Ladies and gentlemen, good morning. Welcome to the Q3 2021 Results Presentation. The conference must not be recorded for publication or broadcast. You can register for questions at any time by pressing star and one on your telephone. Should you need operator assistance, please press star and zero. At this time, it's my pleasure to hand over to Mr. Martin Osinga, UBS Investor Relations. Please go ahead, sir.
Thank you. Good morning. Welcome everyone. First, I want to draw your attention to our cautionary statement slide at the back of today's presentation. Please also refer to the risk factors in our 2020 annual report, together with additional disclosures in our SEC filings. Moving to Slide 2, our agenda for today, and it's now my pleasure to hand over to Ralph Hamers, Group CEO.
Thank you, Martin, and everybody on the line, welcome. Thanks for joining us this morning. Hey, it's a good quarter, you will see. We're fueling growth today, but also for tomorrow. Across the board, our clients are benefiting from our trusted advice, quality execution, and our growing ecosystem. Our strategic initiatives are working and our investments are paying off. For the quarter, we delivered CHF 2.3 billion in net profit, the highest in almost 15 years, and our return on CET1 capital was over 20%. We're making good progress on our strategic refresh as well, and we'll give you an update on this shortly in this presentation. Turning to the next slide. Just looking across, you see the market and economic backdrop were broadly positive in the Q3.
Although there was some recent uncertainty towards the end of the Q3, equity markets are still near all-time highs. Vaccination rates are high, rising. Fiscal monetary policies remain supportive. But at the same time, we see fears of inflation, the spreading of COVID variants, policy uncertainty in China, and also in the U.S., raising concerns around economic growth. We hear similar concerns from our clients too, of course, as evidenced in our last sentiment report. Whatever the environment, we'll continue to provide our clients with our valuable advice and quality execution for them to weather through these uncertainties. If you look at this slide, you see the ongoing momentum with the clients. Our private wealth clients continue to turn to us for these solutions for the advice.
At 5% annualized growth, we saw another strong quarter of net new fee generating assets. Man, what a word. NFGA, adding to the scale of our global ecosystem for investing. Net new loans were positive at $3.3 billion, driven by the Americas. That was despite the volatility in Asia-Pacific, causing some deleveraging in the region. While helping our clients navigate volatility and capturing opportunities, transaction-based revenues with private wealth clients were up 4% year-on-year, against what was already a very strong performance last year. We saw particular interest in alternative investments and structured products as investors look for investments with a positive real yield that are resilient in a higher inflationary world.
We saw $1.5 billion of inflows in asset management in the quarter, with continued strong momentum in alternatives, ETFs, SMAs as well. From my meetings with other CEOs, you see that the optimism is obvious. We're seeing corporate clients looking at actively pursuing M&A opportunities, and that is delivering some growth and fueling some growth as well. They wanna do it in order to fast-forward the growth themselves, build skill themselves, and preempt disruption as they see it in their markets. At the same time, private equity firms are flush with capital. Debt is still affordable, and that all adds to the M&A activity that we see. Funding markets are also favorable. We're helping firms take advantage of this as well.
As a result, the advisory and the equity and debt underwriting all had their best quarter on record. The best Q3 on record, I should say. Global banking revenues were up 22% against last year. SPAC-related fees were 43% year-over-year, mainly from deferred fees as mergers closed. In markets, our strategic choices are paying off as well, with $1.4 billion in revenues. Equities just had its best quarter on record as well, Q3 on record as well. We saw particular strength in Asia-Pacific cash equities, and we're pleased with our performance in global electronic FX, both areas of focus for us. Prime brokerage balances reach an all-time high, helped by several hedge fund launches in the year.
In Switzerland, we see a continuing trend among our clients in converting cash savings into investments as well. Net new investment products were CHF 700 million in the quarter, 13% growth annualized, driving record recurring fees there as well. Now, continuing to build up and deliver on our ecosystem for investing is fueling our growth, as shown on the next slide. Just to start with the private markets here, investors continue to turn to private markets as a source for diversification, as you can well understand, but also for yield. We expect this to continue even if markets were to turn a bit more volatile here. It's an asset class where our clients are generally underweight, and therefore an area where we can add value.
During the first nine months of the year, we facilitated $26 billion of investments into the private markets and institutional investors as well. Our integrated SMA offering in the U.S. saw another $5 billion of inflows this quarter, demonstrating what we can achieve by working seamlessly together for our clients. Yet another good example of our ecosystem at work here. Sustainability is not only the right thing to do, it's become a major engine for us for growth. We also know that sustainability has many facets. That's why last quarter, we further expanded our sustainable investment offering. For example, our private wealth clients can now personalize their sustainable investing mandates along six topics depending on their preferences. We also became the exclusive distribution partner for Robeco's Global SDG Engagement Equities Fund.
That's a fund that motivates companies to fulfill UN SDGs, and we target to raise $1.5 billion of investments over the next six months for them. Sustainability focus and impact, and impact investments grew annualized by 63% year-to-date, and reached $207 billion for us. Now, the success of My Way, as you can see here as well, continues as well. My Way is an intuitive application that allows clients and advisors to jointly set up, monitor, and adjust mandates. Continued, you know, the inflow continued also this quarter. Invested assets on the platform more than tripled year-to-date to around $5.1 billion, as you can see, adding to the strong growth we see in mandates globally.
Lastly, the Q3 again highlights the scalability of our platform. Year-to-date, we've more than tripled net new fee-generating assets per advisor, and this scalability is a significant contributor to the strong operating leverage this year. The financial results overview shows you that our business momentum, our focus on fueling growth, our focus on disciplined execution for our clients, delivering the full ecosystem to our clients, basically, you know, the capabilities that we have ourselves, but also the capabilities that third parties provide through us. All of this led to another strong quarter across all of our businesses, but also all of our regions. That resulted in a pre-tax profit of CHF 2.9 billion. You can see an overview of all of this here, across the different dimensions.
Operating income, for example, was at CHF 9.1 billion. That was up 2% from last year when we had a number of one-off gains. In terms of the underlying, this is much higher quality in terms of income than it was before. Operating leverage strong again because the costs were actually down 1% year-over-year. Here you see the mix of how we've reported as well as how we've already kind of executed on some of the savings plans, coming through and more to come next year to also support our investments. And all of this resulted into a cost income ratio below 69%, the lowest in over a decade. Net profit up 9% to the highest level in over a decade as well.
Return on CET1 capital reached 20.8%. Tangible book value per share was up 4% sequentially here as well. As you can see, we continue to perform well above the financial targets that we have given you. While we do that, we continue to be focused on driving growth on the top and the bottom line. Now, before I hand over to Ulrich, because this is where I basically do that, normally, I'd like to give you a bit of an update as to where we are on our strategic refresh.
As I told you in the first earnings call, I would do a couple of things in my first year, which is one is concentrate on the business momentum, and the other side, the other one was to look at the strength of UBS. There were many things that I'm impressed with at UBS. When I took over as CEO a year ago, I was excited to build on this foundation and to make a strong organization even stronger. I saw so much potential beyond what we were delivering on that you know it was all about unlocking the true potential of UBS. As I said, you know, there are these three priorities that I focused on the first year.
The first one is to articulate the purpose that was always there, but was always implicit and never explicit. We made that very explicit now, with reimagining the power of investing and connecting people for a better world, which is really a driver for consistency across what we do, a driver and a support for dilemmas that we run into, also in terms of making strategic choices even. Second, priority for me was, of course, safeguarding people and clients and supporting clients through the pandemic, which I think, you know, hopefully we're completely through, but nobody knows. Introducing a hybrid approach to working going forward as well. Third, just make sure that, you know, our clients are really supported and navigated in these markets that are not always as clear.
