Good evening, and welcome everyone. Before we start, I would like 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 annual report, together with additional disclosures in our SEC filings. With you this evening are our Chairman of the Board, Colm Kelleher, our CEO, Ralph Hamers, and our CFO, Sarah Youngwood. With that, let me hand over to Colm for opening remarks.
Thank you, Sarah. It's a historic day in Switzerland and a day, frankly, we hoped would not come. Thank you everyone for making the time to join us late on a Sunday evening. We wanted to be able to update our shareholders across the globe on our acquisition of Credit Suisse and the protections we have obtained for our shareholders. Let me start by saying that UBS has been firmly committed to our organic growth strategy. Various events over the last few weeks resulted in regulators across the world urging UBS to consider a takeover of Credit Suisse to preserve global financial stability. Unfortunately for our shareholders in the near term, this will result in the temporary suspension of our share repurchase program, although our progressive dividend policy remains intact.
Reflecting the situation, the Swiss government has exercised its emergency powers to facilitate a swift consummation of this merger, which will occur without the necessity of resolutions passed by the shareholders at a general meeting. I would like to make it clear that while we did not initiate discussions, we believe that this transaction is financially attractive for UBS shareholders, protects UBS from additional downside, and should support earnings growth over time. The terms of the transaction have the full support of the relevant regulators and secures financial stability for all our stakeholders. This includes very significant liquidity support provided by the Swiss National Bank. We remain fully committed to our existing strategic objectives, including the U.S. and APAC. We believe that the strategic rationale of combining our businesses is compelling and will enhance UBS's leading client franchises while offering security for Credit Suisse's clients.
The acquisition strengthens our position in our asset gathering business by adding further scale in wealth and asset management, increasing our combined assets to around $5 trillion across the most attractive growth markets. We are also extending our position as the leading universal bank in Switzerland, operating under both brands to best serve our clients. Our investment bank, as we announced in our press release, will remain right-sized and focused on areas most relevant to our institutional corporate and wealth management clients. We intend to de-risk and downsize Credit Suisse's trading operations, and we'll manage the majority of this in a separate non-core division. We have received key downside protections and will share the risks associated with the rundown with the Swiss National Bank. On a pro forma day one basis, our investment bank will account over time for around 25% of Group RWA.
Ralph Hamers will take you through our execution plans. Let me say that we are confident in our ability to successfully manage this. For over 10 years, we have made significant investments to strengthen our risk management framework and establish our disciplined culture. Maintaining the trust of our clients and protecting our investors has been and will always continue to be the ultimate priority of the board of directors and the group executive board of UBS. Let me hand you over to Ralph Hamers to go into the details of the transaction in more detail.
Thank you, Colm. Good evening, everyone. Again, also thanks on my behalf that you all made yourself available. We're going to update you as to where we are and what we are planning to. Clearly it's not in full detail, so you have to excuse us on that one. We think we really have a good plan here. After days of discussions and due diligence, we did reach today an agreement, and we are acquiring Credit Suisse. I think what is important is that we are announcing this acquisition from a position of strength.
The inflows that we saw during the days of the turmoil last week, they really demonstrate our status as a safe haven and this allow and will allow us to protect all of our clients, including those of the combined bank. We understand this is not an easy situation for the CS employees, but I would like to stress that we look forward to welcoming our new colleagues. Let me run briefly through the transactions on slide three. It's an all-stock transaction at an exchange rate of around 22 Credit Suisse shares for one UBS share. That, if you make the calculation, represents a CHF 3 billion in value, a significant down discount to the Credit Suisse market cap as of Friday's close. That reflects the outcome of our initial due diligence and to leave additional headroom for UBS existing shareholders.
We expect approvals to be expedited to close the deal as soon as possible. The acquisition has the full backing of FINMA, the full backing of the SNB, the full backing of the Swiss Federal Department of Finance as well. We've also received competition clearance in Switzerland, and we do still require regulatory approvals in other jurisdictions, and expect an expedited timeline here as well, because with the most relevant ones, we have been working over the weekend as well. Throughout these merger discussions, it was always important for us to protect our shareholders from downside risk. UBS has obtained at least CHF 24 billion in protection to support marks, purchase price adjustments, and restructuring costs.
