Good morning, everybody. I know everyone is still abuzz from the Super Bowl last night, but I'm really excited to be in the room with you this morning. So kicking off with a keynote fireside chat, I have with us our Group CEO and the President of our Executive Board, Sergio Ermotti. Welcome.
Thank you.
So before I kick off the chat, I just wanted to have a housekeeping question. If you do have a question for Sergio at the end, you know, use the QR code, and your question, if you type it in, will pop up in this fancy little iPad. So for Sergio, let's start with what happened in 2025. We reported last Wednesday, so maybe a good way to start is, you know, talk a little bit about our full year results and our key accomplishments from 2025.
Well, first of all, I think that for us, it was very, very important last year to, you know, get traction again in staying close to clients, helping them navigating a very complex environment and growing our business. The fact that we surpassed the $7 trillion invested assets level was quite a remarkable achievement. I think that financial results were also very strong and, you know, up substantially year on year. And when I look at, finally, we are getting above cost of equity, you know, this huge restructuring has been quite costly in the last couple of years.
So being through the barrier of achieving at least our cost of equity from a core and underlying performance standpoint of view was very important, so we still need to finish it, but very, very, very important. It was very important to see all regions, all businesses contributing to the PBT growth expansion. So the value of our diversified business model has played out once again. If you look at from a geographic standpoint of view, Switzerland is quite large, but also when I look at Asia, U.S., and EMEA, are equally profitable. And of course, you know, the integration is almost done, but last year was a you know a major milestone.
We migrated 950,000 clients from the Credit Suisse platform in Switzerland into the UBS one. This week or last weekend, we migrated 50,000 clients among the most complex. We now need to go through the last 100,000 in March, and then, you know, finally, we will be able to shut down all data centers, IT systems that are de facto worth something like a couple of billion dollars or more of synergies. So we achieved the logistical part of the integration, quite complex, quite risky in a sense, but also achieved our cost savings targets. So almost $11 billion of cost savings since we started. We identified also an extra $500 million.
And last but not least, for me, it's very important that we are also delivering on our capital returns promises to shareholders. We increased our dividend by 22%. So if you look back from 2022 onwards, a quite substantial improvement of our cash dividend. We also delivered $3 billion of share buybacks. And last but not least, I would say really is also, we are not just managing yesterday, but we are also investing for the future, in terms of investing in people, capabilities, AI, and preparing for the next steps.
Because, of course, one of the biggest, call it impediments that we had in the last two years, that while doing such an integration, which is unprecedented in banking, between two G-SIBs, is very little you can do in your operating model. You need to really rely on a, on a clear operating model and reducing the operational risks. So that means that you are not able to adapt or change or optimize, for the future. Now, with the integration almost over, we now have a, again, with Beatriz Martin , Chief Operating Officer, that will focus on, you know, enhancing, our One Bank, approach to clients also in the back end. And then, you know, deriving also a major initiatives in terms of how we can be more efficient and effective going forward. So a big year, but not yet finished.
Big year, but not yet finished. Let's talk about this year and maybe pull out a little bit, Sergio. I think it is an understatement to say there's a lot of volatility and uncertainty, around the globe. So maybe talk a little bit about how your discussions with clients are evolving and how they're positioned across regions, and maybe get your outlook, your broad outlook over the next few quarters.
Well, look, clients, and if I look at asset allocation and clients continues to be, broadly speaking, quite, quite constructive. I haven't seen a major shift in asset allocation, also from both underlying assets, but also from a geographic standpoint of view. Of course, at the margin, a lot of cash and a lot of new liquidities going into either commodities or, you know, we saw also a big rally in emerging markets, but I haven't seen a major sell-off or, you know, out of any assets. In the last few weeks, we see a little bit more of a, you know, desire to further diversify, more of a dispersion, kind of environment with people here in the room are very familiar with that.
I would say that, at the margin, you start to see a little bit here and there, the necessity of the leverage and, prepare cash for reinvest if there is a drop in markets. So, broadly speaking, constructive, but of course, people are really focusing on hedging, on diversification, and I would say that it's- I fully understand that because I have a hard time myself to really look at any asset class out there that is cheap or s omething that you would say, "My God, this is a real opportunity." So, I think investors do feel that way. But, the truth of the matter is that, it's not a lot of places to go in that sense.