That's what we performed on, and you've seen the results. As to the strategic plans, I've also said that I would give you updates during the year when we felt that there was an update to be given. That we would give you a full strategic update towards the end of this year, of this financial year. We will give you a full strategic update on the first of February. Today, I will show you a bit on Switzerland, the Americas, and technology. First things first, which is Switzerland. Switzerland is of course a very important business for us. It's important that we continue to be the number one universal bank as we are.
It's a highly integrative business. It's serving around 1/3 of the households here in Switzerland. It's serving over 90% of large corporates in our home country. We enjoy a leading position in about every segment you can think. The successful execution of our strategy has led to growth, made us more efficient in how we serve our clients, and that helped us to offset some of the impact from the negative rates that we've seen here for almost six years now. In addition to being stable and resilient, Switzerland is also our biggest region in terms of profit, with CHF 2.5 billion in profit before tax during the first nine months of the year, and that's 37% higher than last year.
That makes it a very good base to take the next leap forward. Which brings me to our key priorities for Personal and Corporate Banking on Slide 9. First, we aim to grow. More than that, we aim to grow faster than the market. This means that we will double down on our commitments to be the number one universal bank in Switzerland. We make sure that we're the undisputed number one universal bank in Switzerland, making sure that we become even better for our clients in areas such as private pensions, sustainable finance, and mortgages. That's where we see growth opportunities. It will not come as a surprise that our digital capability will play an important role to make this happen as well.
That's why you see that the second and the third priorities for Switzerland are both technology dependent and technology-focused. With digital at the core, we want to make sure that we remain the digital leader in Switzerland as well. We're focusing on making all of our banking products, our basic banking products, available digitally. That's an absolute must. We'll invest in that, making sure that all of our basic banking products become digitally available and are backed up with remote advice to the extent needed. We are improving the experience for our clients through that as well, and we're doing that. Of course, we're not waiting for a launch of a strategy. We improve as we go, and we have already some handsome results there.
Also make sure that we get some extra efficiency from this as well. These efficiency gains then we can invest in growing above market, as I said. In order to be successful in all of that, we have to further transform, and our transformation objective is about our people, it's about our culture. We have to organize our teams around client needs. We have to become faster. We have to become simpler and more relevant for our clients as well. Under this priority, our Swiss business is leading the way with regards to the Agile@UBS setup, and we're rolling this out through the rest of the organization.
We've also reduced up to two management layers in P&C in the Swiss business, in the P&C part of the Swiss business already in order to become less hierarchical and make sure that people basically use the strength they have in making things work for our clients and speed up decision-making. With these initiatives, we target to grow our revenues with investments funded through our cost savings through the digital at the core. We will have cost savings, and part of those savings we'll invest in those products that I just indicated, growing faster in pension, sustainability, and mortgages.
If we do that well, we will really make a shift away from the cost-income ratio of around 60% to a cost-income ratio of around 55%, by 2025. That's what the plan is supposed to do, and I'm confident in the team to deliver upon that. Here, even with a leading position, we do think there is further improvement potential. We do think there is further growth potential, and we want to maintain our number one position in our home market. Be the better bank for our customers.
Turning to another region of importance, as I said, you know, in March, in terms of geographic focus, there are two areas that are of utmost importance for us because that's where the wealth pool is growing faster than anywhere else, and that's also where the wealth pool is larger than anywhere else. One of those regions is the Americas. It's important for us to be active in the Americas. It is important part of our investment ecosystem. We have a focus in client-centric strategy that plays to our strengths as a global bank here, that differentiates us also from the other players in the marketplace. We've consistently invested in our business and our people for the benefit of our clients.
We anticipated trends, we anticipated changes here, and you see that is paying off. We're well regarded by our clients for our thought leadership, for our solutions that help them achieve their liquidity, their longevity, and legacy goals as well. As a result, we're growing our ecosystem. Net new fee-generating assets were CHF 12 billion. We're up CHF 12 billion. That's 7% annualized in the first nine months of the year. Net new loans were equally impressive at an annualized 28% year-to-date just in this region. Our partnership with Banco do Brasil has added to our growth as well. Year-to-date, we executed 127 global banking deals through this JV, which is developing to a valuable feeder to our ecosystem. Profits in the region grew by 19% year-on-year to CHF 2.1 billion.
Prospects for the markets are also very attractive. The U.S., as I said, is the largest wealth pool globally, and it's also expected to grow faster than any other mature market. It's also a dynamic market. In the next 10 years, $70 trillion in assets are forecasted to transfer to the next generation. A lot to gain here if you are well-positioned to it and to advise your clients. That is what we are, and that is what we want to be with some additional actions. That gets us to the strategic priorities in the Americas on Slide 11.
In order to capture these trends and grow our franchise in the Americas, first of all, we still see ample opportunity in our core business, building on the momentum that we currently have with our clients. What we think we can do even better is to deliver and grow our ecosystem across all of our businesses, the investment banking capabilities, the asset management capabilities to support our wealth clients. To the extent we don't have capabilities in-house, as I said, you know, our ecosystem is an open ecosystem. We will look for capabilities that third parties can help us providing as well in order to truly deliver to our clients what they need and to give them to generate the best client outcomes on this one. We have the scale for that, and we will build on that scale.
We have the content for that, we have the solution for that, and through that, we are confident that we can continue to drive growth in the coming years. In order to do that, we will also continue to enhance our platforms from which our financial advisors work in wealth management. As I said, that's a running program, and that is progressing. But in order to support our financial advisors, our clients even more so, we have a second priority, and the second priority is about being a more holistic bank for our clients. We're planning an upgrade to our banking capabilities and to deliver a full-service banking offering. As you know, many of our clients there are business owners, so the offering will primarily cater for them in terms of lending and cash management, as well.
We have a very well-functioning bank there with high net promoter scores for our clients, and we think we can build on to the experience that we have there and just, you know, give more services to our clients, and with that, also be even more relevant to our clients through their whole lifecycle. Of course, these capabilities will be digitally led. They will be based on cutting-edge technology. As I said, you know, they will be aligned with our client promise, which is these services need to be personalized, they have to be relevant, on time, and seamless. Now, our third priority for the Americas, and specifically for the U.S., is the rollout of a digital-led service proposition, and that's a scalable investment advice model for affluent clients.
We are a trusted brand in the U.S., and we have premium content. We see the opportunity to deliver our expertise and our content to a much broader set of clients. We will start with our workplace wealth clients and our platform there. We already service two million stock and retirement plan participants there. We're planning a differentiating offering, combining a winning digital experience with trusted human advice on a remote basis.
I think that's another example of how we can actually go back to our DNA of content and knowledge on one side, of advice on the other side, but delivering it in a digital scalable way to clients we already have that already think UBS, that have business with UBS, but want to do more of their wealth management with UBS, and that's an affluent proposition. We're looking at increasing the share of wallet with our clients and bringing the ecosystem to our clients. We're looking at further improving the growth with our clients and profitability with our clients, delivering more banking products.
We actually think we can grow in the market by addressing a further client segment, the affluent client segment, by building a digitally led but remote advice proposition to the new clients in the market. All of that brings us to where we are on technology. Also here and also in the previous plans, I mean, we're updating you on these plans, but it doesn't mean that we have not already kind of made steps in this direction. Some of the results that you see today are really because of some of the steps that we've made. But specifically also in technology, the execution of our strategy to level up technology, to make technology a differentiator that's truly in full swing.
