Hello, and good morning everyone. I'm pleased to be here today with you and to give you an update on our strategy, and our ambitions. 2021 was another very strong year for us and we will carry that momentum forward, as we continue to focus on growth. We're expanding into new client segments to open new avenues of growth with a much broader set of clients, and we'll continue to be vigilant when it comes to risk. As we're intensifying our discipline as well, now this will give us the financial capacity to invest strategically across our franchise, especially in technology. As we write UBS ' next chapter, we're aiming to create value, sustainable value for our clients, for our shareholders, for our employees, and society at large. Now, before we go into our plans, let me start with a recap of our purpose and our vision. Last April, we presented our strategic framework by sharing our purpose and our strategy on a page, and you can see it here on the screen now. We're starting with them today as well because everything we do here is guided by one common purpose; re-imagining the power of investing, connecting people for a better world. As you've just seen in the video, our vision is to convene the global Ecosystem for investing. Where thought leadership is impactful and people and ideas are connected and opportunities are brought to life. And the UBS Ecosystem depicted here on slide six is about connecting our clients with people and ideas. It's about helping them realize their goals. It's about delivering them to offer the best we have to offer. This can be from within our firm, but also from other contributors. Now, we are the orchestrator of this ecosystem, and that leverages our scale, and…

Ralph, thank you. And good morning, everyone. For 2021, we delivered $7.5 billion net profit. As Ralph highlighted a little earlier, the highest since 2006, translated into a 17.5% return on CET1 capital and a 14.1% return on tangible equity. Now, following the verdict by the French Court of Appeal in December, we increased our litigation provisions by €650 million to €1.1 billion in connection with this matter. The incremental provision translates to $741 million split between GWM and P&C. Total litigation provisions for the quarter were $826 million. For group GWM and P&C, I'll talk about results both including and excluding the French provision, given the materiality. Full-year 2021 PBT of $9.5 billion was up 16%. Excluding the French provision, PBT would've been up 25% driven by operating leverage of 3% percentage points with all business divisions and regions contributing to underlying growth and delivering positive operating leverage. During the year, we generated $7.7 billion in CET1 capital. Now, turning to expenses. We maintained our expense discipline throughout the year, managing to keep our expenses, excluding variable and FA compensation, currency effects, restructuring, and litigation broadly stable. And we did this while investing in the business, addressing regulatory requirements, absorbing inflation, and growing our operating income by 10%. This helped us to deliver a cost-to-income ratio of just below 74% or below 72% before the French provision. Now, looking ahead, we're on track to deliver the around $1 billion in gross end-year cost saves by 2023 that Ralph just reviewed. For 2022, we currently expect our operating expenses, excluding variable FA compensation, currency effects, and litigation to be up around 2% year-over-year, after absorbing increased investment spend along with higher personnel costs related to increased competition in higher T&E as COVID restrictions ease. Our restructuring costs should be around…

Thank you Kirt. And of course, we will stay joined on stage with Ralph again. So I'm opening up and I think that we have our first caller and this is Jeremy Sigee from Jefferies. So hopefully -- Jeremy, good morning, we can see you. Hopefully you can hear us?

Perfect.

And we can hear you so please go ahead.

Great and thank you. And thanks for the details and much appreciated. Two questions really. Firstly, on the digital Wealth Management project that you've talked about on Slide 16. Could you talk a bit more about the expected timing of that project? I think you said you got the Wealthfront acquisition closing in the second half of this year. How much time do you think you need for integration work before or after that, or for developing a new combined offering if that's the plan? So basically, what will be live when, if you can just talk through the timeline? And then, my second question on a different topic is about the share buybacks. I'm just trying to get a sense of how likely you are to do the full $5 billion in 2022. So could you talk a bit about how you will calibrate the pace of buybacks in each period through the year? What metrics that will be based on? Will you have blackout periods like last year? Would you have big variations between quarters like last year. That will be great. Thank you.

Okay. Thanks, Jeremy. I'll take the first question, and Kirt will take the second one. On Wealthfront, clearly first we need to get all the different approvals that one needs working with teams, making sure it's a smooth transition to actually close the transaction, so that's stage number one. And asset, we expect this to happen more towards while in the second half of this year. Now, from there on, there's a couple of things we will do. So we will -- it will work as a standalone operation for a long time because they are successful, they are growing fast. They're having a unique proposition and you don't want to interfere too much. On the contrary, you have to look at, okay, what are some of the easy wins here? So for example, the easy wins are that they have -- they're not only a wealth manager, they also provide banking services, they have a cash sweep arrangement. We can look at the cash sweep arrangement for our own business. So that will be an opportunity right there. We have two million of workplace wealth clients, $1.5 million in retirement services, and a $0.5 million in equity plans. And introducing a digital wealth offering to them after their shares are facet and they sold the shares for example, we'll actually keep the money in-house. For that we don't really have to do a full integration -- we just have to make sure that there is a good connection between our workplace wealth services, ++and then for Wealthfront to be introduced. So those are the ones that you can do easily for which you don't even need integration. Now, the second opportunity, Dan, is the one for these engineers who are very good engineers and they really wanted to join…