The protection includes FINMA's write-down of Credit Suisse, CHF 15 billion of AT1 instruments, and an additional CHF 9 billion in loss protection from the Swiss authorities in case of potential losses beyond CHF 5 billion, which would be incurred by UBS. Any further potential P&L will be incurred equally by UBS and the Swiss authorities. On the liquidity side, both Credit Suisse and the combined entity will have access to a long-term secured liquidity facility at the SNB, and that's very significant in size. Now, let's look at the financial impact, Slide five. Given the short timeframe in which the acquisition came together, I hope you'll understand we don't have the full financial plan to present yet. As the acquisition price is at a discount to Credit Suisse tangible book value, there's an intermediate 74% increase in UBS tangible book value per share.
We expect to realize more than $8 billion in run rate cost reductions by 2027. We've also assumed revenue dys synergies in the transaction and expect the transaction to be EPS accretive by 2027. In the near to medium term, the Credit Suisse turnaround and integration expenses will likely cause our returns to dip below 15%-18% target. The integration, the way we currently see it, of the businesses is expected to take three to four years and as excluding the non-core rundown. Around $56 billion in badwill will be fully recognized towards CET1 capital of the combination. After the transaction, we will be very well capitalized and will be significantly above our current capital targets.
We remain committed to a progressive cash dividend, including the 2022 dividend, which is subject to shareholders approval at the 2023 AGM. As Colm mentioned, we will pause our share repurchase program. Now, in the strategic rationale on slide six, I will run through the onto the strategic rationale. I'm looking at the slide as we speak, as well. That's six. We start with the asset gathering business. As you can see, we're combining forces with Credit Suisse. As a consequence of that, we will basically be able to drive scale and boost capabilities across our asset gathering platform. You know that we've always kind of that's the core of our strategy, which is, you know, the platform for investing. That's what we're trying to build.
When we had our capital day or our investor update, just over a year ago, we indicated that we had an aspiration to get to six, and this will actually get us CHF 1 trillion into that direction. That's, that's, that's important. The way it is divided, on the wealth management side, we will have nearly CHF 3.5 trillion of invested assets on a pro forma basis. On the asset management side is CHF 1.5 trillion on a pro forma basis. We're strengthening our geographic diversification as well through this. The leadership in position, and we will create leadership positions in Switzerland, EMEA, Asia Pacific, and Latin America.
Now in Asia Pacific specifically, with our strength in Hong Kong, Singapore and China, that will now be complemented by Credit Suisse leading position in Southeast Asia, which part of our strategy was focused on. Basically, we can accelerate our organic strategy here with an inorganic opportunity because that's the strength of Credit Suisse. As I already referred to asset management, if you combine it, that will make the third-largest European asset manager, and it will be an asset manager with an attractive and balanced product portfolio across alternatives, but also more traditional capabilities, as well as it will have a better spread across regions as well. Turning to Switzerland has always been a source of stability for our clients, also for our shareholders, and we're strengthening that by joining forces with Credit Suisse.
That creates the undisputed leader across personal and corporate banking. It will specifically enhance our position in the corporate market, where Credit Suisse has traditionally been strong. Turning to the investment bank, we've always said that we think of our investment bank as a set of capabilities that supports our role as an investing platform in wealth management and asset management. The way we have sized it, in order to have those capabilities, we always feel, was right. With that, we can serve our institutional and wealth management clients. That position has not changed, so we're extremely selective in the trading and derivative assets that we'll take into our investment bank. That portion will also include trades with wealth management clients. On the banking side, the global banking side, as we refer it, we see value in the combined entity.
Credit Suisse's strength, particularly in the U.S. and the technology sector, makes a very good fit to our strategy, where we know that technology entrepreneurs are the wealth creators of the future. They provide quite some capabilities that are very strategic to us in terms of supporting technology entrepreneurs and wealth creation on that side. As Colm mentioned, on a pro forma day one basis, our Investment Bank will account for around 25% of group risk-weighted assets. To close, I'd like to reiterate the way also Colm started. It's an outcome that we may not have hoped for, but the transaction is strategic. It really fulfills a couple of our strategic points. It comes with attractive financial terms, and it delivers sustainable value for our shareholders.
That is because we also have quite some additional downside risk protected and shared. With that, we're happy to open for questions.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use only hands when asking a question. Anyone who has a question may press star one at this time. The first question comes from Flora Bocahut from Jefferies. Please go ahead.
Yes, good evening. Two questions on my side, please. The first one is, coming back, I mean, I don't know if, I should ask you this question, but coming back on the, wipe out of the AT-ones on the CS side, I'm just surprised, you know, around the, this decision, given, you know, the shareholders of CS are not completely wiped out in this deal, and they are normally more junior to the AT-one. I just wanted to ask you here, you know, what triggered the decision from the FINMA, whether you think, you know, this could translate into a litigation risk for you as you embark CS in this transaction, and any consequence here that you want to discuss.