There is no plan developed at this moment in time in UBS, where technology is not taken into account from the first instance, which basically means how do we deal with our clients? How do we service our clients? It is there where technology can make the difference. It is there where technology can bring the personalization. It's there where technology can bring the relevance of the content, and making sure that when we have a proposition, it will be there on time. That way of thinking is prominent now in every plan development, and it's important as well. For that, you need good technology itself. You need an engineering culture as well, and you need to manage technology in a very frequent way. And that is what these five pillars try to tell you.
If you wanna be successful with technology and you wanna deliver technology, you have to work agile front to back. We have launched Agile at UBS and are in the process currently of transitioning some 9,000 colleagues into this cross-functional setup. At this moment, 3,000 of them are already working in agile ways today. We are piloting it in different areas as we speak. The experience on the back of these pilots, we will then use to roll it out even further. In the end, we do expect that towards the end of next year, some 25,000 people will actually work in Agile at UBS.
In order to support that, because if you work agile, you deliver incremental improvements in technology in two-week sprints, as you know, but you can't do that in the back of annual planning, so you do quarterly planning. We've made our planning cycles shorter already. We've made them faster, we've made them more frequent. We have started to our quarterly business reviews, looking three months back as to where some of these projects have delivered, where some of these projects are going in the next six months, what we need to change, what we need to optimize, what we need to prioritize, but always with the strategy in mind, not tactically, strategy in mind. Zoom out, strategy, zoom in three months back, six months forward. That's the way we run it.
There is more that we can do here, and that is all around data and analytics. We feel they are critical to meeting our client promise in these days. That's why, and maybe you've picked up on it or not, but recently we've implemented a central hub to drive the AI, data, and analytics approach and strategy in the group. In the same vein, we rolled out a new AI-based recommendation engine for clients, advisors in Switzerland already. Lastly, on this chapter is, you know, to make our technology estate even more flexible and less expensive to maintain, we're migrating away from legacy technology. We've already decommissioned hundreds of applications. We're moving 1,000 applications to the cloud just this year.
As you can see, we're putting the foundations in place to turn technology into a differentiator here at UBS as well. Now, where are we on our journey here? I think I'm proud to see what's happening here at UBS. The momentum that we have been able to build over the last couple of quarters, at the same time defining our future, without, you know, taking our eyes off the ball. Here you see some of these results. Clients are rewarding us for what we do for them, and that's why we get their business. But that business also delivers attractive returns to our shareholders. You see that on this slide. Our financial performance this year, shown to you in more historical context.
The last nine months we had the highest operating income in over a decade, the highest pre- and post-tax profit in over a decade, the lowest cost income ratio in over a decade, and a nearly 20% return on CET1 capital. I think this is exactly where I have to hand over to Kirt.
Thank you, Ralph. Good morning, everyone. At CHF 2.3 billion, we delivered the highest net quarterly profit since 2007. This translates into a 20.8% return on CET1 capital and a 17.2% return on tangible equity, and drove CHF 2.8 billion of CET1 capital generation. PBT of CHF 2.9 billion was up 11%, driven by two percentage points of operating leverage. The cost-to-income ratio improved two percentage points to 68.7%. As a reminder, our Q3 last year included a CHF 631 million gain from the partial sale of Fondcenter. Excluding this gain, all business divisions and regions contributed to PBT growth and efficiency improvements. Our 3Q results included net credit loss releases of CHF 14 million, of which CHF 11 million in Stage 1 and Stage 2.
While some macro factors have improved slightly, we once again decided to apply a management overlay given continued macroeconomic uncertainty. As of September, the total overlay was $219 million, a $36 million increase from 2Q. Year-to-date, we generated $6.1 billion in CET1 capital, including about $500 million from the amortization of deferred tax assets in the U.S. Given the ongoing tax discussions in Washington, we wanted to update our sensitivity guidance in relation to our tax loss DTAs. Assuming no other changes, we would expect that the value of our U.S. DTAs would increase by approximately $300 million for each percentage point increase in the U.S. federal corporate income tax rate. This would be effective in the quarter in which the tax law is enacted. Turning to expenses.
Year-to-date, while growing operating income, we were able to maintain operating expenses, excluding variable and FA compensation, currency effects, restructuring, and litigation broadly stable. This helped us deliver a nine-month cost-to-income ratio of 71.4%, our lowest since 2006. As a reminder, for the Q4, we expect an increase in cost due to seasonal effects as we have seen in prior years. Moving to our businesses. GWM PBT was up 43% to CHF 1.5 billion, its best pre-tax profit on record. All regions contributed with double-digit profit growth, another record quarter in the Americas and the highest 3Q profit in APAC.
Operating income growth outpaced expenses by 9 percentage points, with improvements across all revenue lines and a gain of CHF 100 million from the sale of our domestic business in Austria, driving the cost-to-income ratio down 6 percentage points to below 70%. This was our 9th consecutive quarter with year-on-year positive operating leverage, and our cost-to-income ratio in the Americas fell below 80% for the first time. Net new lending was CHF 3 billion, mainly on continued strong momentum in the Americas. This was partly offset by some deleveraging in APAC as client sentiment became more cautious following recent policy developments in China. Year-to-date, GWM generated net new loans of CHF 21 billion or 13% annualized growth, almost entirely from Lombard and mortgages. Our net new fee-generating assets were CHF 19 billion, an annualized growth rate of 5%.
Our annualized net new fee-generating asset growth rate for the first nine months of this year is 8%. Moving to income. Recurring fees grew 23% to a new high, driven by market performance and continued strong net new fee-generating assets. Net interest income was up 8% sequentially on higher deposit volumes and fees, along with continued increases in our lending NII. For the Q4, absent any interest rate headwinds, we expect NII to remain broadly flat compared with the Q3. Transaction-based income rose 4%, driven by higher client engagement in alternatives, life insurance, and structured products. While client sentiment remained more muted in APAC due to uncertainties around China, our continued focus on book transformation and positive flows over the past quarters allowed the region to deliver its best 3Q PBT on record, as I just mentioned.
Our interactions with clients in our world-class investment solutions, together with a constructive market backdrop, drove net investments of CHF 98 billion in fee-generating asset products over the last four quarters. Net new fee-generating asset growth was above 6% in all regions, with 15% growth in Asia as we are seeing increasing interest by clients to diversify globally and move into endowment-style investing, private equity and private credit, as well as hedge funds. We saw very strong momentum in P&C, driving our PBT up 44% to CHF 439 million. Operating income increased 18% with recurring net interest and transaction income all up year-on-year. Credit loss releases in the quarter were CHF 6 million, a CHF 91 million year-on-year improvement. Cost to income ratio in the quarter was 57%.
Transaction-based income increased 7% on higher revenues from credit card and foreign exchange transactions, reflecting an increase in travel and leisure spending by clients as pandemic restrictions continue to ease. Recurring net fee income was up 18% to an all-time high, primarily on higher custody, mandate, and fund fees. Continued momentum in recurring fees was helped by CHF 700 million of net new investment product inflows as we engage with clients to provide alternatives to cash deposits. Year-to-date, net new investment product flows were CHF 2.4 billion. Net interest income increased by 5% year-on-year as a result of various deposit optimization measures, which led to lower liquidity and funding costs, and was further helped by CHF 2.1 billion of net new loans in personal banking year-to-date.
