Ladies and gentlemen, good morning. Welcome to the UBS Third Quarter 2020 Results Presentation. The conference must not be recorded for publication or broadcast. [Operator Instructions] At this time, it’s my pleasure to hand over to Mr. Martin Osinga, UBS Investor Relations. Please go ahead, sir.

Good morning, and welcome to our third quarter 2020 earnings call. Before we start, I should draw your attention to our slide regarding forward-looking statements at the end of our presentation. For more information, please refer to the risk factors in our latest annual report, together with the additional disclosures included in our quarter reports and related SEC filings. And now, over to Sergio.

Thank you, Martin. And good morning, everyone. We were all hoping to be in a better place on COVID by now. You'll see more is still facing a difficult situation with Europe confronted with a wave of infections. I hope you and your families remain safe. On our side, we remain committed to supporting our employees, clients and the communities in which we operate. In this context, the clients continue to turn to UBS as a stable and trustworthy custodian of their financial assets for advice, the quality and breadth of our products and for our capacity to continue to lend. Our operational resilience and financial strength are critical to enable us to deliver for them, while we continue to execute against our strategic priorities. As for the third quarter, I think the numbers speak for themselves. Pretax profit was the highest in a decade, net profit doubled from last year and PBT adjusted for items of a one-off nature rose by over 40% compared to the third quarter of 2019. Our balance sheet remained strong with capital ratios above our guidance even after establishing a capital reserve for potential future buybacks worth 50 basis points on our CET1 ratio. We have had good momentum all year with strong performance across the first two months, as well as since the pandemic began to dislocate markets in March. For the three quarters today, the return on CET1 reached 17.6%, held by increased client activity, intense client engagement and our readiness and capacity to deploy balance sheet. This was achieved despite adding to absorb COVID-related headwinds, such as lower credit card revenues in Switzerland, higher credit provisions and lower dollar interest rates. Positive operating leverage was supported by disciplined cost management, which contributed to a 6 percentage point decrease in the cost…

Thank you, Sergio. Good morning, everyone. Net profit for the quarter was $2.1 billion, translating into a 21.9% return on CET1 capital. On a reported basis, PBT was $2.6 billion, with around $60 million net year-on-year benefit from foreign exchange moves. Our 3Q results include a net impact of $526 million from items that we have called out due to their one-off nature within the context of the quarter. This compares with a single one-off gain of $600 million that we had previously flagged relating to the Fondcenter sale. Adjusting for the items that we've called out, PBT was up 41% to $2.1 billion. On this basis, our cost to income ratio improved 6 percentage points to 73% with 12% income growth outpacing expense growth 4%. We provided an overview of these call out items in our deck, which you can find on a 3Q and nine month basis in the appendix. I'll highlight a few of these items. First, we realized a $631 million gain related to the sale of Fondcenter, which closed in September and mostly benefit Asset Management with a smaller part in GWM. There was no net tax expense recognized on the gain, which is the main reason why our group tax rate is lower this quarter at 19%. Second, in order to provide additional career flexibility for eligible employees, we modified the forfeiture conditions of certain outstanding deferred compensation awards for voluntary leavers, which accelerated $359 million of personnel expense into the third quarter. There will be a corresponding savings spread over future periods, most of which, over the next two years. And lastly, in the IB, we booked to $215 million gain on the sale of intellectual property rights associated with an index family. The impact of these callout items mostly cancel out in…

Thank you, Kirt. Before we move on to Q&A, I'd like to share a few reflections on my nine years as the Chief Executive of this incredible organization. Since I took over, we have made great strides to transform UBS. The quality of our people and the strength of our culture today are both testaments to that. According to our most recent employee survey, 86% of our people are proud to work for UBS. This year, I have felt particularly proud and humbled by the dedication, flexibility and stamina that my colleagues have shown in the face of unprecedented personal and professional challenges. I would like to sincerely thank everyone here at UBS for their hard work, their loyalty and their passion to deliver for our clients. I would also like to acknowledge and thank our clients, they have always been and will remain at the heart of what UBS stands for. I have had the pleasure of knowing many clients through my time here. And today, I would like to thank each and everyone for their continued trust in the bank. To our shareholders and the analysts who have been with us on this and the previous 36 earning calls of my tenure. While I haven't always agreed with some of you, I always valued your perspectives and various inputs, to our debates, and never to your support for granted. I like to thank you for your support, and for challenging and encouraging us to strive for more. Also, many thanks to the Investor Relations team at UBS for their outstanding support. Last but not least, a special thanks to those who served with me on the group executive board over the years. Together, we made this challenging but rewarding journey to turn UBS into what it is today. UBS has all options open to write another successful chapter of its history under Ralph’s leadership. With warm feelings and keen interest, I'll be keeping an eye on UBS from across the street. Thanks and now let's move to Q&A.

[Operator Instructions] The first question is from Magdalena Stoklosa from Morgan Stanley. Please go ahead.

Thanks very much and good morning. Two questions for me to start. One on NII and another one on the kind of investment priorities. So on NII, let me return to your NII strategy. And that's particularly in Wealth. Now, volumes have been very strong year-to-date and you clearly kind of plan for more. But in other words, could you kind of tell us how much volumes do you think you need, particularly in 2021 to offset the US dollar kind of rates pressures? And secondly, I suppose, Sergio, if you could can share with us the - when you think about kind of incremental investment dollars, as you look at the business now, kind of what would be your investment priorities as you hand over to Ralph Hamers?