The second element I wanted to ask you, thank you know, for providing us with an estimate of the cost cutting that you can achieve from this transaction. How should we think about the revenues here? I suppose, you know, given the significant overlap that we have to think about potential significant revenue dyssynergies as well from this deal. Thank you.
Yeah, thank you. The first one I, we understand, but that is just the order in which things work. FINMA is, has taken that decision, so it does not create a liability for us. It is their decision, at a certain moment in time to do so. For us, it was looking at, okay, with that as a given, what is it that we can, how can we make the deal work? This is, this was FINMA's decision on that one. On question two, I'll give the floor to Sarah.
Thank you, Flora. On the cost-cutting, we have, as we said, the $8 billion by 2027 in terms of, like, reductions. In terms of, like, the revenues, it's really a range of synergies and dyssynergies, and we are very excited to onboard on the platform the CS clients, and we think it will be very attractive, but we've been conservative in the modeling.
Thank you.
The next question is from Andrew Coombs from Citi. Please go ahead.
Good evening. Thanks for doing the call. Obviously some broad-ranging implications from today, if I could just keep it to the financials for now. Firstly, can you help us with the pro forma core tier one capital calculation on day one, thus post the AT1 bail-in, post the badwill recognition, where do you see your pro forma core tier one prior to Marks, PPA, non-core losses, et cetera? That would be question one. Question two is where do you see your G-SIB requirement moving to? Would you expect to get to go from 1%-2% and therefore do you see your long-term core tier one ratio at 14% rather than 13% as the target? Finally, just coming back to this point around revenue dyssynergies.
I appreciate you don't want to put an exact number on it, but can you help us think how much client overlap there is in the CHF 3.4 trillion of private banking assets? Thank you.
All right.
In terms of, first of all, the way to think about the pro forma core Tier one is you start with the fact that we actually have 14.2 and they have 14.1, and you combine those two, since the entire badwill was recognized, if you want to think about it that way. You can think of their full badwill recognition pre the AT1 as fully supporting maintaining the capital ratio with the full absorption of the RWA before anything happens. That basically leaves you as a combined 14% to think about it that way. You've got CHF 15 of additional badwill recognized that is now available to cover your initial marks and your restructuring costs.
To the extent that you have some marks on some of the portfolios, we also have this $9 billion additional protection which will possibly be for upfront and partially could be thereafter. We feel very good that with that amount, $24 billion of protection, you're gonna be basically at an extremely strong position to start with the combined. In terms of GSIB, it's actually not gonna be the relevant factor for us. When you think about where we are, we did get the ability to have a consistent treatment with FINMA for the medium term.
This is important to us and will be important to you. That means that we don't have GSIB that becomes a constraint. In terms of revenue, the synergies, really it's about the trust of our clients. The overlap exists to a degree, but that wouldn't be very much. It's gonna be a little bit about some of their risk appetite, and a little bit about really making sure that we have all of the data, but we feel very good about the strength of our combined platforms.
I think on the revenue dyssynergies, I think we will very quickly get a feel for the size there, in terms of the overlap. At this moment, we just can't say. Clearly, we have taken some assumptions, but, you know, that's one that will probably show itself quite quickly as to what the real size is of it. That's why we're a bit conservative for the moment. Next.
The next question is from Alastair Ryan from Bank of America. Please go ahead.
Thank you, good evening. Just on EPS accretion 2020, is there anything specific that would stop it being sooner than that? That's just, you know, you've had to work all this out in 48 hours, so, you know, you're confident it can't be worse than that. Yeah, that was it. Thank you.
We definitely hope to make it before that. It's really just about the non-core rundown and the fact that you can't take upfront some of the restructuring costs. Therefore, some of them would run through the PNL and therefore affect the EPS. If you took that out, we would be accretive way before.
Thank you.
The next question is from Jeremy Sigee from BNP Paribas. Please go ahead.
Thank you. Thank you very much. Two questions, please. Firstly, how quickly will you plan to run off the non-core assets? Credit Suisse's plan was relatively slow to run off. I wonder whether you're gonna be in a much more of a hurry to get that out and clean and done. First question. Second question is, I don't think I've seen mention in here of the litigation exposures of Credit Suisse. I assume you inherit all of their litigation exposures. Do you have any risk shelter relating to those or they're all for you? Do you think you'd have a different attitude to settling some of those more rapidly?