For asset management, I will reference year-on-year comparisons, excluding the $571 million gain on sale in 3Q 2020. PBT was up 27%, the 10th consecutive quarter of year-on-year PBT growth. Operating leverage was positive 11%, driving the cost-to-income ratio down seven percentage points to 64%. Excluding a $28 million loss related to an associate, net management fees were up 16% on market performance and nearly $150 million net new run rate fees over the last twelve months. Performance fees decreased to a more normalized level of $33 million. For the next quarter, we would not expect performance fees to repeat the exceptional result we saw in 4Q last year.
After six quarters of exceptional net new money growth, where we averaged CHF 20 billion, excluding money markets, net inflows were muted in 3Q at CHF 1 billion. The IB delivered its best PBT since 1Q 2013, up 32% year-on-year to CHF 837 million. The return on attributed equity was 26%. Since the beginning of 2020, our investment bank has been delivering outstanding results supported by constructive markets and while remaining disciplined in deploying balance sheet. Revenues have been above CHF 2 billion every single quarter with average return on attributed equity of 20%. We deliver this performance while absorbing regulatory RWA increases and remaining within our up to 1/3 of group RWA and LRD. This quarter, global banking revenues were 22%, with the highest advisory ECM and DCM 3Q revenue since 2013.
Advisory was up 78%, benefiting from a higher number of sizable M&A deals. Equity capital markets increased by 32%, driven by higher levels of ECM issuance led by IPOs. Debt capital markets rose 7% on higher levels of leverage loan and bond issuance. Excluding a CHF 215 million gain from the sale of intellectual property rights associated with an index family in 3Q 2020, global markets revenue increased by 5%, driven by equity derivatives, cash equities, and prime brokerage. These were partly offset by lower income from rates, foreign exchange, and credit products against a strong year-on-year comparative. Excluding CHF 229 million accelerated expenses from the modification of certain outstanding deferred compensation awards in 3Q 2020, operating expenses were up 3%, mainly on currency effects. Cost to income ratio was 67%.
During the quarter, we generated CHF 2.8 billion in CET1 capital and increased our CET1 ratio to 14.9% and our CET1 leverage ratio to 4.31%. RWA increased by CHF 9 billion sequentially, mostly driven by regulatory add-ons, which we detail on Page 42 of our Q3 report. As guided, we completed CHF 600 million of buybacks in 3Q, increasing our year-to-date repurchases to CHF 2 billion. In the Q4, we expect to repurchase up to CHF 600 million. With that, we can open up for questions.
We will now begin the question-and-answer session for analysts and investors. Participants are requested to use only hand raised while asking a question. Anyone who has a question may press star and one at this time. The first question is from Flora Bocahut from Jefferies. Please go ahead.
Yes, good morning. I have two questions, please. The first one is regarding the NII sensitivity. I see in your report that you mentioned the interest rate sensitivity is $1.6 billion of additional NII for a 100 basis point parallel move up in the yield curve. Can you maybe quantify how much of that would be specifically U.S.-driven, and also what would be the time frame for that $1.6 billion, whether it's over 12 months or longer? Basically, any comment you can make, you know, to help us understand the drivers on the NII sensitivity would be helpful. The second question is on the level of profitability, which is obviously very much above your target and has been for a few quarters now.
You know, the return on common equity Q1 was 17% last year. It's almost 20% in the first nine months. This is on the level of capital that has piled up. Part of this performance is cyclical, but when you look at the drivers of this higher profitability, I just wanted to ask you which ones do you think are sustainable and set to continue? Thank you.
Yeah. Thank you, Flora. Just in terms of the net interest income generation, first of all, the $1.6 billion is for a 12-month period. Clearly, just given the concentration of our deposits in U.S. dollars, overall, there would be a fair portion of that in the U.S., but we don't provide details exactly on which market and which currencies that would show up in. In terms of our level of profitability overall, I think clearly as you look at the overall shape of our operating income and our performance, we are very levered in equity markets. To the extent that equity markets actually hold up, that's very constructive for our profit levels.
To the extent that we see good volatility in equity markets, it's very helpful to our markets revenue and our transaction revenues. Now clearly, going forward, we can't control market factors. What we can control is the overall flow levels that we generate in the business and also the broader activity around the ecosystem that we continue to look to build out. There, we're confident that we're gonna continue to see very good flows going forward. We're also gonna continue to see enhancements across our ecosystem-related investments that will generate collaborative and other revenues and help scale the business.
Yeah, maybe so on that one, clearly it's a mix of capital discipline. You know, it's a capital-light model that we will continue to work on. It's the scalability and the cost discipline on the other side. Income is one that clearly you know through client advice and market support, et cetera, will always be partially ours and partially not ours. What we can control is capital discipline and cost and scale discipline.
Thank you.
The next question is from Nicolas Payen from Kepler Cheuvreux. Please go ahead.
Yes. Good morning. I have two questions, please. The first one is on technology, where you speak about transitioning to agile with more than you target 9,000 people transition to agile. I wanted to know what does it mean for UBS in terms of operational performance and perhaps even in terms of financial performance? The second question is on costs. Your target is to be between 75%-78%, and you achieved 69% cost-income ratio in this quarter. I wanted to know what kind of performance do you think is sustainable going forward? Thank you.
Thank you, Nicolas. On the first one, on the Agile at UBS, what we're introducing here is front to back agile. This is not agile on the technology side, and then you have a completely different rhythm in the rest of the organization. No, this is front to back agile, which basically means that people who know the customer interface, the people who know the products, the processes, people who are actually into engineering, you basically put them into multidisciplinary teams, and you run them in two-week sprints towards an outcome. If the outcome is satisfactory, you go for another sprint, and if not, you either kind of fix it or at a certain moment, you may even stop the project, right? That's one.
In order to make this work, you take out layers in order to be less hierarchical and make sure that people who are there, that they actually become also contributors rather than just hierarchical managers. That's a big change there. With that, what you're trying to improve and what my experience is that you improve is time to market, fail fast and much higher productivity for the same IT investment that you do.
You'll see that in the plans that we have, we more or less work with the same technology budget, but we feel we can get much more out of this technology budget in terms of outcome by working agile and by improving the engineering culture and the quality further on of the engineers as well. The productivity gains and the time to market, that will all lead either to doing more for the same buck or for better commercial success, and that's what you will see. That gets me to your second question, which is your cost-income question. We're very happy that we have kind of broken through the 70% ceiling here and or floor, I guess it is from where we come.
We're happy that we have accomplished that this quarter. To the extent we feel there is a moment to update the financial KPIs around where we think we can run UBS structurally, we will come back with new targets on February the first when we update the market around new targets.
Thank you very much.
The next question is from Kian Abouhossein from JP Morgan. Please go ahead.
Yeah. Thanks for taking my questions. First question is regarding Asia. If you can talk a bit more about the lending net loan reduction and net fee generating asset reduction and also what you're seeing going forward, should we think about a lower net new number in terms of growth considering the situation in China? What is your outlook for 2022, so to say, around net new money in that region? The second question is regarding your valuation, really. If I look at your valuation against Morgan Stanley, which has a similar mix, clearly more U.S. focused, you traded a 30% discount and at times even 40% discount. I'm just trying to understand how you think about your valuation against some of the peers which have a similar mix. How do you explain, in your own view, that material discount?
Kian, the second question is a very difficult one to answer, right? This is the market, and maybe you should actually answer that question for us. The only thing we can do is, and what you've heard today and what you will hear more of in three months' time is that we know what the power of UBS is, and we know how to orchestrate the ecosystem of capabilities that we have in-house or that we can orchestrate with third-party providers in order to service our clients best. That's what we do. That's what we work on a daily basis.