Yes, Jeremy, in terms of your second question, I think firstly, and very importantly, we actually don't intend to have any positives for the remainder of year. So unlike last quarters, when we advise on a quarter-by-quarter basis, in this case, we're actually giving you advice on what we intend to do for the remainder of year without pause. Now, obviously, still, the overall volume we can repurchase will depend on the actual volume of shares traded and the liquidity on SIX, and our calculation of up to $5 billion is based on what we've seen in terms of volumes in the past, and so we think that that's within reach. But clearly, it's going to be dependent on how much liquidity and how much volume is actually traded in our shares on SIX.

Great, thank you.

Thanks -- Thanks, Jeremy. So, I think then we can move on to our next cooler here, I think is Flora Bocahut from Jefferies. Good morning, Flora.

Good morning. Thank you for taking my questions. The first question I wanted to ask is regarding the use of excess capital. Here on the buyback targets, so this is close a bit to the question that Jeremy just asked but to give us basically an upper limit, up to $5 billion of buybacks for '22, there isn't a lower limit. Should I understand that this will be dependent on your M&A plans meaning provided you do not do additional acquisitions this year, then you would intend to distribute as much as $5 billion via buybacks and therefore maybe can you tell us more regarding your M&A plans and how you are planning to make the decision between M&A or buybacks. And then, the second question is also regarding Wealthfront. You give us, you know, the strategy question we're makes sense. You mentioned that this is expected to be marginally EPS [Indiscernible], can you tell us maybe a bit more regarding to financials, the earnings potential you expect from that the return on investment, to synergy potential you see from that, and maybe just also on West phones, you shiny of you see you plan to target a client reach that is a bit below your usual target client base in terms of wealth. But if I understand correctly, this is expected to be doing value-add wells from brands and not UBS brand. Thank you.

Okay. Thank you. The way I think about M&A. If it comes to the capital generation that we have every year, right? We have a business that generates a lot of capital, but in the organic growth, doesn't use a lot of capital. Clearly we are -- we do lending, we have investment banking activities, they all use capital, but the growth of the use of capital is not foreseeing to needing all of the capital that we generate. On the contrary, so it will always be quite a lot of capital left over to support first growth has to set -- well first, make sure we have a good balance sheet. Second, to support the growth. And in the growth then, the opportunity for M&A. I just want to make sure, the default is truly organic growth because we think we have all the engines in place generally to do organic growth. Now, if it comes to inorganic growth, I'm not going to manage timing here. If the opportunity is there, just like Wealthfront, we'll have to work on the other opportunity. I can't just say, well, why don't you wait for next year because we have -- we are -- it made destroy our capital return plan? That's not what we do. But we have ample capital to return. So it will not impact necessarily quickly the share buyback programs perse, Kirt can elaborate on that. But if it comes to M&A, just to give you a couple of ideas here, so it will be about bolt-on. It would be then on capabilities, on scale, on reaching a segment that -- or business model that we don't -- that we want to develop organically, but we can accelerate through the acquisition. That's a little bit the type of bolt-on. We're not necessarily looking, if it comes it comes. We're focused on organic growth, we're focused on making Wealthfront a success, and we're focused on making sure that we perform on the share buybacks. So maybe on that one?

Yeah. Maybe just to add a couple of points to amplify what Ralph highlighted. And as Ralph mentioned, we're very capital generative. And you saw in 2021, we actually generated $7.7 billion of capital. And so as we look at this year and also we've included in Slide 53, the RWA trajectory, we feel we have ample capital to be able to invest. Firstly, our first priority, of course, is business growth, achieving any regulatory requirements, and then to accrue our cash dividend, we indicated we'll be progressive in our cash dividend. Our cash dividend accrual was $1.7 billion for the $0.50 in 2021 but it does give us good confidence and comfort that we can actually repurchase the -- up to $5 billion and still have ample flexibility to address other priorities as and when they come up.

Okay, Dan. Your question is on Wealthfront. There were many questions in one question. I'm not going to monopolize then. Also, there's answer to answer every little bit that was in the question. But, in general, Wealthfront is a fast-growing scale-up. Let me put it that way; it's a scale-up. It has 470,000 clients. It has got $27 billion of assets under management. It is a segment that you refer to as one that is lower than our normal Wealth segment that we cover. That is true and it's not true. It is certainly true if it comes to the segment that we cover through personalized advice with advisors. But as I was referring to the fact that we also had 2 million of customers in the U.S. alone in Workplace Wealth and they are actually within that bandwidth. They are kind of the upper affluent wealth clients that we need to have a more digital-led offering for. And that's why the Wealthfront is an attractive proposition for them. And therefore with us as well in order to ensure that we keep them as clients going forward. The way we develop Wealthfront, please just look at this as a growth engine for the moment. It's a scale up. So we're not going to run it for P%L. We're not. We're going to run it for growth, number of clients, assets under management, and using direct technology. Later on, we will start managing it for P&L. But for the moment, it needs to continue to grow create value, and deliver that value to us as well. And then on the brands, honestly, we're not there yet. We are at the same time are working on how we want to kind of develop the UBS brand from here, and see how some of these initiatives that may not be straight of our ally our, our normal ally, let me put it that way, whether we should cover them under a separate brand, or under the UBS brand, or a linked UBS brand. So we're not there yet.

