's nothing new, we knew it. Its outflows from the corporate clients on the employee stock option plan was not expected. We had, as Kirt mentioned, we had de facto zero net impact or net contribution of lending to our net new money this quarter. So the -- but if I look at the underlying dynamics, just look at the U.S., we had basically a big improvement of a same-store client adviser, almost 3 times more than last year. If I look at the outside U.S., we had almost 6 billion of net new money. So overall, the numbers are now still in a trajectory that indicates we should be able to achieve and we will achieve our targets of 2% to 4%. And if I look at the momentum into the third quarter, I'm convinced that we are going to deliver that. But as I said we don't look at net new money on a quarter-on-quarter basis. We haven't made a big fuss in the first quarter when we had fantastic results. And I'm going to get to focus on that one. But still, I understand that we need to deliver on our targets and that's an imperative for the organization to deliver.

That's very clear. If I could just, one follow-up on deleveraging. It's been a concern particularly around Asia Pacific. If you could just comment on whether that's been a driver within the net new money? If we look at your APAC loans, they actually look very stable Q-on-Q, but it would be interesting if you comment.

Yes. I think, as always, with those kind of numbers, the real dynamics is on the growth movements. And of course, we had, in the U.S., deleveraging in APAC and EMEA more than in the rest of the world. So I think the dynamics where we could see a deleveraging, it was driven by APAC and EMEA rather than the rest of the world.

The next question comes from Jeremy Sigee from Exane. Please go ahead.

Two questions, please. Firstly, just on the capital and scope for further buybacks. Are there any adverse impacts on capital ratios that we need to be expecting in the second half of the year that could affect that decision? That's my first question. And then second question on the IB side, the less good part of IB, obviously smaller, but less good was Advisory, ECM, DCM, which are relatively weak. But I wonder if you could talk about how you see the pipeline on the primary side looking to the back end of the year and into next year?

Yes, Jeremy. So on your first question, as we had guided during the fourth quarter, we expected about 20 billion of regulatory and methodology increases to RWA during the year. During the first two quarters, we saw almost 10 billion. During the third quarter, we expect about 3.3 billion, and that will taper off a little bit to 2.3 billion, so a little bit higher than we anticipated, but roughly in line. Beyond that, it's really what Sergio mentioned, it's more based on business demand and deployment opportunities, in addition, of course, to volatility from foreign currency movements.

And there's nothing on the capital? You mentioned the RWA, there's nothing we should expect adding or deducting from capital in terms of methodology changes?

No, apart from that, there's no other major changes. Again, as we said, the next major change, well, it comes -- the first quarter was the adoption of IFRS 16, which is going to be about 1 billion increase. And then the next major event for us, of course, is the implementation and the phase-in of Basel III finalization.

Yes. Jeremy, on CCS, of course, again, there is a underlying activity level in Q2 that was clearly not skewed towards our strength and areas of expertise. But also, if you look at the second quarter last year, we had a very strong performance, particularly in the financial institution activities, a lot of capital increases. And there, if you look at the second quarter dynamics, the market was much more Nordic and corporate than financial institutions. So it's an outcome, I think, that if I look at the first quarter performance, was a very strong one. Again, I need to look at the overall environment. We are not really commenting on pipeline. But I have to tell you that in the last couple of years, the problem was never the pipeline. It was always market conditions. Can you execute? Can you close on these matters? And we are now trying to also bring back a little bit more stability and less volatility on those business lines, as Andrea mentioned a few times in public and internally. We are trying also to focus on our hiring in the U.S. on the CCS side of the equation to balance more our portfolio. It goes without saying that we are a APAC-, euro-skewed investment bank. But a little bit of diversification would help and we are not talking about hundreds of people, we are talking about a few thousands of people that can really rebalance the portfolio.

The next question comes from Giulia Miotto from Morgan Stanley. Please go ahead ma’am.

A couple of questions from me. One more strategic and one more short-term oriented. So on the strategic side, on Slide 11, if I understand it right, the merger and the idea of Global Wealth Management is more driven by a push for growth than cost efficiencies in the short term. So -- and here you mentioned U.S. opportunity, in particular the U.S. persons outside the U.S. I was wondering if you can quantify this opportunity and how big do think this market is. What portion do you think UBS can get here? So that's my first question. My second question, more short term. So if I look at your outlook for Q3, it's quite cautious around market activity and client sentiment. So I was wondering if you could, please, give us more color there. So do you expect clients, especially in Asia, to be more risk averse, perhaps trade less or Lombard lending to be down as there is less leverage appetite?