We feel that potential of UBS working across the more divisional structures, if you will, but be much more client-focused, that is what can bring out the best of UBS and the potential of UBS. You will see many of our plans geared towards that. That is how I am confident that our valuation will further improve. Any comparison to any peer who has a completely different constellation of income and strongholds and home markets is a difficult one to make. We do what we think is best to bring the best of UBS to our clients. With that, we do think there is quite some potential here. That's my point zero. On Asia.
Clearly, you know, on the back of a bit more of the uncertainty towards the end of the quarter, we already saw that coming, and we have asked some clients to deleverage. With deleveraging also comes the sale of assets, clearly, and repayment of facilities. That's what you see coming through on NNL and NNFGA. We actually believe that, you know, maybe there's some uncertainty to come, and that may impact maybe a bit. I think the way we look at Asia is much more strategic. We've been there for the last 60 years. We know that the wealth pool is large, that it will grow faster than anywhere else. Therefore, we are committed to the region.
We will invest in the region. We are investing in the region. We are hiring in the region, and therefore we think that will bring the numbers back up. Maybe, Kirt, if you have anything to add.
No, I think you captured it. I would just note that we've seen a number of other cycles, and I would just highlight the fact that I think Asia always recovers faster than expectations. I think we'll continue to see that going forward.
Thank you.
The next question is from Andrew Coombs from Citi. Please go ahead.
Thank you. Perhaps one follow-up on Asia first. In your commentary on the investment bank, you actually called out APAC cash equities as being one of the strong points, and yet in the private banking commentary, you talked about more muted client sentiment in Asia Pacific. I just wanted to check if you're seeing similar trends in terms of transaction activity in Asia between the institutional client base and the private banking client base, if they are beginning to diverge or whether your commentary around more muted client sentiment was more to do with the deleveraging point rather than transaction activity. That would be my first question. The second question, just on the Wealth Management Americas business. It's interesting that you obviously chose to put out a few slides specifically on that business.
When you last gave an Investor Day, I was intrigued that with Asia, with LATAM, with Europe and Switzerland, there were PBT growth targets for those regions, whereas the U.S., it was more about improving the PBT margin. I think the aim was to get the margin up to 25%. Is that still the case for the U.S. business? Is it much more about enhancing the margin rather than an absolute profit growth target?
Yeah, just in terms of your first question, I guess you're right in characterizing the fact that, during the quarter, actually, with some of the volatility, we saw quite a bit of institutional-driven cash equities activity. We're particularly well-positioned to capture the inflows and the outflows, kind of the cross-border, sort of the northbound and within China and across China. In fact, a lot of those volumes came out of our U.S. institutional clients that were looking to trade around some of the volatility during the quarter. Conversely, the uncertainty regarding and in reaction to some of the policy changes was much more concentrated in our wealth management client base, and that did show up in some deleveraging, part of which we initiated as well as a consequence of that deleveraging some outflows.
In terms of Wealth Management Americas overall, we're targeting growth. That's the primary focus. You see that in the investments, in the initiatives that Ralph referenced. We believe that being the largest wealth management market in the world, and given our position globally and also our emphasis in our investments in our ecosystem, we do think that there is additional scale opportunity for us. We talked about that with some of our investments. If you look at what we've done traditionally, we've always been targeting to continue to grow our business in the U.S. If you just reflect on where we are, where we were in 2017, really, where we had a run rate in our wealth management business of about $1 billion a year, we now have doubled that.
If you look at our quarterly profit for the Q3, we're up over 43%, and we're well above CHF 500 million. We're now on a run rate of over CHF 1 billion. We're seeing growth in scale in our wealth management business, and we're also seeing growth in scale in our asset management business, partly the contribution in the ecosystem. In fact, for example, with the SMA initiative that we launched later last year, along with some of the collaboration revenue we're seeing in the IB, all gives us good confidence that we're gonna continue to see good growth momentum there and at the same time, continued improvement in margin.
The next question is from Jeremy Sigee from Exane. Please go ahead.
Good morning. Thank you. One more follow-up on Asia, please. You've talked a bit already about the net fee generating asset outflow and the loan reduction, which were relatively, you know, CHF 2 billion, CHF 3 billion kind of size. But there's a much bigger reduction in the total invested assets that came down by about CHF 37 billion. So I just wondered if you could talk about what those assets were that left the bank and what the drivers of that were. That's my first question. The second question, still on Wealth Management. The outlook comments warn about seasonality and slowdown and the abnormal activity levels in 3Q. I just wondered whether you have in mind just the transaction revenue line or whether that also may affect the fee, the recurring fee line as you look about the change from 3Q to 4Q. Thank you.
In terms of Asia, the other, of course, impact on our overall invested assets was market performance. You did see market performance in the Asian indexes move down during the Q3. In terms of the question on asset management, I you know, I guess I didn't completely understand it, but just firstly note that if you look at the last 12 months, we've had over CHF 70 billion of inflows. I highlighted in my speech the fact that we're seeing continued very good net new run rate momentum. We feel very comfortable that the trajectory of our management fees is gonna be positive going forward as a consequence of that.
In terms of performance fees, and also I highlighted in my speech the fact that performance fees at CHF 33 million are actually at a more normalized level. What we saw last year in the Q3, and particularly in the Q4, is we saw outsized performance fee levels, and that was predominantly generated out of our O'Connor hedge fund business. I mentioned that we expect to see more normal performance fee levels in the Q4.
Maybe to add, Jeremy, on the asset management side, this is a bit of a chunky business, right? If you lose a client, you may just lose a couple of billion already there on the institutional side. But you see strong momentum in the wealth management channels, in the wholesale channels. You see strong momentum in SI sustainability and impact. The Concord initiative in the U.S., strong momentum as well around alternatives. There's quite a lot of inflow momentum in the asset management business.
Thank you.
The next question is from Magdalena Stoklosa from Morgan Stanley. Please go ahead.
Thanks. Thanks very much. I've got two. My first one is about Americas, because you've given us a very good steering where you're going strategically. You know, with the strategy of growth, how do you think your channels for inflows will evolve, particularly in the U.S. market? Because of course, the business model is very dependent on financial advisors. How do you see it going forward? You've mentioned workplace channels that you're developing. You've also, of course, mentioned the affluent-oriented mobile channels, and of course, the SMAs via asset management. When you take it all into account, how do you see that future growth channel mix evolve from here? That's question number one.
Number two really is on the capital, because of course, you've got a very strong CET1. That 14.9% implies a very significant excess. How do you think about kind of moving parts here into next year? You know, how do you think about your capital allocation between, of course, organic growth, but also the level of payout? Thank you.
Thank you, Magda. So specifically on the U.S., the financial advisors channel is a very important channel for us, right? I mean, that's we grew up with that channel. That is our channel. That's our franchise. You will see that, you see it in the first two initiatives and priorities that we have for the U.S. business are truly to support that channel, to support our financial advisors, to be more effective with our clients, to support them in getting the right advice, the right product in front of them, to support them across the lifecycle, be early on if they wanna sell their business, involved with the banking services.
The first element of the improvement that we can see is how do we bring more of the ecosystem, asset management, investment banking products, to support the financial advisors? How do we make sure that the platform from which they work is state-of-the-art so that they basically can focus on client advice and do what they're really good at, and what they're motivated to do. That's a truly important channel for us. Even in the second priority, around, you know, building the banking services, like main banking services, we are supporting the financial advisors already through, mortgages from our bank. They do a really good job there.
They introduce mortgages, which is important for them to build their client relationship on as well in order to do their own wealth advice. We wanna broaden the banking products to support them in their dialogue with our clients, also in the entrepreneur side and the cash management side. Even more so to support them in that and build a continuous dialogue and a strong relationship with our clients there. Then the third one is one which is already a different channel, right?