Okay. Thank you. Thank you Flora. So I think we're to move on now to our next caller. I think is Stefan Stalmann from Autonomous. Hi Stefan, you're online.

Yes. Good morning, everyone. Thank you very much for the presentations. I wanted to follow up first on the return on CET1 target, please. I think if we take out the French provisions, you have generated about 19% return in 2021, targeting 15% to 18%. The denominator will probably not grow a lot. So it seems that you're implying with these targets declining profits. And I was wondering what conceptually would cost profits to decline and also how this jibes with the explicit target of 10% to 15% profit growth in Wealth Management, your biggest business. And a second aspect of the financial targets, in the past you have explicitly limited the capital consumption of the investment bank up to a 1/3 of the group and I think that that target is gone. Is there anything that we should read into that or is it just a cleanup effort of a target that was not really needed anymore?

Stefan, I will take the second one, and Kirt takes the first one. So it's exactly what you say. So we're very disciplined in managing our capital within the Investment Bank. And it has been really useful for us to really have that target out there as well. But we manage it in a very disciplined way or will continue to manage it in a disciplined way. So nothing has changed there. It's just that we don't repeat it as a target per se. But nothing has changed to the way we deal with the capital allocation to the Investment Bank. So it's kind of a target that was always there. We will always have made, and therefore it doesn't serve a purpose anymore. But be assured, we will continue with the same discipline there. With that Kirt, on return on CET1?

Yeah. Just to comment on return on CET1. Firstly, indeed, we do need to accommodate increase in RWA. I think, again, if you -- if I reference to Slide 53, you can see there's 40 billion of additional RWA just in order to invest in the business and to achieve our organic aspirations. In addition to that, we've got another $11 billion related to regulatory requirements and right now we're anticipating around $20 billion in order to address a Basel III finalization subject to FINMA and some final decisions. I think the other factor, if you look at our performance in 2021, of course, we actually had a net provision release. And when we model and we look at our provisioning going forward, I would say we model that conservatively but that overall target does contemplate some level of overall CET1 build that you would expect. And of course, we are leaving some flexibility just to make sure that we can deliver against our targets in all kinds of different market environments.

Great. Thank you very much for this.

Great. Thank you, Stefan. And so with that, we'll move on to our fourth caller, who I believe is Alastair Ryan from Bank of America. Good morning, Alastair.

Thank you, Sarah. Good morning. First question then. Just to be clear on Wealthfront, is that what you need to achieve your stated strategy goals in the U.S. as it stands today or we long of further deals to get you there? Second, I think to understand Stefan's question. Actually, you do say you're sticking with the third of the group in the investment bank. I just want to reconfirm that's absolutely still the case. And then, how am I going to manage on the investment bank as well? How am I going to track the increased alignment between the IB and GWM? You know I have had issues with that in the past and would still do because you don't provide the numbers, how am I going to track that, please? Thank you.

Yes. So Alistair, as of the moment you may have to trust us. Rather than to be able to back us with the last question first. Yes, I mean, you should basically start seeing that in basically what we did already this year. We're -- if it comes through the banking activities and the sectors that we cover, and the way we collaborate with the wealth business. You can see it in some of the deals coming through. We can see it in some of the wealth that is created by some of the deals also coming through on the wealth business. But in order to be more successful in that one, and I think that's an even more important move there, is to focus on what we call the global family and institutional wealth [Indiscernible]. That's truly where the strength of the investment bank and the Wealth Management activities come together. That's what we truly want to manage as one under one leadership with one risk management area to focus on it. We've allocated resources to it in order to make sure that we have a very smooth and supportive offering for our clients there. So that's where you will see it coming together. And that is a pretty important part of our growth plans, in terms of income in that segment, so that's one. Then on the capital discipline for the Investment Bank, I can reiterate -- I just did it. That nothing has changed there. And then back to Wealthfront. We'll be need more acquisitions to make to U.S. work, yes and no in order to continue to make it more efficient and to create more scale. It is clear that in the U.S. we have -- and I discussed that two quarters ago, we have planned…

Thank you.

Thank you, Alistair. So I think we have anything to move on. And I think our next caller is Magdalena Stoklosa. Good morning, Magdalena. You have the floor.

Good morning, Sara. Thanks. Thanks very much. Good morning, Ralph. Good morning, Kurt.

Hi.