Yeah. I'll start with the last one. We did review the portfolio. We have taken some marks as to what we feel a settlement amount could be, and that is all in the assumptions that we're working with. We've built in some reserves there for us that we feel comfortable with after the short due diligence that we had. I mean, the cases are not unfamiliar, right? It's. They already publicly also provided information about it. Yeah, we took some reserves against that as well in our calculations. Let me put it that way.
Yeah.
No?
In terms of, like, the rundown, we will definitely be very decisive and very fast. It is definitely our desire to find solutions, but at the same time, some of the positions are extremely long dated and embedded in the systems, which is why we wanted to also be realistic and transparent. This is not the type of portfolio which you can simply offload tomorrow morning. We will preserve value. When we say in a hurry, it's not at all that we have to do it. It is just that we would like to put it behind, but we will be very rational about how we execute.
Yeah. I think we have to also look as to kind of the extra protection that we have here, right? That's also why we asked the protection because we want to do that in a rational way as well. For us, the sooner the better, in the end, because in the end, we want to also free up the management resources, right? Make sure that we, you know, we concentrate on what we're good at.
Thank you.
The next question is from Chris Hallam, from Goldman Sachs. Please go ahead.
Yeah, good evening, everyone. Just two questions. First on slide nine, I think you said, 25% of IB RWAs as a percentage of the group, and that's excluding non-core assets. I just wondered what that number would be if you would to include those assets. Secondly, in wealth, it's a bit of a follow-up to Andrew's earlier question. I understand slide seven is essentially a pro forma combination of the two businesses as at Q4. Given the recent headlines on the outflows at CS, are you able to give us a sense of what the rough level of acquired wealth AUMs on day one would be?
Yeah.
Um.
Yeah.
If you take the 25% and you did it on the total, that would be 23% because the way we are gonna want to think about it, just so that you get a little bit in our head, is what is the non-core we're gonna want to keep really as a segment so that...
Yeah. Okay.
it's not intermingled. It's run separately, it's run differently. We will report it so that you can see it in full transparency. So that you also can see the UBS you know, in its other segments.
Mm-hmm.
The UBS you know now will include the GWM platform of CS and the AM platform of CS and the P&C platform of CS, and the parts of the IB, particularly banking, that will match well with our capabilities. That is why we presented the number this way just to get started in the way we will want to present the numbers.
Okay.
The next question is from Tom Hallett from KBW. Please go ahead.
Hi, everyone. A small handful from me. I suppose, are there any material adverse condition clauses for the deal? Secondly, I suppose, are you indemnified in the case of any legal challenges from your own shareholders? Thirdly, what needs to happen to restart the buybacks? Finally, you know, is the First Boston spin-off now shelved? Thanks.
What was the last question? Sorry. No.
Is the First Boston kind of spin-off, you know, like being shelved?
Oh, okay. Okay, great. Yeah.
Yeah.
Can't give you answers on everything yet, honestly. On the MAC, there's a customary MAC. It's one that we feel comfortable with, as a MAC. It should be seen as a MAC. I think that's important, that one. Sarah?
Um.
Sorry, Tom.
You went very fast through four questions.
Sorry.
I think No, the one was litigation exposure from shareholders.
Yeah.
There was the MAC, and then it was the last one that it was the First Boston.
Yeah.
I mean, that is what we will work on. Yeah. Then there's one that we're missing. No?
Yeah. So what needs to happen to restart the buyback?
All right.
Oh, sorry. Technically we haven't actually paused yet. We intend on pausing at some point. Of course that will be part of the deal. It is gonna become really part of making all of the assessments and making sure that we integrate. Right now, we are looking at taking a pause. There is no restrictions though, in the use of the badwill, for example, for the restarting of the bad of the buyback. For us it's all about maintaining the target levels that you know about for us, which now apply for the combined.
Right now we are over it, but we want to make sure that we wait until we have totally integrated some of the losses and made sure that we are fully dimensioning. Because we have the downside protection, that enables us to be rather faster on it, but we want to also support all of the restructuring costs. If we gave you the $8 billion and you apply any traditional cost to achieve on those restructuring costs, those are large numbers that can be very well covered with all of the excess capitalization that we have. Yet we want to be cautious as we go into it and make sure that we at all time remain above the target levels that we have.