Thank you, Magdalena. I'll take the first question. In terms of net interest income, as I highlighted in my speech, we have seen substantial momentum in our lending revenue. In fact, overall, our loans are up 14% or $25 billion. So there's also some foreign currency translation impact, in addition to the net new loans of $18 billion. That helped us offset a good portion of the US dollar interest rate headwinds. So quarter-on-quarter, I think is probably the best - the best place to focus, where we did see a $100 million of headwinds from lower dollar interest rates. And then also, you might recall, I indicated we were going to push out COVID related liquidity costs of the business divisions, which we did during the quarter, and there's another $25 million there. Now, we're actually - we actually saw that peak during the quarter. So therefore, the US dollar related headwinds will begin to taper as we get into fourth quarter, and also into 2021. And we believe that it will fully absorb it by the end of the second quarter. Now, also, as I indicated, in my speech, we expect that the continued momentum from the loan volumes we already generated and we expect to generate will allow us to fully offset any remaining headwinds from US dollar interest rates.

Thank you, Magdalena. In respect of priorities on investments going forward, I guess you mean that more that the cost side of the equation, I think that we need to continue to be very balanced in our front to back approach in how to invest the money. And I think it's very important that first of all, we continue to generate the capabilities on the right to invest in our future by creating efficiencies and effectiveness in the way we look at it. I think is, you know, the COVID experience has demonstrated that the validity of having a strong infrastructure and a resilient infrastructure that supports higher volumes when necessary, but also the necessity to be - to reflect the technology in the digital developments in respect of how we face clients, what we offer to clients and what is also very important, how we give the tools to our front people, being client advisors, being sales people in the IB or investment bankers in the IB and asset manager and so on, to be able to be more productive and more informed and better equipped than our competition. So it will continue to be a balance between front – in investing front to back and creating through that also cost synergies, because in many areas, of course, we need to, you know, make sure that we also capture the opportunities that technology can offer to become more efficient.

No, absolutely. And then, and if I may Sergio, since it's kind of last earnings call. I also just wanted to say that it's been an absolute pleasure for us kind of working with you over the years and wish you all the best with the Swiss Re chairmanship, and they're lucky to have you.

Thank you, Magdalena. Same here.

The next question is from Kian Abouhossein from JPMorgan. Please go ahead.

Yeah. Thanks for taking my question. First of all Sergio, thanks for all the support. And clearly the calls, the early calls that you joined with us highly appreciate it. And hopefully, it gives you an opportunity not to start the calls too early going forward. But we very much appreciate your support. I have two questions. The first one is related to total payout, because clearly you're changing the mix. You also mentioned that in the fourth quarter you might take further reserves. And I'm just trying to understand how I should think about payout policy. I think you say any excess capital will be paid out, but clearly just for us to think about how should we think about that quantitatively? And in that context, how should we think about the pace of buybacks, because clearly, you're reducing the cash payout, cash dividend absolute, and as a result, clearly you're substituting part of that with buybacks. I'm just trying to understand, you know, pace of buyback? Should we think about gradual as of ‘21? Or how should we think about the whole process of reserving and buying back? The second question is really more of a general question about your view of what you think you - was your biggest change in the group, which had the biggest impact? And also, what is it that you would have liked to have done looking backwards, looking back mirror, and something that maybe didn't happen?

Well, thank you, Kian. And for sure, I won't wake up so early in the future. So in terms of payout policies, I don't think that we - you know, the intention here is to continue to distribute and add any excess capital that we don't need to grow the business. And also, I think that the key leavers for us are also very highly determined by not only the guidance we have been giving you on in terms of where we think we're going to be in terms of CET1 ratio until the full Basel III is implemented, because of course, in two or three years time, my colleagues will also have to reassess and rebalance this around 13% to whatever is appropriate. Because, you know, if you look at pro forma, since I started the fact that we are now running at 19% CET1 ratio, and so the older regulatory inflation that is coming in, makes the 13% that we are used to talk about a little bit of a relative game here. So - and most importantly, Kian, is the stress. So stress is the very - you know, our own stress assessment, and also the regulatory stress models that we get are also very indicative of how much capacity we have for capital returns. So I don't think that is going to be strictly driven by a payout ratio - set of numbers, but those two elements. So, in terms of timing, the pace will be determined in 2021 by two factors. Of course, the most important in respect of even this $1.5 billions or whatever we're going to accrue in fourth quarter, determined by the regulatory framework, internationally you will see that there is a clear desire at this stage and we understand also that…

We hope so. Thank you very much.