Really, two quick questions from me. Of course, still on strategy random investments and one of your kind of commercial aspirations. So the first one: you're self-financing your investments in the medium-term, and that's quite impressive, and you've shown on the Slide 23 where your savings are coming from. But could you tell us from here on the marginal dollar level, where are your strategic investments likely to be? So that's question number 1. And question number 2 really, on the commercial aspirations, could you help us attribute that above 5% net new fee-generating assets growth from a perspective of the region, maybe also product, maybe any other initiatives that you think we should be aware of on that medium-term in terms of growth there? Thank you very much.

Sure. I'll take the first question, and then I'll let Kirt take the second question. If you look at where we generate the savings, it's literally -- we will generate savings across the whole first. So the real dedicated areas like the footprint optimization, the -- some other activities that we may look at, down-scaling. But in general, we're also looking at efficiency matches across the whole company, and that is driven by the efficiency that digital can bring. That is driven by the decreased layers of reporting that. The Agile way of working brings. And it is delivered by the efficiency, that the Agile -- our productivity, if you may, that the Agile way of working will bring as well. So that is basically a savings across the firm or wherever we introduced the Agile. You can expect savers to come out, but we'll reinvest. Often reinvest in the business itself as well, or reinvest somewhere else. so you may not see it in the P&L, but I'm just trying to describe to you where the pockets of savings are coming from. Now, there's another big saving that we are anticipating, or at least a big way to increase productivity, which is on the technology front. That's on how we technology -- how we run technology, how we prioritize technology. But also on further [Indiscernible] up, as what we call the quality of our engineers. So that's also -- there we're quite some [Indiscernible] is freed up to invest. Now the areas of investment are in technology itself. But from a regional perspective, you can expect us to invest over the next couple of years some $200 million to $250 million, for example, in the U.S. So the U.S. you can expect that the investments go where we have…

No I think that you've covered it all very well. I just to address the question on net new fee generating assets. I mean over I think firstly and importantly, one of the reasons we came back with this as a target versus net new money is because, of course, fee-generating assets is far more strategic and its higher quality and it's where we really drive the recurring revenue momentum. Also, very importantly, it's what the business is focused on. So we have more confidence because the business is very, very much addressing this from how we look at product development, leveraging our CIO insight, how we connect that to our clients and our product development. Now, in terms of the products overall, of course, within fee-generating assets, the main focus is around mandates and our advisory products. And you saw that on Slide 9, our managed solutions, which are mandates that are most closely linked to our CIO overall content. In addition, from the professional client side, there's the professional market access product which has been one where we've seen a lot of inflows and that's more for the global family and institutional clients that are trying to get direct access to our trading. And then obviously private markets and alternatives is a key focus for us. And I would say, overall, you will see higher growth in sustainability than non-sustainability. Now, from a regional perspective, I wouldn't emphasize one region over the other, and really that's the advantage of diversification. We might see one quarter where APAC is down, but the Americas is up. And so therefore, we would expect to benefit from that diversification. But just to give you the insight into what happened with a $107 billion of net new fee-generating assets in 2021, Americas; $64 billion, 8% growth. EMEA; $19 billion, 6% growth. APAC; $14 billion, 13% growth starting from a smaller base. In Switzerland, $11 billion with 10% growth.

Thank you. Thank you.

Great. Thanks, Magdalena. And so with that, we now move to our next caller who is Adam Terelak from Mediobanca. You have to floor.

Morning?

Morning.

Thank you for the questions. I had one on the cost income target, and another on capital return. Mid-term -- if I look at your kind of RWA guidance with $370 billion. It looks like you don't need to maintain much capital at all through 2025. You've obviously got U.S. DTA benefits that grosses up your capital generation. So could theoretically payout ratios be pretty high going forward. And how should we think about that in terms of buybacks beyond 2022, given you kind of mentioned some limitations on AGV on the and whether you need to kind of further up with the dividend to manage that capital in excess capital going forward. And then secondly on cost-income, the targets just look very conservative to me. If you adjust for the litigation, NII upside which should drop straight to the bottom line, I'm getting low 70s already. If you put a billion of cost savings which you are reinvesting in growth, marginal cost of growth should be low. I mean, what -- why 70 to 73? Why can't we go lower than that?

So, to start with your buyback question overall, and your Adam, your statement was absolutely correct. I think if you look at what we indicated this year, $5 billion and then you take the $1.7 billion progressively on cash dividend that gets you to around 7 billion. On top of that, of course, we'll deploy $1.4 billion in the acquisition that we're making the Wealthfront acquisition in the second half of the year. You just compare that to our net profit in 2021, and you can easily get to a payout ratio that's greater than 100%, which is logical because we're starting at 15% overall CET1 ratio. And then I think also as you do the math, you think about the $7.7 billion again of capital generation and you start to look at what that could mean for 2023 and 2024, while we haven't specifically guided I think the math is pretty straightforward. It shows that indeed we can continue to generate substantial capital and also have very, very high payout ratios and still manage to our overall capital ratio while addressing Basel III and the capital that's required to grow the business. Now turning to your cost-income question, again, I'll provide really a similar answer to the one I provided before. It's just as we look at the business, as we think about the investments that we're looking to make, well, we intend to continue to be -- have positive operating leverage overall as we go through the next couple of years. Still when we look at what that means in terms of what we're going to deliver how that aligns to our return target, the 70%, the 30%; actually aligns quite well to the 15% to 18%. And naturally, we're leaving ourselves some degree of buffer just so we can manage with any kind of volatility that might come. I would also then maybe just close my comments on that point is. Last year, the results that we generated were when we probably saw the best primary banking market that we've ever seen. And also when we had a markets environment that was very, very constructive. And I don't think any of us believe that we're going to see that repeat itself in 2022. So, we have to accommodate the fact that we're going to see a different market environment.