Given that outlook, and then you talked about the progress that we've made in terms of the integration, what are your key strategic priorities as you look into 2026?
Well, as I mentioned before, I think that, of course, we need to deliver. I mean, it's not so strategic, but we need to deliver on our 2026 targets. So, I mean, it's quite clear that, for me, it's completing the integration, both from a logistical standpoint of view, as I mentioned, the final mile of, you know, migrating these clients. It has been very complex so far, but what we did over the weekend was even more complex. I mean, we had, you know, 50,000 clients with more than 500,000 different positions with derivatives, very complex migration. So I think that we cannot be complacent around this topic.
Delivering this integration and preparing the bank for the future, as I mentioned before, by investing in AI capabilities, redesigning our processes, and managing risk in a very dynamic ways is the name of the game. So the prerequisite for us to earn our ability to think about the mid long term is continue to deliver and be on our ambitions in the integration. I think the UBS of today is even stronger than the one pre-acquisitions in terms of, you know, geographic footprint, product capabilities, people. I think that we got a lot of very good people that are complementing our existing talent bench.
So, I'm very positive that, you know, all the secular trends that supports our industry, you know, wealth creations, demographic trends, societal trends, people are, you know, having different views on how, where they choose to live and work, plays very well into our global franchise. So we, we should be, you know, we will be a beneficiary of that. You know, through our network, we can capture all of that. And, so we need to be prepared for that, and, so, I, I think that, but we cannot be complacent. So I think the competition is quite fierce, but if we keep our focus on clients like we did in the last decades or so, keeping our discipline on our business model, we're gonna be able to be a winner out of this.
So, Sergio, we're sitting here in sunny Miami, Florida, so maybe it's a good way to segue into the U.S. strategy. A year ago, you gave a strategic update, really focused on improving profitability and growth. So where is UBS in their U.S. journey, and where does the company go from here?
Well, the journey is a medium long-term journey. I would say that we needed to regroup and restore a you know an appropriate level of profitability. I think that we have been profitable in the U.S. now in the last 10 years. We have been profitable, but not profitable enough compared to our you know opportunities that we have. I think that it's fair to say that the market dynamics have changed a lot. They are not. They have not been very favorable to our business mix in the U.S.
I think we are very large in the U.S., but not as large as some of our competitors. And I'm not talking about you know Wealth Management. I mean, we manage $2.3 trillion -$2.4 trillion of assets, so we are not small. But where we definitely are smaller than our peers is that the set of banking businesses that we have on the platform, of the U.S. platform, is not as comprehensive as our co-peers. And that drives some level of competitive disadvantage in being able to share this fixed cost of a banking platform across different businesses. Now, it's fair to say that we haven't really invested enough in banking capabilities. Our lending penetration is increasing. In the last seven quarters, we improved it every single quarter, but it's still below what we could do. Our checking banking capabilities, deposits, is not as comprehensive as we should.
Now, we got a conditional approval from the OCC for a national charter, and that's gonna allow us in the next couple of years to also increase t he penetration of deposit and NII, that will be constructive to narrowing the gap to our peers in terms of profitability and capabilities. We are doing good progress in making the Investment Bank and Wealth Management working closer together, more specialists on the platform. We want to expand our high-net-worth business, and we have been hiring people to do that. We are very good at the top end, ultra and GFOs. But of course, you know, it's also important for us to leverage our platform in a more comprehensive way. So I'm glad that we were able to show in the last 18 months, 24 months, good progress in achieving mid-teens returns on pre-tax margin returns.
Our view is that we should be at around 18 by 2028, which is still below our peers, but that's the nature of who we are. So we, we can probably try to improve it, a little bit more, but it's totally unrealistic for us to think that we're gonna match, the pre-tax profit margins of our U.S. peers in the U.S. Like is, I would say, never say ever- never say never again, but it's gonna be very challenging for all our U.S. peers, which, by the way, are the largest competitors for us globally, to achieve the same level of profitability and margins that we have outside the U.S. So that's the nature. So we are working to improve, but, you know, we have to pay attention that we don't let these things go out of balance in recognizing who we are globally and how important the U.S. is also, at the same time, for our global franchise.