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

Thank you. Good morning. And thank you as well for me. Sergio, thank you for everything you've done with us over the years and best wishes for your next steps. Just two questions, please. So one is just picking up on the comment you made a moment ago, just around the sort of regulatory and political process for approving the resumption of buybacks. And you mentioned the international dimension. And I just wondered, to what extent a Swiss decision on restarting buybacks will be constrained by a need to sort of coordinate that with what the Fed is doing and what the ECB is doing. So whether that is a constraint on the process? And more broadly, what do you see as the constraints or where do you see the political debate in Switzerland about allowing some or all Swiss financials to resume share buybacks? So if you could just sort of talk us through the domestic and the international politics on that? That would be great. And my second question was more sort of nuts and bolts about the cost accruals in the investment bank, and just how you feel you are accrued at this nine month stage? In other words, do you think that you've got sort of conservative accruals, with scope to claw back something in fourth quarter? Or, you know, if we get a normal revenue level, will we see another sort of 78-ish percent in cost income? So just how you think you’re accrued in the investment bank for costs? Thank you.

Thank you, Jeremy. I'll take the first question. And I'll pass the second to Kirt. Well, you know, of course, I can’t speak for FINMA and how they make their decisions. So I think that I would probably refrain from doing that. But it's quite clear that at this stage, there is a necessity to still and as I mentioned before, to some extent, I do understand the necessity of trying not to single out or create a stigma in the system around who can pay dividends or cannot pay dividends and do share buyback, who cannot do share buyback. But over time, I do hope that internationally and domestically there is a differentiations, I think that it's very important to number one, reinforce the credibility of the regulatory regimes that we introduced, and we are managing today. And I don't think that one size fits all. In terms of capital returns policies going forward is the right solution. I think that it's also very important for all of us and for you guys, particularly to make this industry an investable asset class, by basically trapping unnecessary capital in the banks. You know, you either going to make it not attractive or you're going to force the system to deploy capital in a way that over time cannot be constructive and no matter if its used for organic or inorganic growth. If you basically don't allow the right amount of capital returns to be - put back into system, it is dangerous, particularly when you have, you know, banks that are trading below book value. And there is an opportunity to utilize share buyback as a very flexible and efficient way to return capital to shareholders. I think that there is way too much. And now I'm going into potentially the political, but not only the more the media side of the equation, that there is a tendency to demonise share buybacks, I think that share buybacks are a very efficient way to retain flexibility or regulatory flexibility, prudential flexibility, while returning capital to shareholders. So I don't see any political versions in Switzerland in that respect, as long as we demonstrate like we did, that we are able to support the economy and put a very proactive – having a very proactive role in doing that and funding the economy, there should be no doubt that there is an advantage for Switzerland, particularly, to maintain a very strong financial center and an investable asset class in the banking industry.

Yes. So Jeremy, just in terms of your second question. So mechanically, what we do across all of our business divisions is that we accrue after economic contribution before variable comp or bonus. And so therefore, we take into account the cost of capital that we deploy in the businesses use, and year-to-date, we've accrued on that basis. And we feel like we're fully accrued in the IB, but also across all our businesses, for the results that they've generated year-to-date. Now, having said that, just like all our peers, as we get into the fourth quarter, we learn more about what the markets likely to do, and there are other factors that get taken into account or finalizing our compensation levels overall. But as I said, just to be clear, again, that we feel very, very comfortable that we're fully well accrued for the investment bank, based on its performance here to date.

Okay, thank you.

The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.

Yes. Hi, good morning. Two questions, please. First, one more on payout, your cash dividend is about 20% payout ratio, just wondering how we should think about it going forward, give me a very strong net profit level this year. So should we think like, it's a bit at the lower end to ensure progressiveness in the future or is that kind of a good run rate also going forward? And then secondly, a smaller one on Asset Management, in particular in within your equities business, another quarter with very good inflows. I think partially, that is driven by the separately managed accounts, but also the underlying business seems to be doing well. Just wondering what are you doing there specifically? And on the cross selling of these SMAs, because I guess that's the main story down? Thank you.

So, on the payout ratio, as we outlined this – in our policy, you see the accruals that clearly indicates the new base for our cash dividend going forward. As we outlined we believe that the payout ratio for cash will be similar to our US peers. And we will, of course, also continue to strive for very low nominal increase year-on-year to reflect the profitability and so that we improve a little bit our cash dividend. But as long as the stock trades below book value or tangible book value, I think that it's quite clear that we will prefer to do share buybacks also, in order to retain as I mentioned before, going forward, more flexibility in terms of how to navigate any challenges that you know, the industry and we may face going forward. So I think you can see that resetting of the payout being closer to our US peers levels going forward.

Yes. Benjamin, in terms of Asset Management flows, as you indicate, they are very strong in the quarter, but they're also very strong year-to-date with $18 billion, excluding money markets, and as I referenced, that's an 8.9% annualized growth rate. But the $50 billion, excluding money markets is 8.2%. And while clearly there's been a benefit and positive flows from the SMA initiative with our US Wealth Management business that has exceeded our expectations. If you look at the totality of the flows, they're actually a quite broad base, and of high quality. So we've seen good flows across all our channels, institutional wholesale where we've invested, as well as GWM across all of our strategies, including, because we've seen very, very good performance in our In-House O'Connor Hedge Fund and seeing good flows there across hedge funds. The flows on the active side have been more concentrated in equities. Also, as you mentioned, in the testament to that quality is the fact I highlighted in my speech, our net new run rate fees on a cumulative basis year-to-date are $150 million. And I think that just speaks to the quality of the flows overall.

Thank you very much. And all the best for the future, and specifically your role Sergio.

Thanks, Benjamin.