Maybe on the litigation, everybody can always litigate, right? That's not what we can stop. The way we have run this process, we have done with strong legal advice, but also, as you know, with specific emergency ordinances. And that is actually the way that we had to go in order to be able to do this in a weekend and secure as much certainty of the deal, and with that also, you know, creating the stability that we needed to create over this weekend as a signal to the financial world. Yeah, that's the way we went. Step by step, in a very coordinated way, also with the government here. Okay.
Yeah.
Next question.
Thank you.
The next question is from Kian Abouhossein from JPMorgan. Please go ahead.
Yeah. Hi. Thanks for taking my question. I wanted to ask a more maybe general question about looking at this transaction. How do you think about clearly the opportunities where you really think, okay, I want to hit the gas pedal. I see a lot of opportunities to not just integrate but also further expand our footprint, but also clearly where you see potential headwinds that worry you when you have your executive board meetings. The second question I have is regarding deferred tax assets were written down by Credit Suisse in its U.S. legal entity, and I was wondering if you could share your view, if it's maybe possible to use those going forward on a combined basis.
Okay. So on the first one. Clearly, what Credit Suisse brings, is actually on the wealth side, quite complementary to our strength. If you look at Asia, where we, as you know, are focusing on growth, basically where we were less present, where they are really strong in Southeast Asia. This is really helpful for us that we will have that franchise, but also the skills to deal with that particular client base as well. If we feel we can grow faster, we will look to grow faster there as well. It also brings a very good franchise in Latin America for us as well.
Which is one that we were looking at, how we could develop that as well. That's truly where it helps. They have some capabilities, also in the wealth business that we don't have as developed. With those capabilities and those experiences, we can then also use that for the rest of our wealth franchise. That's one on that one. The headaches, if you wanna call that, let's call it challenges. Clearly, the real challenge here is the rundown of the investment banking activities, right? It was already for them, and it will also be for us, and that's also why we, why we looked at getting the protection in that area.
Our team is very committed to working on it. We'll also kind of reach out to them as soon as possible there. That is one that, you know, it's an important factor of creating value by making sure that we refocus that investment bank in a way, the way we have our refocused our investment bank, in terms of having the capabilities and developing the capabilities, also to the wealth franchise. That is. That's, that will be quite some work. You, Sarah?
Well, on the deferred tax assets, we looked at the full tax situation in due diligence. It probably worth saying just in the context of due diligence, that we did have several days. It was an extended weekend that was extraordinarily intense, that there were many people involved and just tons of work that was done. It is actually a lot of information that was shared, and that gives us the ability to answer your questions. On deferred tax, we did see that on the, there were also some liabilities, so taxes was rather neutral in our analysis.
Great. Thank you for your help.
The next question is from Stefan Stalmann from Autonomous Research. Please go ahead.
Yes, good afternoon, everyone. Good evening. Sorry. Thanks for hosting the call. I have a couple of questions on the numbers, please. On the cost reduction, the $8 billion cost reduction that you're planning, is the starting base the reported cost base of CS or is it the adjustment, the adjusted cost base of CS or anything else? The second question is you will have to translate the U.S. GAAP accounts of CS into your IFRS accounts. How confident are you actually that there won't be any surprises from that translation? The next question regards the fair value of Credit Suisse's long-term debt, the one that's actually held at cost in the Credit Suisse accounts.
The fair value of that was already CHF 5 billion below, the accrued value at the year-end, and that has probably dropped a lot further given what credit spreads have done. If there's no recovery, you would probably look at a very material discount on these liabilities when you actually integrate them into your balance sheet. Is that plausible? Have you considered that? What will it do to your earnings going forward when you have to actually amortize that discount into your earnings? Thank you very much. Those would be the three questions.
In terms of like the $8 billion, it's the result. You take us plus them minus the reductions equals the total, and so that $8 billion is what comes out. It's really on their expense that we are gonna be doing it. In terms of the gap to IFRS, we are doing. We did like a whole like purchase price analysis. We did not share it because obviously this is something that we will do and with our auditors before the closing. That will be that we have of course considered at a fairly granular level already all of the adjustments that we would need to do.
We have separated in our analysis, what would be temporary, versus, marks on. Marks that we reflect a different opinion of value as opposed to, something which is, a different, type of recognition, and also what affects the CET1 versus what doesn't. The debt was of course, considered, so we didn't of course just do the assets, we did, the liabilities as we looked through, all of it.