As you said, it's a channel through which we do retirement management and as well as stock management, equity plan management, which is more geared towards a more affluent population where we already have two million clients there. We feel that if you develop a digital proposition to manage their wealth beyond what they already do with us or after they basically cash in on, for example, some of these stock plans with their company, that we can actually support them to continue to invest wisely through such a digital offering with remote advice.
Clearly, you know, if there is an opportunity there that there is also clients outside of our current clients through the workplace services that are attracted to this opportunity, we will also look at that. It is much more an affluent proposition than the financial advisors are after. There's no real conflict there. It's really a different segment of the market.
Maybe Magdalena, just in terms of your question on capital, certainly we have the luxury of actually sitting on top of a significant buffer versus our o verall 13% guidance, which holds. Our intent still is to return any excess over 13%. Now on the one hand, that does give us strategic flexibility, but clearly it also gives us some good potential to return quite a bit of additional capital to our shareholders. Also we continue to have the guidance that we are going to balance those returns in favor of buybacks. Now, we'll have an update overall on our capital return policy in February, but I think you can expect us to continue to have a very important emphasis overall on share repurchases as we get into next year.
Great. Thank you very much.
The next question is from Stefan Stalmann from Autonomous Research. Please go ahead.
Yes, good afternoon. Thanks for taking my questions. I would like to start with Broadridge. You have not mentioned this project on your Americas slide, and if I remembered well, this was now the crucial period of this project going live. Could you maybe provide an update on how this is going and also flag any particular cost increases that may or may not happen during this implementation and transition period? And the second question. A relatively broad question on greenwashing. That's I guess an evolving discussion point in the fund management industry. I was curious if there's any concern for you, first in your own production and asset management, but also in wealth management, given that you're probably selling a fair bit of third-party funds with, you know, ESG credentials to your clients. Thank you very much.
Yeah. Thank you, Stefan. On your first question, I actually think I did mention it in building on scale, which is, I refer to the platform through which we support our financial advisors, which is basically what we call VMAP, which is basically developed in collaboration with Broadridge. That is continuing. It's a project that had its challenges. As you may know in the past, we have replanned that project. We are releasing in batches. At this moment, FA is working with it, and with their feedback, we further improve things. So that will be released over time in separate releases.
That is certainly a project that we are committed to finishing, and what needs to be finished as well, for two reasons. First, we need this platform to support our financial advisors to do their work efficiently, and improve their productivity as well. There's another side to this as well. We feel that this could be, or this will be an industry standard for many other parties to work from as well as a core platform for financial advisors. Therefore, it could be also licensed to other parties to use, which will then further decrease the cost to us. It's very much on one side a productivity play, and on the other side, a skill play with third parties bolting on to that as well.
Are you, Kirt?
Yeah, I think, of course, as you noted, there's an awful lot of focus in general on sustainability, and obviously with that comes greater scrutiny. We certainly have seen that. We haven't seen the last of that. We would note that, we feel comfortable with what we report related to ESG and sustainability. I think you've seen in the slide presentation our sustainability focused assets overall, which sit across our three businesses, so asset management, wealth management, as well as P&C. We also have reported this in our sustainability annual report, and we're very comfortable with the data that sits behind this. I think one of the challenges and complexities that we all have in the banking industry is the fact that we don't have defined standards.
With a lack of defined standards, you could always point out something that's reported that might be inconsistent with some other standard that exists in another jurisdiction. Clearly, we're very hopeful that we start to get some convergence around standards and what is expected of the banking industry. Our objective overall as a leader in sustainability is to continue to reflect our best practices and all the reporting that we provide to the market, and that is something that we're very focused on ensuring.
Great. Thank you very much for that.
The next question is from Adam Terelak from Mediobanca. Please go ahead.
Morning. Thank you for the questions. I've got two, one on GWM flows and the other on capital into next year. On the flows, obviously, net new fee-generating assets is still very strong. I just wanted to get a bit more color of kind of the structure of those flows behind the scenes. Are these into advisory discretionary mandates or is it third-party funds? And how that looks in terms of the margin on the business coming in. Because clearly the fee margin on being reported each quarter on fee-generating assets has been very, very stable. So just some commentary on that and the outlook would be great. And then secondly, on capital, in terms of payout for next year, I think an important input this year has clearly been your regulatory inflation.
Your numbers this quarter and next have kind of gone up a little bit on that front. Could you just give us a color for 2022 in terms of any reg inflation to come through? Then on the prime $2 billion you're highlighting in the report, what's the basis for that? Is that to do with the losses incurred on Archegos? Is that to do with more technical detail on the exposure, just how that's been calculated in terms of the add-on with FINMA? That would be great. Thank you.
Thank you, Adam. Just in terms of the overall flows and mix that go into net fee generating assets, I think, as you know, we've defined that principally as mandates. The bulk of the total net positive flows are comprised of mandates. They're really a full range of mandates that go from fully discretionary managed to actually an overall under contract mandate product where our more professional clients actually have full discretion, and the overall mix of revenue is much more oriented towards transaction revenue. In terms of margin, we're not necessarily just focused on margin. We're focused much more on overall revenue and operating income growth. Just, we're very comfortable that this is a good measure that references quality of flows.
We are seeing, of course, we're driving overall top line revenue. You see that in terms of the 23% net recurring fee income growth versus our overall invested assets are only growing 16%. In addition to mandates, there is some mix of funds, but that's a smaller proportion of the total inflows and mandates. Also alternatives are included as well within that overall metric. In terms of your capital question, I think you've seen we highlighted the fact that we did see an increase due to some regulatory add-ons, and that's not a new theme. I think it's an unfortunate part of banking that we do get regulatory add-ons.
We mentioned the fact that we expect another CHF 2 billion related to prime brokerage, combined with the around CHF 1.5 billion. As I mentioned, you do see that detail on Page 42 of our report. I think you can consider that of model and technical nature. It's not due at all to any losses or any other factors related to our prime brokerage business. I think you heard me note that prime brokerage was an important contributor to our year-on-year performance overall in our investment bank. We haven't provided yet an update on what we expect in terms of regulatory add-ons, and that is something that we would intend to highlight during our February update.
Needless to add, I think with the substantial surpluses that you see we have in capital, we're still very, very comfortable with the flexibility we have and our ability to continue to return capital very, very attractively to our shareholders.
Okay. Is it fair to say the market risk update was one of the bigger items to come through then?
That's right. The market risk update was another one, and that was a larger one. It's part of discussions that we've been having with FINMA since 2019, and that's been fully absorbed.
Right. Thank you.
The next question is from Andrew Lim, from Société Générale. Please go ahead.
Hi, good morning. Thanks for taking my questions. So the first one is on Personal and Corporate Banking. You know, it's often seen as a sleepy division with very little growth. For the past two quarters now, you've had some good growth here, and across the three main revenue lines. You've talked about deposit optimization as one strategy, but I was just wondering if you're seeing something broader driving the growth there in transaction-based income, NII, and recurring fee income that we should be taking note of going forward. Secondly, you talked a lot about your digital strategy, including developing a full-scale digital bank in the U.S. I was wondering how crypto sits within that.
Whether you're merely just going to offer ETF products to your customers or whether you're thinking about offering trading custody or even lending based on crypto or whether it's something that you feel is valueless within the grand scheme of things? Thank you.
Yeah. Let's start with the second question as to crypto. I still feel that the market, not many players understand the true value of crypto, what determines the value of crypto, what the users of crypto. Therefore, I think it is not something that one can regard as an investment, but it's much more, it's more about speculation. Now, we don't advise on speculation. That's what it is. That's why we don't go there. If clients want to do it, they can do it, but it's not something that we will actively offer ourselves.