Thank you, Giulia. I'm afraid you're going to have to be patient until Investor Day to get the full answer to your question. But maybe in a nutshell, I can tell you that from a regulatory standpoint view, our self-restriction post the 2008, 2009 development, we have de facto been restricting ourselves to do business with U.S. persons outside the U.S. So you can imagine that it's de facto business that we didn't really touch and cover in the last few years. And so the community of people having either a U.S. passport or having de facto U.S. person status living in Asia and Europe is substantial. And I believe that we have opportunities to capture a fair share of wallet of this business that was mainly driven by U.S. institutions. So more details for the Investor Day. Well, Giulia, also on the outlook, I think it's always fascinating for me to see the comments about our outlook statements. Because it looks like I'm reading different newspaper or I'm seeing different news or even, which I'm not, using Twitter. If you would use Twitter, you would probably understand that the outlook for the environment is not the most constructive. And so having said that, what we are trying to point out is two factors: the environment out there, macroeconomic, geopolitical protection, you name it, it's quite intense. Just look at what's going on with Brexit. Who knows what is the outcome. If I read the comments this morning of official language being used in a negotiation that is threatening, it's almost like quite disturbing. Having said that, we have to consider seasonality factor, which I'm not saying anything new, everybody knows that the third quarter during the summer is clearly not as dynamic in terms of the client activity. And overall, the last sentence is the one I really hope people can reconcile with. Despite all that, we are still sticking to the fact that we can create value in any kind of market condition. So I describe our outlook statement as a realistic assessment of the environment out there and our ability to operate profitably and still serving clients in the right way.

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

So two questions. Firstly, on deposit beta. Secondly, on level 3. So on deposit beta, I just wanted to get some more color as to the shape of deposit beta you're seeing both outside the Americas as well as in the Americas? And I know you mentioned a forward-looking statement, which was that you expect U.S. deposit beta to increase. So I wonder if you could elaborate on that. And secondly, on level 3 assets, these seem to have increased 70% year-on-year, 20% Q-on-Q. So just trying to understand what's driving the increase in level 3 assets?

Yes. Kinner, on deposit beta, as I highlighted in my speech, first of all, if you look internationally, actually, our beta tends to be quite a bit lower than the U.S., just in general. And that is in part because of how our international clients use us. We're not a transaction bank. And -- so therefore, most of the rate increases that we see, actually, we retain. Now in the U.S., we -- I highlighted the fact that we engaged in a retiering exercise in the fourth quarter. And that retiering exercise helped us to keep our beta down for the last rate rise. And so our beta through the last rate rise has been around 35%. What I mentioned is I don't believe that, that's sustainable. I do believe that, that will increase and we would expect to see that come up with the next rise in rates. Now exactly where, I'm not sure. But I think over time, if we're able to maintain that within the 50s, that actually would be a good result for us through the course of the ongoing rises in some rates. Now your point on level 3 assets, there is some ebb and flow naturally in level 3. I think if you look at our schedule overall, some of the increases you'll see were on the lending side and that just naturally is a consequence of some of our leveraged lending activity. But again, we would expect that to fluctuate up and down. But I would re-highlight the fact that we're still around 1% of total assets, which is at the lower end of our peers.

The next question from the phone comes from Jernej Omahen from Goldman Sachs.

I just have three reasonably brief questions left. The first one is on Page 22, so on the net new money figure. And there was lots of talk of this lower contribution from Lombard lending. I have a question, so this lower contribution from Lombard lending, is this a function of reduced demand for this product? Or is it a function of actually a higher level of redemptions of these loans? I mean, particularly in Asia, I was wondering whether you had situations where you had to trigger outstanding Lombard loans or redemptions of outstanding Lombard loans? Then the second question is on Page 25 on the Investment Bank. And here, UBS shows a 23% return on allocated equity. I think the target is 15%, if I'm not mistaken, for the medium term. So I was just wondering, when we look at the composition of the operating income here, between Equities, seeking Corporate Client Solutions, what component of the Investment Bank is overearning today compared to the medium-term target? And the third question is very short on the Equities results, still on Slide 25. It's a strong result, but you gave a very generic comment, which is strength across all products, all regions. Can I just ask you to provide us with a bit more clarity as to where in particular, which products you saw strength in?