So just wanted to unpack something in what you said. You mentioned $2.3 trillion-$2.4 trillion of AUM in the U.S. There's clearly been a lot of conversation about advisor movement and flows. And I cover, of course, all of our peers, and it's always so competitive in Wealth Management in terms of talent recruiting. What are you seeing in terms of how that business is going, and what is your vision for 2026?
Yeah, look, you know, it's luckily enough, I mean it from in terms of at least being able to demonstrate, as you know, a strategic consistency in what we are trying to do in globally in the U.S. We have been really anticipating that we would have headwinds on flows in the U.S. Two years ago, we clearly say that we were expecting net new assets globally to go up $100 billion a year, which is relatively not a big number compared to the size of who we are, because both in the U.S., but also internationally, a lot of work needed to be done to restore the appropriate level of profitability in terms of, for example, revenues on risk-weighted assets or, you know, mix of businesses.
So we have been willing to sacrifice growth for efficiencies. This is the reason why our revenues on risk-weighted assets, if you go back 24 months, went from around 7%+ to 10%. That means that short term, you need to be willing to let clients' relationships, that may be good clients, but absolutely not paying for the capital you allocate to them. Totally inefficient. Second, of course, we want our financial advisors to be able to serve their clients at best and grow their businesses. But in order to do that, we need, we need also to make sure that there is a good balance between what shareholders makes and what financial advisors makes.
So we have been really looking at reclassifying and relooking at a compensation grid for part of this population that were de facto benefiting from being part of a team of people, getting all the advantages of, you know, a large team in terms of how the grid works, but de facto never growing their business and not really contributing to the bottom line. And that, of course, is not very popular. But, you know, we can't fix that issue of restoring PBT margins by being overly popular with people that are not growing their businesses. And in our point of view, you know... By the way, this is the same we did outside the U.S.
Mm-hmm.
So we sacrificed marginal money for quality of growth. And it's also very, very important outside the U.S., was a very important item in how to drive the cultural integration of the two banks. Because it's fair to say that maybe at CS, there was a tendency to look too much at top-line growth and not so much on risk return. And, you know, in a sense, it's a very coherent story.
So, now, in the U.S., we do expect to see, or ready to see in the second half of the year, positive momentum in net new assets growth. And if I look at 2028, we're gonna go above $200 billion in net new assets growth, in which the U.S. will play an important part. Overall, we are preparing the bank for the future. We need to be able to take a step backwards in order to have a sustainable business model.
So Sergio, just also wanted to follow up on something you said, and that's on the conditional approval from the OCC on our U.S. bank charter. You mentioned that that's going to strengthen our ability to gather deposits and types of deposits, like checking. Are there any other competitive advantages that the U.S. bank charter can give the U.S. business?
No, I think that's, that's de facto, the biggest, one. I think that if you look at our NII, penetration as a percentage of revenues compared to our peers, is probably a half. So I think this is a huge, you know, not only, is where also there is a, there is a, a revenue, contribution, but also in terms of net profits, down to the shareholders, is, is probably one areas where we can, capture, some more, value. So I would say that one is-- And, of course, more comprehensively, if you are able to do more banking, with the same clients, you are making your relationships deeper.
Yeah.
So, that's more of a, you know, not exaggerating, but, you know, to the extent that you can get closer to be one of the house banks, beyond just Wealth Management, you get some advantages. But of course, the biggest opportunity for us is to continue to work closely between the IB and Wealth Management, you know, monetization, IPOs. I mean, GDP growth and wealth creation are definitely some big topics, but at the end of the day, big levers for our business is monetization, and across the globe, not only in the U.S. I mean, we need to be there when people are IPO their business, they are selling their business.
We need to be closer to them when they do their wealth planning, their succession planning. I think that we have $ trillions going to the next generations in the next 10, 20 years. We need to continue to be the same bank that, like, in the last 150-160 years, we have been able to bank with fourth, fifth generation of clients. We need to continue to do that, and this is where the value is gonna come from, so.