On your P&C business, now you've seen that the P&C business is indeed making a good comeback here on all dimensions of income. It's got to do with, you know, the normal economic activity that you see coming up again. You see in the Q1 of the year, you saw companies still repaying under their COVID facilities, and now they are drawing down on their new facilities in order to support the growth they see. They need working capital. They're investing. You see more activities there. You see the mortgage market continuing to develop interestingly as well, and therefore you see the net new loans also there increasing as well. That's what impacts NII from a growth perspective.
You know that we introduced a deposit pricing scheme where we have engaged with customers with deposits over CHF 250,000 as to charging them on their deposits. We have gone through this on a client-by-client basis as to how we better price either for deposits or for alternatives. Therefore, you've seen the NII also improving from that perspective. With the opening up of the economies, you see more spending. You see more international spending. Therefore, you see our credit card revenues going up as well. It's really the. It's almost the. I think it's a picture you can expect from all domestic banks in the world.
You know, economies opening up, businesses investing, businesses growing, needing working capital, mortgage markets being interesting, not only because the low rates, but also because, you know, clients dare to move again. You see much more spending, and therefore you see much more transactional income, you see much more credit card income, et cetera, et cetera, et cetera. Clearly we were ready to benefit from that. Our team did a really good job being ready for all of this to happen. At the same time, we have to make sure that we do an even better job at servicing our clients digitally, and that's why we are making the plans and implementing the plans as I said.
That's great. Thank you very much.
The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.
Yes. Hi, good morning. Two questions, please. One on capital and the second one on GWM lending. First, a follow-up there. For your new capital targets or how do you think about Basel IV or finalization of Basel III inflation going forward, should that change to 13% or target or and everything in excess is, so to say, up for payout? Also, how do you think about a potential M&A buffer in your capital ratio? Some banks and financial institutions have this incorporated, in particular considering you are supposedly looking at some asset management transactions. Secondly, you mentioned GWM loan growth was in particular driven by mortgages and Lombard loan. I was wondering whether we should expect, so to say, a bit more capitalized loan growth going forward in that division or an increasing focus also on structured lending going forward. Thank you.
In terms of capital, to reiterate again, our intention is to return all excess capital above 13%. Naturally, we welcome the strategic flexibility. In terms of your point, would we ever retain a capital buffer for acquisitions? It's not something we certainly would believe in. We wouldn't wanna retain capital that is actually not being put to work on behalf of our shareholders or being provided to our shareholders for them to put the capital to work. We would also note that we have built in flexibility because of all the capital that we generate each quarter. I mean, you saw that we generated CHF 6 billion year-to-date. In the quarter itself, we generated CHF 2.8 billion. That alone gives us flexibility.
If we see some strategic opportunity, we know that we're likely to generate pretty significant capital to be able to help us address that opportunity. Now in terms of GWM and our lending focus, you are correct. The majority of the loans that you've seen year-to-date, I guess CHF 231 billion is our total lending portfolio in GWM as of the end of the quarter. CHF 147 billion of that or almost 65% is Lombard, and then another 30% is mortgages. That's indeed where we've been seeing the preponderance of growth. Now, at the moment, only about 5% of our total lending is what we would consider to be structured, so more single stock financing subscriptions of that nature.
Now, our intention going forward is that you would expect that we're gonna continue to generate very good flows across Lombard and mortgage, but we will continue to look on growing our structured lending. We do see client opportunities, particularly within our entrepreneurs, where there is demand for that type of lending. That is a part of the market that we wanna continue to address. Also, you heard Ralph talk about launching the broader banking platform in the U.S. That's also gonna create other sources of lending flows in other areas related to bank lending. That's another lending or loan growth opportunity for us going forward.
Very clear. Thank you.
The next question is from Anke Reingen from RBC Capital Markets. Please go ahead.
Yeah. Thank you very much for taking my question. The first one is just on cost. You made a comment that you said it's already helped the performance year-to-date. It's already helped by your cost program. I just want to confirm it's a relatively small benefit out of the one billion targets you previously mentioned. I just wonder if there is any update on potential restructuring charges, you know, Q4, I guess not, or early next year. Secondly, you talk a lot about working across the divisions within UBS, and you obviously already have some benefits with asset management. I just think in terms of the whole potential, where do you think you currently stand, and how much is like, is this, like, incentivize the divisions to work together, and how much more is there to go for? Thank you very much.
Yeah. Thank you, Anke. The cost plan, I mean, there is a bit of impact here. But the real impact of the cost plan will actually come through our 2022 and 2023 numbers. You know, we can give you much more detail on that also in February as to how we plan that and where we see then also the room to translate that into investments on the other side, to the extent these investments make returns that we expect them to make. On the restructuring provisions, for example, we had expected that a little bit higher, but what we see is quite some attrition because of the markets as well.
From that perspective, the market is helping us as well in, because there's also voluntary release happening, et cetera, et cetera. I'm looking at Kirt at this moment, at least at for the Q3 was [crosstalk]
CHF 66 million in the Q3 after CHF 90 million in the Q2, which as Ralph said, is lower than we expected. Any further update on restructuring related to the $1 billion, we'll update you on in February.
Yeah, exactly. Your second question was on the [crosstalk]
The second question was on collaboration.
Exactly.
[crosstalk] revenue working across the business division.
It's a very good point there. Clearly, as you know, we're trying to ensure that, you know, that UBS is more than the collection of divisions. We truly believe that, you know, we work for one and the same client, and we have to look at ourselves plus our partners as ones that work in an ecosystem of capabilities that we want to deploy with our customers in order to support them in developing their wealth. For that, you need a further collaboration, which is happening in many different areas.
If it has to do with, you know, wealth and investment banking working together on the specialized lending, on the direct access to the markets or the wealth with asset management in the U.S., for example, under the Concord program and the SMA product offering. Where we feel the opportunities are there, we will certainly do so. You should realize that the top of the house, which is the executive board members, we all have the same financial KPIs. Nobody has a divisional KPI specifically, which makes sure that the top of the house is fully collaborative, making sure that our clients get serviced the best product and best service from the products that we have or source from others. Quite some changes already made this year in order to make that work.
Okay. Thank you very much.
The next question is from Daniel Regli, from Octavian. Please go ahead.
Good morning. Thanks for the presentation and for taking my question. I have four questions. One, on NII, particularly in Global Wealth Management. As I understand, the margin expansion you have seen is mainly due to deposit management or optimization. Can you give us kind of an idea of what the current interest yield curve shape has for an impact on NII in this quarter or maybe in the shorter term, the longer-term outlook? Secondly, on IB revenues, obviously, and we are waiting for the kind of normalization in IB revenues for a while now. Banks repeatedly were talking about the normalization in revenue for Q3, and now you again posted a very strong quarter. Can you give us kind of an outlook here on what do you expect going forward in terms of IB revenues, also with regards to pipeline, maybe deals pipeline for Q4? Thirdly, again, maybe.
Hey, Daniel, it's Martin here. Just the rule is two questions per analyst. We'll take these two questions.
Oh, sorry.
Take it from there, please, right? Because we have a few more people on the queue. Thank you.
Okay. Sorry [crosstalk]
I will start with your second question, Daniel, here, which is on the outlook. Also going by my introduction, you see that, you know, the companies are really kind of looking at the opportunities to build scale in this market, to benefit from new business models, to look for further opportunities to grow as well, and looking for capabilities to add to their core businesses. Therefore, the current momentum that we see in the market in terms of M&A, the advisory side, to the extent the markets hold up on equity capital markets, we actually think it looks good for the next quarter. I'm not going to go into where this is going to be in the next year, et cetera.