The next question is from Anke Reingen from Royal Bank of Canada. Please go ahead.

Yeah. Thank you very much for taking my question. And for me as well, thank you for all your help, and being on the call in the early morning, and all the best. Just two questions, please. First on capital return, I understand your 20% comment, or your dividend accrual. And in terms of the buyback, the $1.5 billion, should we think about this being a 30% ratio, so taking the total capital return to 50%? Or is the buyback more as a fixed amount in terms of absolute terms that you're envisaging? And could we end up in a situation where that is basically in 2021 you're executing on your 2025 buyback, as well as on your 2021 buyback? And then secondly, on the tax, could you talk us through about the moving parts as the tax rate would go up in US? Thank you.

So, thank you, Anke, as well for your comments and remarks. So in terms of total payouts, I think it's a good question, because we need to clarify this topic. So we have no intention to reduce the payout ratio that is available to shareholders. We have no intention to have a fixed payout. The payout will be a function of the excess capital that we believe we have on our balance sheet based on our future plans on how to grow organically the business and the stress scenario we have. So the total payout ratio can be very similar to the one we had in the past. So we will not retain excess capital, and that's the beauty of the share buyback, share buyback and function and reflect in a much better way at this stage our flexibility to move around this payout ratio. But you know, there is no constraints we are able to grow and our businesses by self generating capital and all access capital above those levels that will be returned. So there is no fixed percentage in mind or implied in any numbers that you saw being accrued or communicated.

Yes, Anke, in terms of your tax questions, so maybe if we use, what has been put forward is the Biden tax program, the increase in the corporate tax rate from 21% to 28%. That would result in a write up of our DTAs of around $2 billion and an increase in our overall tax rate of around 2%. But very importantly, because we do have the advantage of our DTAs in the US, first of all, we will continue to pay zero tax or almost zero, there's still state and local taxes that we would incur in the US market and also, the overall cash taxes that we would pay at the group level will not change at all until the full expiry of our DTA. So you wouldn't see any change in our cash tax position, which would allow us to continue to accrue the same level of capital that we're generating today and also help the other question that you had around buybacks and cash dividends.

Okay, thank you.

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

Yes, good morning and first of all Sergio all the best. And thank you very much for the last nine years, never a boring moment, much appreciated. I have two, I guess nuts and bolts questions left. The first one relates to the changes to your deferred compensation $359 million. If I understand that correctly, you're amortize as you're accelerating the amortization of an existing deferral, and $359 million seems like a pretty big acceleration, you only had about a $1 billion of deferred compensation that needs to be amortized at the end of 2019. So I'm trying to understand what this is actually reflecting? Are you trying to facilitate the exit on UBS of the group of let's say, highly paid MDs that are not performing so well anymore? And would maybe like to leave voluntarily? Maybe you could give a bit more color on what you try to achieve with this move? And the second question relates to the commodity trade finance fraud in P&CB I appreciate you cannot tell me which company that is, which counterparty that is. But can you maybe say whether this fraud actually occurred in the third quarter or if its dealing was a fraud from previous quarters? And is it reasonable to assume that this is a Swiss counterparty? Thank you very much.

Thank you, Stefan. So for your words, and yes, that was never boring. You're right. So in terms of acceleration, in respect of deferred compensation, you know, this is not about managing and managing on the performer, we do manage this over the cycles, or, you know, we look at our underperformance. I think is more reflecting of two issues, we have realized, and although we continue to believe that a more restrictive vesting and a policy in our deferred compensation plan is appropriate, we have realized during the COVID times that many of our colleagues in the bank and not just highly paid MDs across the board, because this is touching different, different segments, are maybe thinking about reprioritizing their lives. And I don't think that it's appropriate for people that have an intention to do something's completely different in their lives, outside the financial services, industry and banking to be restricted by the fact that we have longer vesting conditions than many of our peers. So I think is a realization. Together with that, we also recognize that, you know, in the bank, that there was a necessity to thank all the people at less senior ranks in the bank for their efforts during the COVID environment. And so that's the reason we for example granted one week of salary to all employees, so around 25,000, people are touched by that. So it's part of a more broader issue. And it's not about underperforming or over performing, is a realization that, you know, COVID has changed the lives of many people, and we should not stand in the way of people lives decision. So of course, if they want to re-enter the industry and join a competitor, they would have to forfeit any compensation. In respect of your questions, unfortunately, you're right, I cannot really talk about anything other than of course, this fraud was – is something that we discovered and was crystallized during Q3 and therefore is reflecting of what happened in Q3. And I think that there has been some media coverage in some specialized magazines about who may or may not be the counterparty. But for obvious legal reasons, I will not go into any further detail. But only to underline that this is not an idiosyncratic UBS situation. This fraud has impacted a number of lenders. And we believe that in that sense, you know, we took the appropriate provisions and our exposure on this matter is de minimis.

Great. Thank you very much again.

The next question is from Adam Terelak from Mediobanca. Please go ahead.