So all six of our U.S. G-SIB peers are going to be here at this conference, and I suspect that deregulation in the United States is going to be a big topic, which is, of course, going to, you know, turn into where they're going to allocate excess capital. Now, in Switzerland, the tone is a little bit different, and maybe the conversation is a bit opposite. Could you update us on where the conversation is going in terms of too-big-to-fail reform? And, you know, given what's happening in the U.S., what does that mean for how you're allocating capital, how you're thinking about the business?
Yeah. A little is a little bit of a diplomatic representation of the situation. So I would say that Switzerland has chosen a quite emotional reaction to what happened with Credit Suisse, which was, you know, to some extent, totally understandable from a political standpoint of view, also for the broader population. So I think that many of you, probably in the room, don't know, but, you know, basically, Credit Suisse, the founder of Credit Suisse, was a big figure that established a lot of, you know, the industrial developments of Switzerland in the infrastructure one, and was also a big person in terms of funding the Polytechnic universities.
It was a very emotional situation. So in that sense, all right. But what happened in the last two to three years, you know, of course, the emotions didn't really calm down, and at the same time, you see, the regulatory landscape developing in a very competitive way, adding on to the fact that the existing regulation in Switzerland is already the highest. I mean, if you look at UBS today, we have de facto the highest minimum capital requirements of any G-SIB. And this is not an opinion, it's a fact demonstrated by expert and many other people. So, I think that this is now in a political process.
It's good that the parliament is now looking at this matter more, you know, less emotionally, I would say. And in the next two, three months, we're gonna find out what it is. You know, I always say that the current proposal as displayed are not acceptable, you know, making our business totally uncompetitive. So we will, you know, make our case till the last minute, on making sure that we can continue to operate successfully as a global bank out of Switzerland, for the benefits of not only shareholders and clients, but I think also the whole country. But of course, it's not in our control.
How does this background impact how you're thinking about, you know, deploying capital for growth and also, you know, capital return plans?
Well, I think for the moment, we are definitely not restraining our growth and business ambitions. So I think that, fortunately enough, we don't have a capacity issue of generating capital to deliver on growth and to deliver on, even, our capital return policy. I mean, that's not the issue. The issue is that whatever new regulation comes, or, we will have enough time, and that has already been stated by the government, and that, that we will have enough time to build it up to that level. So the debate is not about, can you really grow and do share buyback, but it's: what is the ultimate level of capital you have to hold, to do the same business compared to your peers?
So we're not gonna stop growing, we're not gonna stop doing the right thing for shareholders, but eventually, the debate is, you know, can you be competitive in terms of return on capital? And I believe that from a strategic standpoint of view, this is one of the most important topic that is too often neglected. And I know I'm talking with an audience of shareholders, and I don't need to convince you on that one, but shareholders are the first line of defense. So when people talk about the resilience of a banking system, they should understand that the first things to do is to have, of course, a solid capital, but the second one is to have a solid sustainable business model.
One in which shareholders believes in, and if some things happen, they are willing to consider building and bringing more capital in an emergency situation. But if you have a structural competitive position that doesn't allow you to earn the same level of returns for a given unit of capital, then is where, you know, we need to be aware. So my issue is not about what we can do in the next three to four years. My issue is to say: How can we compete over the long term? And this is the reason why we need to make sure that, you know, clients, shareholders, employees, do believe that we have enough resources to manage the medium term, but the real debate is the long term one.
So we're also going to be expecting to hear from our peers about what some investors call the capital markets renaissance. I think there's very, very lofty expectations in terms of the type of activity levels this year. So maybe talk about what you think, you know, what kind of activity level we could see from UBS in 2026, what you're most excited about. And, you know, you talked about lending and the IB and Wealth working together. Where are areas that you're looking to build out further to gain share?
Look, I mean, like our peers, we are seeing a very, very good momentum in the capital market pipeline coming from corporates, but also sponsors and also, you know, I would say the institutional clients are willing to really look at how to deploy capital at the right level. But I don't want to spoil the party by saying that while I'm fully confident about the pipeline and the quality of the pipeline is there, this renaissance was something that we were discussing a year ago—and you remember how the first quarter turned out to be.
Yeah.