You know, who knows? Currently, that looks good. Markets continue to be constructive overall in what we see as well, also this month, you know. From that perspective, we think that, you know, the markets are constructive, both on the advisory side as in general as well.
Daniel, in terms of your first question, if you look at our NII on a year-on-year basis, the majority of the growth was actually generated by lending, as you would expect, in GWM with the CHF 21 billion of net new loans we generated this year. Also overall margin has improved slightly, but generally, we've maintained our margins on those loans. Now, quarter-on-quarter, we actually did see a good increase in overall deposit NII, and that was predominantly generated by increase in flows. We've actually seen quite a good build-up in volumes over the last three quarters.
In addition to that, we had some other non NII or non-margin specific contributors to our overall NII for the quarter, and that included some revenue from some sale of some available for sale securities in the U.S. that helped us. Plus, you heard reference to the repricing that we've done for clients above 250,000. That also helped us a bit in the quarter. Going forward, if you look at our NII, the main factor that will drive revenue will be flows as we look into next year. I referenced that quarter on quarter, we expect to be stable. If you look at the shape of the curve currently, there is some expected increase on the back end of the curve, but that really won't help us until 2023.
It really takes a change in short-term interest rates to help us on the deposit margin side of things. Beyond that, I think you heard an earlier question about the 100 basis point increase, which leads to CHF 1.6 billion, but that's very theoretical.
Okay. Thanks a lot. Apologies for asking or wanting to ask more questions.
No worries.
The next question is from Amit Goel from Barclays. Please go ahead.
Hi. Thank you. So two questions. The first is, I mean, to be honest, I'm still a little bit struggling to get my head around why the group isn't returning more capital already via buyback or other means. Obviously when I look at the ratio relative to the target, I see the commitment to get back to the 13. I mean, obviously there's the French case out there, but even, you know, even that, when I look at the theoretical surplus, you know, it seems to not be such a big factor. Last year there was the additional buyback accrual.
Really just trying to understand, you know, what exactly we're waiting for in terms of seeing more money coming back to investors. Then secondly, just a question, maybe coming back on APAC. Just wanted to understand a bit more in terms of exposure to heavily structured product, whether you see that as an area of risk and/or risk management or whether that's an area that you're looking to continue to grow as we go through the coming periods. Thank you.
Yeah. I don't know how many different ways I can answer the question, Amit, about returning capital. But I think I've already been very, very clear. Our intention is to return capital above 13%. You'll hear more about our plans to return capital going forward. You can do the math and you know that there is ample opportunity for us to continue to engage very actively in buybacks. Now also I would mention that if you look at the one constraint we do have, it's we generally will repurchase up to about 25% of our shares any given day in the market, just so that we're not overly influencing price moves.
You can also factor that in and then look at the number of business days that are available in a quarter, and that will give you a little bit of a view in terms of the limitations around buybacks. In terms of your second question, it's just a little, I'm confused by the way you ask it. You say that are you gonna engage more, implying that we are already engaged and exposed to heavily structured products in Asia. When I think if you look at our Asian business, naturally we are exposed to structured products.
That in particular is a big part of our equity derivatives platform, both on the side of our investment bank, where we're very focused on structured derivatives, and that's not just in Asia-Pacific, it's across all markets. We've actually rebalanced our equity derivatives business, so we got a much better mix of flow and structured product exposure overall, which has been very constructive for us. We're also exposed on the distribution side for our wealth management clients, as they tend to like to invest. Particularly when they see volatility in the marketplace, they like to invest in structured products. We referenced one of the reasons you saw year-on-year growth in our transaction revenue and wealth management is because we did see higher structured product revenue. Again, not just Asia-Pacific, but really across all regions.
Yeah. Thank you.
Structured lending, right? Which is different from structured lending. It's just Did you know?
Sure. I was kind of asking in relation to perhaps a bit more the structured lending. Essentially, you know, some of the comments about, you know, asking clients to deleverage to some degree, whether or not, you know, how you think about the growth of that business and/or risks within it.
The deleveraging was not for particularly geared towards structured lending activities. The deleveraging is just about making sure that the Lombard loans as well and the LTVs that they get honored. Depending on the concentration under these loans and the movement of some of the underlying stock, the question is how do you kind of recalibrate your portfolio to be more diversified, more internationally diversified, et cetera, et cetera? That's a discussion that went on. That's how we also support our clients through a change in sentiment and by recalibrating their portfolio. On the structured lending itself, I know that Asia is a market generally more open to structured lending.
Our exposure is limited to that, to a certain extent there. We are pretty conservative on the risk side if it comes to very specific structured lending also in Asia. We do think it's a good business, but we do it with some conservatism, as you know.
Yeah. I think you heard me mention that our structured loan to total loan portfolio is about 5%. We do intend to do more structured lending, but as Ralph said, on a very selective basis.
Cool. Thank you.
The next question is from Tom Hallett from KBW. Please go ahead.
Hey, guys. Thanks for taking my questions. If I remember correctly, you said something like CHF 70 trillion of wealth will be transferred to the next generation in the coming years. I guess what I would like to know is what's the track record of UBS, say the past five years for assets that have been transferred down from, say, one generation to the next. You know, is it sort of 80%, 90%? Any sort of indication around that would be good. For those that don't convert down the generations, why is that? What's typically driving that? Secondly, could you provide more color around the associated loss in asset management, please? You know, is that something we should expect again, or is that just a one-time thing? Thank you.
Okay, the second one is a one-time thing. The first one, I don't have those numbers, Tom, but in general, how it works is that clearly, you know, the transfer of wealth from one generation to the other may come with a choice for either a different advisor or a different channel altogether. As you can imagine, it's a new generation. That is why it is so important that we, you know, have different channels in the market, different offerings in the market, as well. The numbers I owe those to you to the extent we even have them.
It's certainly, you know, it's looking at, okay, if you have generational transfers, you know, do you need to have different coverage, different financial advisors or a different channel altogether in order to manage that? In general, what we do is we're very early on in these discussions. As you can imagine, the transfer of wealth from one generation to the other, specifically, if it also has to do with the underlying business itself. The transfer of the business that is being run by one generation to the other comes with quite some emotion sometimes, with a lot of advice and with a trusted relationship. Honestly, that's exactly what we do. This is exactly what we do. We have these discussions pretty early on.
We take our clients through some of this, make sure they feel comfortable before they even take the decision. Once they take the decision, we also make sure that every step of the way, they understand what's happening. This is what we do. This is our business.
Maybe just to add to that. Part of that, as Ralph mentioned, is a real focus on the next generation. In fact, we have a number of very active education content programs that we offer to the children of our wealthy clients. We do that very proactively, including running overall events. We bring the children of wealthy clients together so that they can interact as well. We find that we start to build and create actually that confidence and that linkage at that earlier age. It's obviously very helpful to that transition point that occurs later on.
Okay. Thank you.
Hey, in absence of further questions, I'd like to thank you for calling in and staying with us this morning. We are very proud to deliver such a good set of numbers, record numbers from many different dimensions. That's thanks to our clients who put their trust in us. Thanks to our colleagues here at UBS who support our clients all the way through some of these uncertain times. We're very proud here, but by no means are we complacent. We have developed some plans that are very interesting and that we feel will fuel growth also for the future, not only now, and we're really looking forward to seeing you in the next quarter when we can give you a full update on those plans and the resulting targets from that as well. Thanks very much.
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