Yes, Jernej, thank you for your question. Just in terms of Lombard lending, what we highlighted is, it was one of the features that impacted net new money during the quarter and the more important point was we actually did not see growth in lending. We saw slight deleveraging, relatively small in the Asia Pacific region. But I think as you see on Slide 22, Asia, of course, has been contributing most to our growth of loans, up 28%. And what I would characterize, it was not as a consequence of margin calls. It was more -- as our clients become more uncertain about the future because of the geopolitical issues, the concerns about the trade war, they're less likely to leverage their investments because they're less uncertain about their ability to generate returns, and that's simply what drives their appetite for Lombard loans in particular. In terms of your second question on our returns, first of all, I would highlight that we target greater than 15% overall return on attributed equity for our Investment Bank. We would highlight as well that there naturally is a fair bit of volatility around that return level, which is an inherent characteristic, of course, of that business. We would also highlight the fact that actually we've been fairly consistently above that level over the last number of years. Now in terms of which business contribute to those returns, it really is across-the-board, all of our businesses. And there might be one part of the business that's more contributing during a particular quarter than another. So you would've expected, for example, CCS to have been a larger contributor to returns in the first quarter than it was in the second quarter. Now in terms of your Equities question, we would just highlight that we actually did see quite good growth across all of our products, so across cash, derivatives, across financing, we saw particularly good growth in derivatives and that was really just characteristics of the volatility that we saw in the industry. And I think, also, we saw a good growth in Asia Pacific and that was as a consequence of the MSCI A-shares inclusion. I would also highlight the fact that Sergio mentioned, we been invested in building out our Americas platform. Americas had particularly good quarter, where we saw good growth in flow and structured products in that region.

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

I was wondering if I could get a little bit more color on two of your charts, please. The first one is Chart 8 where you helpfully break out the increase in regulatory costs and you clearly suggest, and this has been a topic of debate before, that there's a permanent and that there's a temporary component here. Is there any further comment or guidance that you can give about the size of the temporary part of this stack and maybe the timing over which this could normalize or come down? And the second question relates to Slide 27 where you discuss your headcount shift towards more internal staff. Could you maybe give us a little bit of a sense about the economics of this shift? How much does it cost you extra during the time that you implement this, if anything? And what kind of cost savings or maybe efficiency gains do you expect to reap at the end of this process? Those would be my questions.

So thank you, Stefan. I'll take the first question. So I have to say that I'm afraid I'm not going to go any longer into predicting regulatory cost because I go back to the office and I will find a new requirement and request on my desk. So what I can tell you is that it's unlikely that we're going to see a major tapering off this cost base until the early part of 2020. If I think about all the upcoming requirements in front of us, it's very, very difficult to say that. I do think that, over time, we should be able to master and optimize the cost base, but it's still going to be very high. I just mentioned, just go back into a couple of years ago and also the upcoming discussions about Brexit makes it very clear that you have to accelerate the readiness of being able to be compliant at the end of Q1 of here. And this is going to cost us only this year almost 100 million. So the Brexit stakes are only costing 100 million this year and it's something that was not even on the radar screen a couple of years ago or was seen as a remote risk. So as I said, we don't expect a lot of tapering there because there are always new inflows. But what's really, if you look also again here, is quite interesting because the stickiness of the cost is there. But if you look at the underlying inflows and outflows, it's quite interesting because we are able to basically take out the temporary part of the equation, I have some permanent one, but the incoming flows are constant.

So Stefan, on your second question, as we actually go through the in-sourcing process, there is an increased level of cost related to the recruiting as well as typically we have some overlap between when we fully insource and we eliminate the outsourced resources, possibly some onboarding cost. But ultimately, as we complete the in-sourcing process, we tend to get a little bit of a cost benefit as we eliminate the margin that we've been paying to the outsourced partner. But what's more important for this program is its much more about control, quality and productivity. Whereas we insource more, we look to reduce our overall risk and we look to increase productivity over time, so it is really an effectiveness play overall.

The next question comes from Andrew Lim from Societe Generale. Please go ahead.

The first question is, coming back to the Corporate Center. Could you tell us how that should pan out in terms of pretax losses after allocations, so really focusing on, say, funding cost, how you expect that to pan out, regulatory costs also over the next few years, not just the next few quarters? And then secondly, coming back to buybacks. Do you need preapproval again if you want to do more buybacks in addition to your plan that you've already committed to from FINMA? And when FINMA look at your capacity to do buybacks, do they look at your stressed CET1 ratio and how that looks like compared to, say, a 10% minimum?

Thank you, Andrew. I'll take the second question first. As I answered already before, we don't need any formal preapproval. We have a program open that we can buy back after CHF 2 billion. And then from a regulatory standpoint of view, we have an approval of our capital plan. And to the extent, and that capital plan has different stress behind it, not only ratios but also stress test. And therefore, to the extent that we are able to deliver on our capital plan for the year and deliver the equity that we outlined in our capital plan, we have the flexibility to do share buyback or capital returns as we deem appropriate. But as I mentioned before, we have to take in consideration if we need capital to serve clients to deploy for business or we need to look at the macroeconomic conditions. And if we don't, we're going to definitely take the opportunity, particularly considering market conditions in using that tool for the rest of the year.