Exactly.

Great. Thank you. Thanks, Adam. We are going to move on to our next caller and I think it's Kian Abouhossein from JPMorgan.

Thanks for taking my questions. First question is regarding just Ralph coming back to your comments on costs. You mentioned potentially flat cost and I just wanted to clarify, I think you mentioned track because I don't know what context to slow it was exactly. But if I look at your cost guidance right now, plus two plus-minus variable expenses, can you assume that's a good guide for the next few years considering you still have $400 million of savings to come in '23? And as a result, is that an indication of that we can use that going forward in your plan based on what you know today. That's the first question. And the second question comes to Wealthfront. You used to have seen calls SmartWealth, and you closed that down quietly, and I just wanted to see what is the difference between Wealthfront and smartfront -- SmartWealth? Sorry, looks very similar to me -- to what you just acquired. And in that context, can you talk a little bit what are your long-term ambition on this business that you just acquired? I mean, is it U.S.? Is it global? And what does that mean for the future? How should we think about your digital robo -investing in the affluent after five years from now, or six, or seven?

I will start with the second question. I will lead into the first question and then Kirt takes over on the first question as well. Now, you mentioned Smart Wealth. So Smart Wealth for the ones who don't know it, was a Wealth Management proposition -- digital Wealth Management proposition that we once had. We closed it down. And there were a couple of learnings from that one and those are the learnings that we took to heart when considering to go with digital approaches in Wealth Management. Again, with digital-only ones. And if you look at the learnings that we saw in smart wealth, they were really around the fact that they -- it was not a separate unit. It was not a protected [Indiscernible] that was allocated, it didn't really have a marketing angle to it. It was not focused on user experience and it was -- and we focused too much on P&L from the beginning. And honestly, if you want to build a business, you have to separate it, you have to protect it for a while, you have to have it grow. And if you expect P&L to come from a business like that in the first five years, basically, you're setting it up for failure because it's not going it's not going to happen. Because even if it is digital, you need scale. And scale, you can only have with clients. And the clients only come if you do marketing and you have a cost of acquisition. Now, if you start cutting back on cost of acquisitions, the clients don't come. If the clients don't come, the money doesn't come. If the money doesn't come, you will not create the scale that you need. So that's -- those are kind of the high-level learnings…

Very helpful thank you.

Great. Thank you. Thanks, Kian. So now working to move to our next caller. Who is Andrew Lim from SocGen. We can see you, Andrew, please go ahead.

Thank you. Thanks for taking my question. Just a bit more on the wealth front [Indiscernible] question. I guess the wealth front acquisition in itself looks quite expensive at 5% of [Indiscernible]. So I know you said you are going to leave Wealthfront alone. It doesn't work the other way in the sense that you were able to use its technology and [Indiscernible] Wealth Management in the Americas sooner rather than later. And what is it specifically about that technology that Wealthfront has that makes it so attractive to pay such a high price for the acquisition? And then secondly, you mentioned as part of your strategy that you're exiting some markets. What markets are these? How material are these markets? are there any other financials that we should be aware of that could influence them to crude financials overall? Sure. Thank you. So on Wealthfront again, I'm not sure I said I leave it alone. We said, we'll keep it as a stand-alone entity as long as there is a scale up. And what makes them so unique is a couple of things. First, they're really driven by the same culture the same value. And they have true engineering culture. Their technology is proprietary. It is open. We can connect it. We can reuse it in parts. It will accelerate our own engineering culture as well, it's good to have that. The second thing is Wealthfront is not a robo advisor. I know people talk about it

that way, but it is a digital Wealth Management offering. It also offers banking services. It also offers investment services of course, and it has two unique capabilities here; one is the tax-loss harvesting technology that they have and models that they have, as well as the direct indexing capabilities they have as well. So there are capabilities they have there that are sought after and that we like as well. Then, we will want them to grow and the synergies that we see, even if it is a standalone entity, are truly in what I was just indicating, which is that they have banking services, and part of that can come to us. We have 2 million Workplace Wealth clients. At this moment, we don't have a really good offering for, but then we will have, so we will actually make synergies here as well for them to grow on the back of the clients that we refer. We will later on be able to introduce other UBS products to their clientele as well, like mortgages. And then and that was in the later stage, we can also look at how they do custody, clearing, et c, et c, et c. But that will be at a later stage right there. And then the synergies would be more on the operational side. But that will be later. So there's a lot of reasons why we think that what we paid for it is certainly worth the money. Maybe I could just add just from a pure financial standpoint. Firstly, when we complete the acquisition, we expect that -- we indicate this to have about a negative 40 basis point drag overall on our capital. We expect it to be marginally EPS accretive. We do not expect to be dilutive…

Okay.