Good morning. So I had one on capital and then another one on loan growth in GWM. So on the capital front, it feels like a just a slight change in how you're dealing with the buyback. So previously, it was obviously coming out of each quarter's earned earnings, and now you're accruing into CET1 ahead of the buyback. Is that just caution in the face of current regulation? And will that go back to normal in terms of coming out of as you go earnings once the buyback is turned on? And then on GWM loan growth, kind of couple questions there. It seems like the $10 odd billion of GWM loan growth is added $60 million plus of revenues. But on the other side of that the RWA growth seems relatively limited. If you just talk about the economics of that sort of loan growth, and in terms of the outlook for RWA, whether that is still going to be relatively balance sheet light, while still managing to defend the NII? Thank you.

Thank you, Adam. I’ll take the first question. So the reason why we created this reserve, it's also to reflect the unique situation we are in right now, in terms of, you know, the regulatory constraints that we discussed internationally, they're the one that we are subject to. The intention was to really flag if necessary at all, what is our intention? What we would have done so far, if we could have basically acted without any of those constraints. And I don't believe is necessary - I don't believe is necessary in the future to do that, but you know, the circumstances will determine how my colleagues will react and adapted to this environment. But this is something that is more reflecting of the situation that we have right now in terms of constraining execution and is a further more formal commitment to shareholders in respect of what we do and is a way to create more transparency, again, of what we would have done so far this year, if we would have - were allowed to do that.

Adam, in terms of your question on the dynamics of lending movements in our Wealth Management business, so within the quarter on quarter, on quarter, we saw around a almost $40 million contribution of lending revenue, lending NII, that increased from 2Q. Now overall, of course, the way that the $10 billion will materialize is that we’ll see that fully in our run rate in fourth quarter. So we'll see more benefit of that $10 billion in the fourth quarter than we did in the third, which gives us a positive view on quarter-on-quarter trajectory of lending revenue going forward. Now, the composition of the $10 billion it was mostly Lombard security base lending out of US, as well as some mortgage and there was a smaller contribution from structured lending. The risk density, so the RWA contribution from a Lombard portfolio is relatively low. Hence, you didn't see a big movements in RWA, although you did see some increase in GWM. Going forward, we would expect to see contribution across the range of our lending products, including the more structured end and the more structured end does have higher risk density and therefore would contribute to more risk RWA, but overall, you shouldn't see a material change in the overall risk density of our GWM business.

Great. Thank you very much. And all the best.

Thank you, Adam.

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

Good morning. First, let me echo the thanks of everybody. I’ve enjoyed reading some of your wide ranging exit interviews with the press over the past few days. And most of my questions have been answered. But let me just give a couple on the investment bank. You have seen a very strong quarter investment banking, as you said it is across regions and across products. But I did notice that the Americas is now 40% of your investment banking revenues in the quarter, it's usually around a third. So it doesn't look like the Americas was particularly strong. And so perhaps you could comment on that. And then secondly, the Banco do Brasil agreements been announced, perhaps you could just elaborate on the advantages and what you see for that going forward? Thank you.

Yeah. Thank you, Andrew. As I highlighted, the contribution was broad base across all regions for our investment bank. Now we did see a very good investment banking quarter in the Americas and that did helps in particular to have a higher level of contribution from that region. We also saw a very, very strong quarter for us in Asia Pacific, which is something we highlighted as well as in the document and you see that APAC is up considerably a year-on-year. Within Asia it was very driven by equities, equities, had a - and I think it's really in line with the overall level of equity activity that we saw across that region. In the Americas, it was a bit more mixed between some equities, but as well as equity derivatives, equity derivatives had a better quarter for us in the Americas after a fairly weak second quarter. We also saw very good ECM, equity, capital markets and leverage capital markets activity that helped boost the Americas contribution overall to the investment bank. We were pleased that we closed the Banco do Brasil transaction on October 1st. We were - had intended coming into the year to close that earlier, but obviously, because of COVID effects, the regulatory approvals took much longer to work their way through the system in Brazil. So now that that is launched, we've already started actively to build up. And we've already seconded to that staff to that initiative. And we would expect over time that this will allow us to establish a very, very competitive investment banking platform, not just in Brazil, but it is - it's across multiple countries, including Argentina, Uruguay, and so on. And so it will allow us to leverage the strength of Banco do Brasil's corporate franchise and the strong lending footprint that they have there with our investment banking expertise and we think this will create quite a compelling offering for our clients.

Thank you.

And the next question is from Andrew Lim from Societe Generale. Please go ahead.

Hi, good morning and congratulations from me also Sergio for the past nine years. You certainly put UBS on a good footing for your successor. So to my questions. On the Global Wealth Management, obviously, we've had a lot of volatility these past few quarters. And I was wondering if you could take stock on where you think the gross margin might move going forward? You’ve given quite a bit of color on the NIM inside. But on the recurring fee side, and also on transaction fees, perhaps you could give your thoughts there. So how sustainable those fees are going forward? And what the key moving parts are. And then a question for you, Sergio, perhaps, we've seen quite a lot of M&A activity in Asset Management, there definitely seems to be a trend towards consolidation. If we look towards UBS’s own Asset Management business, you're closing in on $1 trillion of AUM. Just wondering what you think in terms of its strategic positioning, whether that scale is enough or whether also there's perhaps other strategic gaps that need to be filled on the distribution of funds or the product offering?