So Andrew, on your first question, just to give you a little bit of a flavor of what we retained within the Corporate Center. I think, historically, we have had cost related to regulatory projects, predominantly along our legal entity structure build out. The other regulatory matters are allocated out to the business divisions. And as we complete the buildout of our legal entity structure, that should bring down a portion of the cost that we retain. We also have some litigation expenses and that creates some volatility. But I think actually, if you look at the last five quarters, net of litigation expense, you've seen the net cost that we retain come down, and they should stabilize at around the levels where they are now. I would mention as well on NCL, the Non-core and Legacy there, you've seen the negative drag on that part of our Corporate Center actually become quite de minimis, we would expect that going forward, absent any large litigation movements.

So it sounds like excluding litigation, your Corporate Center costs should be at a rough quarterly run rate equivalent to how it is right now?

Yes, that's right. I think if you look at -- there were no litigation expenses in Services this quarter, so that's a pretty good indication of the run rate for the Services part. In NCL, we actually had some litigation, but it was offset by mark to market, and so not a bad indication of where we would expect to be going forward, absent litigation expense.

The next question comes from Amit Goel from Barclays. Please go ahead.

Most of my questions have been answered, but -- I just have two. One is, just in terms of client behavior within the Wealth Management business, and obviously, you've mentioned that you've only seen slight deleveraging so far, but obviously, there's no contribution to net new money from lending this quarter. Just in terms of what are you seeing in terms of trades that clients have had on, are you seeing any impact from the flattening of the U.S. yield curve? Are you then expecting a bit more deleveraging given how the outlook is in the coming periods? And then secondly, in terms of behavior, are you seeing changes in terms of turning out to the U.S. deposits and so forth at kind of present time?

Yes. Amit, so if I look at client that we are relating, if you look at the dynamics of the transactional lines, it's quite indicative of what you mentioned on yield curve. And you see activity levels on Wealth Management -- on the Wealth Management side of the equation on fixed income being definitely down on a year-on-year basis and somehow compensated by structural business on the equity side. But net-net, you can see the impact of client behaviors involved in fixed income by those dynamics that you outlined on the curve. Now when I look at the sentiment, I mean, the latest survey we did with clients in the last few days in the U.S. is quite, in my point of view, indicative of a sentiment that I believe is also more broader and global. In a nutshell, clients feel somehow constructive about the medium- to long-term outlook for the economies and growth. Having said that, if you look at their behaviors in terms of how they look at their equity portfolio, for example, it's very sticky. They don't really make a lot of trading. They don't really move their positions, so they [indiscernible] believe is a good portfolio. And most importantly, if you compare their cash holdings or declared cash holdings to the second half of '17 to today, it went up 5%, so almost 24%, 25%, which from a U.S. standpoint of view is a very high level of cash. So you can see very well reflected so my -- some kind of divergence between outlook, medium to long term being okay-ish. But on the other hand, when it ticks down to investment, they are very good.

The next question from the phone comes from Al Alevizakos from HSBC.

So question number one is on the Slide 26, again going back to the cost before allocations. I can see 955 million that relates to currency and risk control. What is the chunk exactly that goes into technology? And how does that take us to the guidance in the annual report that overall technology expenses will go up to 4 billion in the next few years? That's question number one. And question number two, even though, Sergio, I know that you're probably going to tell me to wait for the Investor Day, I was wondering about the Wealth Management, the robo-advisers. If there is any update in terms of any success that you had either in the U.S. or the U.K.? And actually, since you're spending a lot of money, when do you expect to breakeven in those investments, will it take 5 years, 10 years? What is the main assumption?

To the second one because you already got half of the answer. So we will give you more details, for sure, on October 25. But in a nutshell, I think we see two diverging stories, to be honest. I think, if I look at the U.S., we have a pretty good momentum. And actually, I'm very happy, and the team is very happy about how this is working. If I look at the U.K., it's not such a good dynamic and -- which is part of the equation because when we look into these new initiatives, we have to take the courage and accept that risk and failures can -- it's part of the equation, so two stories. I will give you more details. And when I look at the U.S., considering also our critical mass and the ongoing business, payback can be quite rapid. But again, more details in October.

Yes. And to answer your first question, actually, what we said is we would expect our total technology spend to be over 10% of revenue. But if you take that as a benchmark, around 3 billion, you can see that the numbers are trending pretty close to over 3 billion that we've indicated on Slide 26. One of the growth drivers is also amortization year-on-year in addition to just keeping our spend at an elevated level.

The next question comes from Jon Peace from Crédit Suisse.

So my first question was on the fixed income business. I just wondered what the catalyst for to this 100 million revenue recognition on the day one P&L? And is there any possibility that, that could recur? And my second question was on your litigation notes. You mentioned an 850 million U.S. RMBS settlement where a lot of the cost will be borne by third parties. Do you have an indication of how much you might expect to recognize in your own P&L, net of any existing provisions that you've got?