Great. Thank you. Thank you, Andrew. And so we're going to now move on to the line of Nicolas Payen from Kepler. Good morning, please do go ahead.

Good morning. Yeah, thanks for taking my question. I have two, please. The first one, sorry to come back on the Wealthfront again, but just in terms of acquisition cost because you just said that you're not managing it for the P&L at least in the P&L. I wanted to know what does it mean for acquisition cost? Do you see higher acquisition costs especially in the U.S. and what does that mean in terms of competitive landscape there? Where are your edge versus competition there? And the second question, you just disclosed something very useful, I think, which is your change the bank versus run the bank IT spending breakdown. And I wanted to know, what do you expect in term of allocation going forward between those two items? Thank you.

I'll start with the second one first. I think this is a little bit word will be in terms of allocation. As so clearly you have to strategic bucket and you have the bucket this as to what we call license to operate. And we come from a period here at UBS where we needed to invest a lot around making sure that we were compliant with new laws, new expectations, regulatory requirements et cetera. And we run quite some programs to ensure that we would always be in compliance with some of those -- with all of those. But it did ask for a heavy IT investment, and most of these programs have been brought to a very good end. And then are closed, and that gave us the opportunity to increase within the total, the percentage of strategic spend as we call it. But that within strategic spend, we have moved on from everybody to determine what is strategic spend within their own domain and their own business unit, and their own group function, to now basically the top, basically the executive team, deciding, okay, no, we collectively decide on what is strategic and not the business division. So basically, with that, we have crowded out some less strategic projects that we're maybe seeing but the division itself, as strategic, but on a higher level would be seen as marginally strategic as one, or for which we could actually accelerate some of the other projects that are just more remunerative or more important to us in other divisions. And that is a process that we went through in terms of first qualifying all the projects, then taking budget away from some of them, and reallocate them to others, and accelerating other projects with that. And we now have…

Great. Thank you, Nicolas. And so now we're moving to our next caller who is Amit Goel from Barclays. Good morning. We can see you. Please do go ahead.

Great. Thank you and thanks for taking my questions. Two questions. The first one again, just following on the Wealthfront acquisition. But just trying to understand or just thinking about how you see the longer term outlook for margins in the U.S. I appreciate these are different customer segments that Wealthfront customers will have more access to EVS product. It looks like they charge about 25 basis points. So again, just wondering how you're thinking about that longer term. And the second question, so it definitely relates to the -- part of your trajectory. Just curious if you can go into a bit more detail into the $40 billion business growth. How you see that in terms of lending, structured product, IB related, and so forth in terms of where you're looking to utilize that what you've been in. Thank you.

Okay. I'll take the first one, and Kirt takes the second one. On Wealthfront again, on the margins. The current offering that Wealthfront has that 25-basis-points fee. But they are, as I said, they're not just an investment engine or robo -advice. They are broadening their services to become more and more like an overall bank. So also, the cash of the clients is with them. So they have cash under management, we have assets under management as well, and the [Indiscernible] makes money as well. So they get income from that as well. And that is only for -- that is for the digital-only service they give the 25-basis points, and then they make on auxiliary services that make more money as well. Now clearly, if you are going to go in with additional proposition the one that for example, would give you access to remote advice. You would charge different fee. So it's not like, this is the pricing of Wealthfront and therefore, if we have an additional proposition, we keep to that and then for the clients that want the current service in the current experience, and the current choice. This is what it is. This is what Wealthfront manages really, really well. But if you give further value-added services, we can also price up a bit. And I do think that the market is very well aware that that also needs to be done in those cases. And you can just go through the comparison with all the other players. And then you get an idea as to what -- what would be a normal margin in the market.

And maybe just to give you a bit of a profile of the $40 billion. I think, firstly, the majority of that is going to continue to be allocated to lending. I think you saw, of course, this year, as I highlighted, we generated $28 billion in net new loans across Wealth Management and P&C, that focus is going to continue. In addition to that, we highlighted the fact that we're looking to really scale and grow further the global family and institutional client segment. There they do require more sophisticated loans, they have slightly higher risk density. And we do plan on seeing growth in allocation of RWA to that segment overall, which is a Wealth Management segment there. But then, in addition to that, they do require investment banking capabilities, including structured overall derivatives and they also require prime brokerage services. So there will be some IB related overall RWA to serve and support that segment. And then overall as we've indicated several times, we're still looking to keep the same guidance that we have in terms of our overall CET1 ratio, leverage ratio, and also the use of capital by the IB.