Yeah. Andrew, I'll take the first question. In terms of GWM margin is I noted, you've seen stability quarter-on-quarter on a recurring margin, after a quite a bit of compression from a number of mandate and non-mandate impacts, including what I mentioned, that some of the changes that we've made in our US business to address some regulatory requirements there. You know, clearly, we are managing all of the levers for our recurring business. And we would look to create continued stability as we go forward sequentially each quarter. Nevertheless, there are competitive pressures there. And there also are segment mix and other changes that will occur. So we would expect over time for some - for there to be some continued margin impression, although not to the extent that we've seen over the past year. If you look at our net interest income margin, that's dropped down to 14 basis points. We highlighted the fact that we've absorbed most of the US dollar headwinds, and we've got some tailwind from lending [ph] We wouldn’t see that stabilizing over the next several quarters to around the current level. In terms of transaction revenue, which is really the - what we saw come through to drive the growth in operating income on a more pronounced basis, up 16% year-on-year. Also, as we mentioned, this remains a key focus of Tom and Iqbal’s and we are continuing to drive out improvements and connectivity between our CIO, our IB platform that is now much more integrated, along with linking in the lending. So we would continue to expect to see good levels of transaction revenue going forward. And along with the typical seasonality, that's the margin that you would expect to see bounce around most, from quarter-to-quarter.

Thank you, Andrew. And in respect of your question, you know, I guess first of all, I would say that the hard work that my colleagues put together in the last few years to reshape and reposition our Asset Management business, as a standalone unit are starting to pay off. And I'm glad to see that. For us when you look at the fact that we are getting close to the $1 trillion markets, it's an important milestone in respect of creating some scale effects, which are, you know, necessarily in that business. But most importantly for us was the ability to continue to develop kind of unique offering as part of an asset gathering equity story. So for Asset Management fits very well into our equity story, because as you know, it's very low capital consumption compared to other banking businesses. There is a high degree of synergies between Asset Management and the rest of the organization, particularly with our institutional and corporate clients, but also with Wealth Management. And the fact that we have been able to create unique segments of strength, like in sustainable finance, like in the alternative space, in passive where we have very customized and high margin passive businesses are - and the alternative space in general are complementing the more traditional Asset Management offerings. So when you look at that M&A angle, we have to look into okay, first of all how is Asset Management fitting into our equity story, which I believe now is quite clear, that is very, very compelling and value-added story. And looking at M&A, you need to basically say how can you retain all of this without – and creating shareholder value? And, you know, while there has been always a lot of discussions on the Asset Management, industry consolidation, the truth of the matter, it's a very complex industry to merge, because of different cultures, ownerships, and priorities. So you want to make sure that if you do that, you don't impact clients by doing that. That you need to find partners that has the same culture, as you have, not an easy task. So I'm glad that we have the flexibility to always look at the best interest of our shareholders and clients without being forced strategically to take any actions now.

That's great. Thank you very much, Sergio and Kirt.

Thank you.

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

Yes, thank you. Let me add my congratulations as well, Sergio on your time and your final quarter at UBS. So my first question is just following on from the question on global Wealth Management margins, you're still seeing some gross margin erosion, but how confident are you that your forward cost initiatives are going to see the net margin find a floor around 15 basis points level of the last couple of quarters? And then secondly, your US peers have talked about seeing kind of normal seasonality with Q4 trading revenues, pipeline maybe benefiting a little bit from a pickup in M&A. I just wondered if you had any comments on that, similarly. Thank you.

Thank you, Jon. As I just referred to my last answer to Andrew, I talked a little bit about the dynamics overall, and on the gross margin side. And, as I said, I feel pretty confident that the series of strong strategic initiatives that are already underway and starting to gain some maturity will continue to provide some support on the top line, even as we see markets falter a little bit. On the other hand, you see very good expense discipline in the business. And I think it is a strong statement. The fact that our expenses are down 1% year-on-year. And I would just add to the top line comment that Tom and Iqbal remain very committed to continue to deliver positive operating leverage. So they're very focused on managing the expense line, as well as the top line and I'm pretty confident that they'll strike that balance effectively going forward. And I do expect a positive operating leverage out of that business overall to continue to materialize over the next couple of years. In terms of what we heard out of US peers, and I guess if we look at our own business, I think firstly, I would just note that we have seen volatility come down. In the start of this quarter, volatility has been lower, despite the fact that we're within an election period. And I guess, I suppose I would attribute that back that Biden is so far ahead. It's created a little bit less uncertainty and volatility. But still with the potential risk for a contested election and also some of the other geopolitical factors that are going on globally, that could contribute to some building volatility as we go through the quarter. Away from that, as we look at our banking business, you heard some commentary, of course, the third quarter was a very weak M&A quarter. I think there's still a lot of uncertainty regarding M&A. There was more, at least announced activity that started to pick up. But still, depending on how the quarter trends, I think there's a question as to what's going to really close within the quarter. You know, beyond that, I won't say a lot of - I won't make much, much comment at all about how we're seeing our overall pipeline.