We should not underestimate that, geopolitical and macroeconomic developments and the current volatility will continue to, leading to stop and goes also in terms of windows. You know, when you can execute certain transactions. Particularly when you speak about strategic M&A big, big discussions, I mean, this is, you know, the geopolitical landscape, the uncertainties are definitely some things that, I would say corporates are much more willing to take that kind of risk compared to a year ago.
But we should not underestimate that it's still some things to be prudent. So I wouldn't really look at 2026 per se, or trying to pick up any given quarter. Right? Other than saying the pipeline is robust, is even stronger than last year, but, you know, markets needs to be there, and, and, and a degree of stability needs to be there in, in, in terms of allowing us to execute on, on the pipeline.
Scale is a big factor for success in investment banking, and obviously, our U.S. peers continuing to get bigger. Do you feel like UBS has enough scale to compete against our large U.S. peers and deliver attractive returns in this business for our shareholders?
Well, it depends what you... You know, in 2011 and 2012, we made a clear decision that we did not want it to be an investment bank that is a one-stop shop, that does everything to everybody. So I think that back then, we had to recognize for strategic but also realistic consideration that, you know, Basel III was a reality, that, and, and, you know, in order to really rerate our stock, we would need to focus on what we are very strong at, while continuing to do, you know, be very competitive in areas that are not as... Where we are not the number one leader. So that's the reason why back in 2011, 2012, we say: Look, we are undisputed, the only truly global wealth manager, undisputed. We are the leading bank in Switzerland, undisputed. Those are the cornerstone of our strategy.
But then they need to be in order to be successful in these two businesses, we need to be strong in Asset Management and in the IB. But only in the areas where we see that we can be competitive with institutional investors and corporates, and at the same time, being quite relevant to the rest of the franchise. Right. So, I mean, if I look at our equity business, research capabilities, prime brokerage, part of our capital markets, FX, precious metals, we are a leader. So we are able to compete with the best in class. Actually, in some areas, and you saw our gain in market share in the last couple of years has been quite significant. So we are a top player.
But maybe we are less of a top players in other areas, particularly that are areas where capital consumption is very high. Capital consumption is not always justified by the ancillary businesses that we can bring to corporate clients. I mean, for example, you know, by lending more, you know, and having a you could probably get access to ancillary businesses with corporates, like in treasury or debt capital markets, but this is not part of our business model. So we need to really understand what are we good at? What can we really excel? And while not pretending to be a one-stop shop. So short answer, we have everything to be very competitive in the areas where our clients want us to be competitive. And so if that means accepting that when you look at league tables that are, particularly when they are the more broader one.
Mm-hmm.
Maybe we are not popping up there. But what I care about is the league table and the market shares in all the areas where we make investments, like in banking, in healthcare, TMT, in the broad industrial sector, with financial sponsors, as I said, equities, FX, and capital markets; we are a top leader. So I look at that data point. Are we earning enough out of our investment? Are we competitive, financially and qualitatively? And the answer is yes, and I see still room for us to improve.
Maybe just shifting topics to alternatives, which has been quite the talk of the market, particularly in the private market. So, you know, a lot of investors are talking about both the secular growth opportunity. At the same time, there are growing concerns over credit quality. And some of our competitors have been making acquisitions to grow scale in this space. How is UBS positioned to benefit from the continued growth of alternatives in privates?
Well, actually, our biggest M&A success in the area was merging internally. I think that by merging our alternatives capabilities that we had in the U.S. in Wealth Management outside the U.S. in Asset Management, we created last year the fifth largest LP in the industry, with $330 billion of assets. And that scale is now allowing us to be a strategic partner to the most, you know, attractive and competitive GPs, and offer a breadth of capabilities and products, not only to our Wealth Management clients, but also more and more to wholesale and institutional clients that are strategic partner of ours. So I see this as an enormous growth.
If I look at our penetration in alternatives, in our asset allocation, our CIO, and I would say also, external trends, indicates that over time, an ideal asset allocation should contain around 10%, some people are even talking about 15%, I would say 10%, let's call it, allocation to alternatives. We are now at 5%. And it's a journey that needs to go through. I fully... In some areas, the speed of this penetration of alternatives has been, you know, generally speaking, outside, I see a little bit too fast.
Mm-hmm.