Got it. Thank you. Try if I just follow up from just one point on the margins. Just on some because I think also the point you made earlier was that -- obviously, there's a customer acquisition cost, so just trying to put into that context. So your ability to scale-up the pricing relative to trying to grow that customer base, how do you think about that trade-off?

Again, it has to do with what you provide to your customers. And customers, as you say, are willing to pay up if they regard it as a better service. And for us, clearly, the pool of customers we already have to offer Wealthfront services to, we don't have to acquire anymore. And we just have to generate the leads towards Wealthfront, and make sure that our customers are happy with what Wealthfront does for them. So that would be a pretty low cost of acquisition for a Wealthfront perspective, let me put it that way. All new customers to be acquired outside of that scheme is a market theme, which is the cost of marketing through social media, etc., which, yes, depending on how fast you want to grow, you have to increase. You have to do it the way -- that's the way we approach it, and Wealthfront approaches as well. And then you have to look at your customer lifetime value. And you see that the customers of Wealthfront have a very long lifetime and, therefore, their lifetime value is actually very high. And then you can afford also to do more on the customer acquisition costs if you get the same profile. So there are pretty long-tenured clients there. They're very -- they have a very loyal client base, and every new client seems to have the same profile there.

Great. Thanks, Amit So I think with that we'll move on to our next caller. Here Andrew Coombs from Citi Group. Hi, Andrew. Please do go ahead.

Good morning. Thanks for taking my questions. Two from me, please. One on cost, and one on the M&A strategy. Some costs if I look at slide 30, you've been very explicit on your 2022 guidance of costs, excluding compensation or should take variable compensation and litigation. If I do the compensation competitiveness, clear the key topic coming out of U.S. bank reporting, for example. If I look at your variable and FA compensation cost, they're up $700 million. If you adjust for the 2021 off relating to the deferred award acceleration, I think they're up just over $1 billion, and that compares to $3.2 billion in revenue growth, so you're looking at a marginal cost income 35% there. Do you think that's a good proxy going forward to model those compensation costs? So that would be my first question. Second question is from the M&A strategy. Wealthfront's an interesting acquisition in part because you've talked about organic being your default strategy. But where you can go [Indiscernible] you talk about alternate M&A. And clearly in the U.S. launched advice advantage. I assume that when that be load into Wealthfront in some capacity. If I try and think of a --not exactly the same but similar prospect that you have outside of the U.S. it would be My Way. You talked about now having $7 billion of assets. But with that being obvious areas you need to consider bolt-on M&A to accelerate that strategy?

Yes. So let's go back to -- so you have completely digital wealth managers like Wealthfront. And then you have -- and we have one of those as well, which is UBS Advantage, as you were referring to, which plays in a higher wealth segment actually. It's a 9th digital wealth manager in the U.S., but it plays in a higher segment. But again, it's digital-only. My Way is a way to digitalize the mandate business. So it is one which you get a completely different client experience where the client feels that he or she is much closer to allocating portfolios, to sectors, regions, different asset category. And then leave it to UBS to manage within the boundaries that you set through My Way. and it helps the engagement of our customers. But in the end, these customers would still want to have the personal advisor, side-by-side to make sure that they are doing the right thing. And therefore, it caters also for our higher wealth segment. But it is a digital approach to improve our client experience. And thereafter results were digital approach, operating that platform and therefore, it is a much more efficient way to do so. So there's -- these are two different proposition space. One is how to digitalize the world of the financial advisor to make the financial advisor much more close to the client, have a good way to discuss with the client, but then, have a digital support so that the financial advisor or the client advisor doesn't have to go into paperwork and a lot of documentation, etc., but we can really go to the next client. So better customer experience, seamless execution, and productivity increase. So that -- My Way I would see much more -- much more as a…

Samir (ph.), I will take your compensation question. But, first of, I didn't completely follow your math, so we can follow-up on that. However, we're very consistent in terms of how we accrue compensation, variable compensation for FAs, really that can almost be looked at as the FA's total compensation because of course it's there are higher payout, but salaries are quite de minimize. That overall payout depends on the grids; the grids are pretty public. It also depends on mix, which is aligned with the grid. So the more lending we do, more NII, the actual overall less payout, and therefore the percentage of payout to revenue, the marginal payout is lower. Now, in terms of how we accrue for all the other business divisions, obviously with the IVD the largest in terms of the total accrual that we have for variable compensation. It consistently is based on what we call S-curves. And we also accrue after. So we accrue against economic profit. So we always look at the equity allocation to the various different types of revenue and also the costs to generate that revenue before we take into your accrual for variable compensation. And that approach is not going to change going forward.

Great. Thank you very much. Thanks, Andre. So we're going to move on to our next caller who is Anchor Reingen from RBC. Good morning. Thanks for bearing with us. You have the floor. Thank you.