Yeah. Maybe let me add. Jon, thanks for that. And, you know, I think that assessing seasonality in our business in the last 24, 36 months is like assessing climate change. So I don't think that there is any longer a clear define pattern of seasonality. So in that sense, it's extremely dangerous to try to project things in two, three months with all this uncertainty. So I would, you know, always refrain from making comments on quarterly outlook. But I think that the level of activities is still there. And of course, it's quite difficult to predict that the US elections won't translate into, as I mentioned before, our clients are clearly indicating that they do plan to shift their portfolios, no matter what the outcome of the election is, because there will be sectors that would may or may not benefit from stimulus packages from different tax rates that may come or not. And that will probably - we will probably see more movements after the elections.

Great. Thank you.

The next question is from Nicolas Payen from Kepler Cheuvreux. Please go ahead.

Yes, morning. Thanks for taking my question. I have two follow up please. The first one is on share buyback, you said that you actually communicate your intentions to resume share buy back to the FINMA and that they raised no objection, yet you're still not allowed to do that immediately. So could you elaborate why did they actually communicate you any criteria for you or the industry in general? And then the second is coming back on the net new loans in GWM, could you actually tell us how much of that translated into net new money for AUM? And Sergio, thanks for the support and good luck for your future challenge. Thanks.

Thank you, Nicolas. You know, I think the reasons are the same that you have been seeing also being explaining in public by regulators. And then what I mentioned before is definitely, you know, the outlook, you know, probably that assessment would have been different two weeks ago, two months ago, actually. I mean, it was different maybe if you look at the outlook for the rest of the year. But the second wave is coming into Europe and the unresolved and unclear situation about the scene coming or not coming early on is putting a little bit of prudence in the equation. So it's all about that. Its the fear that the second wave may be coming. And it's probably, you know, a little bit of concerns of letting things all reopen shortly before a new wave of macro economic deterioration comes in. So hopefully, as I mentioned before, by the early part of next year, we will have more clarity on this matter.

Yeah, Nicolas, in terms of your question on the net new loans, the $10.5 billion, around $5 billion of that was generated in the US, mostly in security space lending. And in the US, unlike internationally, you're not allowed to directly leverage your investments through those loans. So therefore, there is not a tight linkage between net new money in that type of lending. Now internationally, the other half of it, the $5 billion was a bit more broad based across regions and also concentrated in Lombard lending and their - we did see some benefit for our net new money flows, along with the lending and the leverage that our clients took on as part of their investment strategies.

Thanks.

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

Hi, thank you. And echoing my peers comments, Sergio. Thank you for everything you've done. And good luck for the future. And just maybe I've got two questions. One, on that note, and maybe one a bit more on the business. So just curious I mean, actually Sergio as you do the handover. And of course, you've spent some time now with Ralph, and just your thoughts in terms of, you know, his – or at least the group's key priorities going forward? Where do you think most time should be spent, and in which areas? And then second, slightly more business related question. Just curious on the US part or the sorry, the Americas and in terms of the Broadridge investment, just trying to get a sense of what kind of impacts you're looking for that to have, as it continues to roll out in 2021. Obviously, I see the commentary on being able to charge clients on an average balance basis. But just trying to get a sense of what kind of revenue impact and or longer term cost impact that's anticipated to have? Thank you.

Thank you, Amit. So I guess in terms of handover, you know, personally, I believe that and that is going to be a kind of split approach. The first one is to basically look at new ways. We have a ongoing plan, and I'm sure Ralph will have that - bring his views and user experience in helping us to make our front to back even more efficient, using data digitalization to the next level. So we have plans, but they need to be executed, and they need to be focused. So I'm sure we will find ways to optimize the way we run the bank front to back. And the second one, as we do that, as we did in the past, we need to continue to execute on our plan. So it's not that the bank, you know, can forget that, you know, quarter-by-quarter, we need to continue to deliver results and executing on our strategic plan, but also adding an eye into what is the future, and how to be stronger and better for our clients and shareholders. So it's a double prone approach, doing - looking at day to day, but also thinking about the future.

Yes, Amit, in terms of your second question, with the Broadridge partnership, which as I highlighted is, where we're already deploying some of the functionality. And you saw that in the third quarter with a updated billing convention, and with our expectation that we will fully implement the platform during the course of 2021. We do expect to have much more flexibility and deploying services, new products, new solutions to our clients, streamlining workflow, and also some of the complexity around compliance, for example, and onboarding. All of this should help to improve the productivity of our FAs in the US, where we already have the most productive in the market amongst our peers. We think that this will help us take that productivity to the next level, which again is a very key focus of Tom and Iqbal's. Now on the cost down, once that is fully deployed, we will be able to retire some of our legacy platforms that will reduce our overall IT infrastructure costs. In addition to that as we will be part of the Broadridge echo system, when new regulatory developments come about, for example, the cost and time to implement those will be significantly lower. And that will create a cost advantage for us. And then finally, in addition to that, we are looking to make that platform available to other peers within the market. And as that does take place as well, we will see an overall reduction in the cost, the ongoing costs of running the platform itself. So we do think that there's quite compelling both revenue productivity opportunities, along with some cost save opportunities.

Okay, thank you.

The next question is from Javier Lodeiro from ZKB. Please go ahead.