I mean, I fully understand that many subset of Alternatives haven't really seen a recession, haven't really seen a huge dislocation. I mean, we saw dislocations, but they were all V-shaped dislocations.
Yeah.
They didn't really have time to really assess any proper mark-to-market of any assets that are private over few quarters of a slowdown or recession. So in that sense, alternatives, they also need to go through, or part of the alternatives, they need to go through a proper validation, call it.
Credit cycle.
Credit cycle.
Yeah.
Right.
Yep.
Particularly in credit, I believe that credits, private credit, will be part of a capital or funding stack of a corporate or part of the asset allocation, but there is no free lunches. I mean, I think that how things have been rapidly growing, you know, when you have such kind of expected returns, you can't really expect a free lunch and no risk. So I'm not so sure. And so for us, it's very, very important because we manage our first order risk on our balance sheet.
No, I mean, I'm not really concerned about it, but our biggest risk is to make sure our clients fully understand what they are doing. Our biggest risk is suitability. Right, so it's. You know, history tells us a very clear lessons. When people lose money, they are all pretending to be stupid and unsophisticated, no matter, right? No matter how good they are. Right? So we need to pay a lot of attention because I see that this being the biggest risk by far.
So one more for me, and we do have a question from the audience that I wanted to ask you. You mentioned AI several times in the beginning of our chat. So maybe talk a little bit about what you think the impact will be from AI for the industry overall over the next three to five years, and then specifically for our firm.
Well, you know, I think that from my standpoint of view, if I look at what it's already available today, and if I look at the kind of business we are in with a lot of front-to-back processes, very manual intense, very, very, you know, full of, you know, opportunities for, you know, enhancements, I think. And what I see, the capabilities of AI is already today, I think that we're gonna be busy for the next three to five years , and we will be able to create a more efficient and effective operating environment through that. So I do see value in how people will eventually also deploy AI in terms of serving clients, enhancing products, but 80% of the value I see in the next three to five years for us is back-end, back-end processes, efficiencies.
And this will free up resources. By the way, all of that, you know, the vast majority of all of that will go to the benefit of clients. So, I mean, we can, you know, I mean, our industry is a highly competitive industry, and as we all know. And, you know, of course, some of it will go to the bottom line, but the vast majority will go to the benefit of clients. This is so important because I believe that the winner, the one who can really, deploy AI and create, you know, better, not only better product, but more efficient product, cheaper products, will use that competitive advantage to gain market share. And therefore, it's vital for us to be now fully focused on that.
You know, I keep mentioning to myself and to my colleagues that we cannot be complacent about, you know, having had a fantastic run and integration. You know, it's not enough. You need to really continue to have the same kind of focus because, you know, the changes we're gonna face in the next three to five years, even if they are discounted by 50% of what people are talking about, they're gonna be profound. Most likely, they're not gonna be as quick as everybody expects, but they're gonna be much more profound than everybody expects. So this is the way we are preparing for the future, and I rather err on the conservative side in being overly focused on that topic than being complacent.
By the way, there's a U.S. CEO called Jamie Dimon that agrees with you that a lot of these productivity gains are gonna be competed away. So we have a question from the audience. Given the opportunity in the U.S. and the pending regulatory backdrop, there is sometimes a discussion on re-domiciling the business or at least shifting where capital is allocated further. Is this sort of thing realistically even possible?
Well, shifting capital outside to the outside the U.S. while staying domiciled in Switzerland, regulated under the Swiss regime, won't help resolving the structural topic I, I mentioned before. So, re-domiciliation is definitely not something that we are now focusing. We are really, as I said before, investing a lot of energy and resources to really make sure that all the decision-maker are making decisions for the future of the regulatory framework in Switzerland based on facts and not emotions.
Fully aware that, you know, the current proposal are not acceptable, are not viable, are, you know, not something that we believe are in the interest of any of, of the stakeholders. So we're gonna just focus on that one. We don't want to speculate about this topic because our preferred option is to continue to be a global bank based in Switzerland. And this is something that we want to continue to drive the focus in that way for the next months or, you know, until the solution is found. And only then we will make a decision on what is most appropriate.
Great. We're actually out of time, so thank you very much.
Thank you.
Sergio, for joining us. Thank you, guys for being in the room.
Thank you.