Thank you very much for taking my question. I have two remaining ones. First is on what steps are you taking our initiatives to change the mindset and like if incentivized staff, because we took a look at agile structure, cooperation. And I mean, you mentioned you have quarterly reviews of the investment budget. But what are there sort of like levers for you to support a more agile and operation and as well as larger cooperation. The second is on your ESG and sustainability initiatives. Clearly, a lot of banks are talking about it, but is it a net positive for you? You gave us a number of $400 billion of invested assets and compare this to the $250 billion. Probably not all of this is a net positive but using net you are one of the winners and then that positive sense given your business mix. And where do you think you are on your journey, is a $250 versus the $400 billion a good indication? Thank you.

I'll start with the last one, end with the first one. On ESG, you're talking about the sustainability and impact investment category where we have grown to $251 billion this year out of which $172 billion is within the Asset Management. And we actually see inflows coming across, literally across, new clients coming in specifically for this offering. Existing clients moving part of their mandates, part of their business into that offering. So I would certainly say given our reputation and given the effort we put in, in being the leader, being the thought leader on the ESG side as well, and that's why we centralized all of our ESG activities outside of the business divisions because I want to get us consistent across everything we do, and that will further increase our reputation and attract new money. So in that growth is absolutely new money, and we see ourselves as a relative winner. For the moment, but with all the plans we have, for sure we will continue to be at the forefront there as a thought leader, not only for us as a company, but also in terms of the products that we deliver and making sure that we continue to cater for more specific needs. This can be as general as, okay, I want to have a portfolio with high ESG -rated companies. It could also be, I would want to invest in water purification technology only, or in whatever new technology there is that can help the climate, for example. So we certainly see ourselves there as a relative winner. It is one of our strengths in the Asset Management business. It is certainly also one of our strengths now if it comes to, if it comes to our CIO strategies, basically we have since September…

Great. Thank you. Thank you, Anchor. And now we're just going to our final caller who is Pace Brown from HSBC. We can see you, Pace, so please do go ahead.

Good morning, everyone and thanks for taking a couple of final questions. Just on the coming back to the wealth Americas business. I guess we go back a few years. We used to have the pre -tax margin target to 25%, and I guess if we think more recently we've seen some of your tiers in that market, pushing the bar a bit higher, and I'm looking for margins above 30%. Given the configuration of the business currently worth and you're still sub 20% on pre -tax margin. Is that a realistic range to think about over the medium-term? The second question is, on the interest income sensitivity guidance. you've given on Slide 32 for the current forward curve, the $800 million of NII upside. I don't know if you can give any figures beyond full year '22, does that figure grow? Is it an accumulation of gains on the current forward curve once you start thinking about reinvestment further on beyond full year’22? Thanks very much.

On your first question, if you look at the performance of Wealth Management Americas, you've actually seen a very positive trajectory overall in our efficiency ratio, as you would expect. We have come down from 87%. This year, full year, we were a bit above 80%. We actually had our first-quarter below 80% in the third quarter. And so the trajectory is moving in the right direction, and we expect that that's going to continue. And it's also helped by, of course, our lending, given the fact that the payout ratios are in lending and that's something I just addressed. And that's very, very accretive to our margins. So as we increase the banking product volumes and actually catch up where we have a bit of a gap versus competitors, we should continue to see positive trajectory overall on our efficiency ratio on the U.S. Also, very importantly, I would note that we've -- we doubled the PBT from the business. We've gone from $1 billion, we're now over -- we hit just over $2 billion this year, and we've done that over the last five years, and we're on a run rate above $1 billion overall. In terms of the interest income guidance, frankly, I find it almost meaningless to give you multiple-year guidance on interest income. Yes, we can model it, but the fact is there's so many developments that are going to take place in terms of our overall banking book, our asset, our liability structure, and we know that interest rates are going to move and forward curves are going to move. So I find it more useful to give you the one-year guidance, which is something that we're reasonably comfortable providing. But then, to extrapolate that into 2023 and 2024, I frankly don't feel it's very useful.

Great. Thank you. And that ends all our questions for today. So just handing back to Ralph for a few final words.

Okay. Thank you, Sarah. I -- yeah. By the way, I thought it was very good to see you all on screen because for the last five quarters, at least, that I've been here, we've been on dial, on telephone. And it's so much better to see you actually, and to engage with you. And although the screen is there, and my camera is here, it kind of sometimes confuses us as well, but it was so much better to see you on screen. So thanks for making that possible on your end as well. It just gets us to a much livelier conversation. At least that's the way it's felt on this side of the screens, I guess. So, as our set -- we're closing the session. We're happy that we had another strong quarter two and an absolutely record year. And that demonstrates the value that we add to our clients. I hope that our plans, the way we laid them out today and summarized all of them, and we have given them piecemeal to you, that they are clear to you. First we see that this is just the beginning. There is much more to come for our clients, for our shareholders. And so for now, I would like to thank you for watching. And I really look forward to seeing you soon. So Thank you. Bye.