Yes. Hello. This is Javier Lodeiro from Zurcher Kantonalbank. Thank you, Sergio for all the last few years and all the best for your new challenge. I have actually two questions. First of all, on the 25th of September, Julius Baer said they were forced to pay $150 million to the former - was to Germany due to on the case of the former Democratic Republic. And this is a case where it came from the former private banks UBS sold to Julius Baer back in 2005 and there is apparently a recourse. And now I wanted to know if you're going to take over the $150 million, and when we will see that charge either in the fourth quarter or in the first quarter? And then the second one - my second question relates to the PSP transactions. That's a real estate divestiture you did in Geneva, as well, at the end of September I see in your call out items that you flagged only $64 millions. And this is on slide 26 of the presentation. Is that really the whole amount on that - on the Geneva transaction? These are my two questions.

So Javier, thank you, also to you. In respect of this matter, that you mentioned that with Julius Baer. Yes, Julius Baer has notified us their intention to seek indemnification under the transaction agreement relating to that transaction. We believe that we have substantial defenses to this in a indemnification claim, and therefore, as you can see, there is no necessity now and in the foreseeable future to take any provisions.

I would only note that, if you look at our Note 16, you will not see any mention of the Julius Baer related matter.

So is it fair to assume that you don't have any litigation reserve specifically for rank for this case?

We don't talk about our reserves, and as they relate to specific matters.

Okay, thank you.

Just in terms of your second question, I would only note that there are a number of different real estate related moves that are reflected in 26 that include the sale of a property in Geneva. But then in addition to that, we've also taken some lease related impairments, and we've had some write down in other properties.

Okay. Thank you very much.

And the next question is from Tom Hallett from KBW. Please go ahead.

Morning, guys. So I guess most of my questions have already been asked. But could you just walk us through how a democrat win in the US would impact the business? And do you get the sense that most clients have already repositioned for the likely outcome of that? And then secondly, how sustainable is the current credit provision run rate? Obviously, given current news about more lockdowns? How should we think about the sensitivity of that over the next quarter or two? Thank you.

Thank you, Tom. So in respect of - you know, it's difficult to say how the clients will really react, it all depends exactly, as I mentioned before, you know, for example, what is the true intention to move forward the agenda on the tax - on increasing taxes to what level and exactly for what, so that may or may not determine for example, an acceleration of profit taking in certain position to avoid or to optimize capital gains taxes. But also it depends how a democrat or a republican win will determine how money that will most likely come to a stimulus package that we believe is going to come in any case, will be floating to the economy. So I only can tell you what clients are telling us, that almost two thirds of them are planning to change their asset allocation after the election, and that tells you the story, you might want to do. So - but you know, how they do it, when they do it, it's not 100% clear. There are also other factors that may determine this. And the second question, what was it?

Yeah, just in terms of our credit provisioning, I think as you heard from our outlook statement, we still view our credit loss expense for the fourth quarter to be marked markedly below the first half levels. Clearly, if there is, between now and the end of the quarter, a very significant deterioration in overall macro economic outlook and expectations that we might see spikes in unemployment, for example, as a consequence of more severe lockdowns, we would have to reflect that in any updates that we would make to our models. And that could very much have an impact on where we end up for credit loss expense. However, at the same time, I would just importantly, underscore the fact that, if you look at the quality of our portfolio, I think any change across the industry is - would still likely impact us less, far less than our peers.

Okay, thanks. And Sergio, all the best.

Thank you, Tom.

The next question is from Alastair Ryan from Bank of America Merrill Lynch. Please go ahead.

Yeah, thank you. Good morning. And I guess my perspective would be, it's an absolute pleasure that UBS has avoided blowing up in a bad air, which as a cycle that really dogged [ph] the company back to at least say early 1990s. So and - I mean, you do deserve the congratulations of everybody on this call. And looking forward now that UBS in a position to make these choices, which it wasn't coming out of previous downturns, is there more growth in Wealth Management, because the world's more uncertain? Or is it going to be a process of keeping costs tight? Because there's less wealth generation around the world in the next couple of years? Thank you. Thank you.

Thank you, Alastair, I think is a - you know, you need to do both, actually. But you know, it's not just that - you know, I think in terms of growth, we have two opportunities. The first one is like in the US, we still have room to have higher and more representative share of wallet for what we are in the Wealth Management industry. And, you know, as you can see, we continue to execute on that. And I'm sure over times, we will improve our growth and trajectories. Second, in general, wealth creation is still a team. So no matter how you look at it, the Wealth Management, the asset gathering industry is set to grow twice the pace of GDP growth in the next decade. No matter where you look at, how you look at it, which sources you look at it, they all come more or less to the same conclusion. So we are well-positioned to capture these growth opportunities. But of course, you can't just pretend that growth is going to come on top of the existing infrastructure and market dynamics, you will continue to - we need to continue to work on creating efficiencies and managing cost, because fees are likely to continue to margins - continued to be under pressure, right? So you need to really protect margins by increasing share of wallet, by growing faster than others, but also by recognizing that there's going to be a competitive headwinds. And so in that sense, I'm very positive about the need for investors and to invest assets because of their needs to prepare for, you know, their retirements, but also in general wealth creation in the emerging markets and in Asia will continue to drive the prospects of our industry.

Thank you.

Okay. Looks like we are – that we have the last questions here. So again, many thanks for everything and I wish you all the best going forward. Thank you.

Ladies and gentlemen, the webcast and Q&A session for analysts and investors is over. You may disconnect your lines.