When we think about the total, it is in that context that we gave you the comfort that the amount of excess capital that is served to us is putting us in a very good position to absorb that and be very, very well positioned. In terms of the debt to, of course, the fact that there is the access to the liquidity, the very significant liquidity that was provided by the Swiss authorities is also very helpful.
Sarah, may I, could you just follow up the $8 billion? That is based on your stated cost, not on your adjusted cost. Is that correct?
I'm sorry, I don't understand the question.
Well, are you starting with the reported cost base of CS or with the adjusted cost base of CS and of your cost base as well?
Oh, I'm sorry. Sorry. With their standalone cost, it would be the effective re-reported cost, except that it's not reported, since it's the forecast that we obtained and really built on our own.
If you want to reduce cost by CHF 8 billion, you have to have a starting position, isn't it? What is the starting position?
Yes.
Sure on the adjusted numbers.
Sorry.
No.
We start with, we built a projection for standalone CS, and that expense base was then reduced by $8 billion.
Okay. That one.
reducing $8 billion.
Projected. That number of $8 billion is as of 2027 because, and that's a run rate number.
Okay
... run rate reduction applied to 2027.
Thank you very much. Thank you.
Yep.
The next question is from Amit Goel from Barclays. Please go ahead.
Hi. Thank you. Just a few follow-ups and thanks for the call. Just to get a sense of, on that CHF 8 billion of cost reduction, how much restructuring charge, are you kind of envisaging? Is it close to the CHF 8 billion, or you think it could be materially less? That's the first question. The second question just relates to the protection that you've got from the Swiss authorities. I just wanted to check, obviously, as you know, there's been a huge amount of, you know, there's not been a lot of time to do all the due diligence, but I was wondering, in terms of the non-core assets, is that now kind of set?
you know, as you continue to spend some time to go further through portfolios, are you still able to determine which assets go into non-core and are eligible for the protection? Lastly, the benefit from RWA relief related to the protection. I was just curious, you know, how meaningful is that? Thank you.
The first one, yes, the parameter is still certainly the non-core unit they have, but also contracts that we think should go there. That parameter is still being worked on.
Yeah. We do have the opportunity, as Ralph Hamers said, to continue to define more precisely the parameter. We have a broad universe, and it is beyond what is currently and what they call the non-core unit. It's a fairly broad approach.
Including our run part of what we want to run now.
Yeah. In terms of the RWA release that come from the protection, yes, you're exactly right because the exposure is diminished through the protections. As we do on the adjustments, we will reflect on that impact, but that is very helpful. In terms of like.
Kind of cost to achieve.
Yeah.
The cost to achieve on the cost reduction.
The cost reduction, cost to achieve, I think, it's always a fairly traditional ratios in terms of like a lot of it is the personnel, a lot of it is a little bit of it is the IT. Therefore on the IT, there is just the reduction, and that's a one time. On the personnel, you have some cost to achieve that are commensurate, if you think about it, about, in terms of like, what could be... It can be less also. We have built that into our models.
The last piece of the restructuring cost that you have to think about is the marks that would come over time as it relates to the portfolios, and that's where the protection's come in.
Okay. Thank you.
The next question is from Andrew Lim from Societe Generale. Please go ahead.
Hey, just to add, it's 1.2 to 1.5, depending on where it is, but there are some cases where it's up to eight.
Yeah. That's the average on the personnel side.
actually we have different by division.
I know you're trying to make a calculation, so that's... We better give you kind of an average multiple.
Yeah
that we have assumed, on the personnel, aspect of the $8 billion.
Yeah.
Yeah. You can do some work. Thank you. Next.
The next question is from Nicolas Payen from Kepler Cheuvreux. Please go ahead.
Yes. Good evening. I have two questions, please. The first one is on the protection and of the non-core assets. The CHF 9 billion. Once you go above CHF 9 billion, did I get that right that you will share 50/50% of the losses with the Swiss authorities? The second question is on... I know it's very early stages, but any idea of the kind of return you could achieve on a run rate basis? Would it be, you think, significantly higher than the 15%-18% return on CET1? Thank you.
Okay. First I want to answer the questions around the cost savings. You know, we're giving you the answers as we are going through stuff that we've been working on. The CHF 8 billion, again, it's about CHF 6 billion on the FTE side, on the staff side. That has a cost to achieve of CHF 1.2 billion-CHF 1.25 billion. It is CHF 2 billion on the more IT system side, okay? Where there is no particular one. Multiple. On your 50/50. Basically the way we have constructed the guarantees, we take this CHF 5 billion first loss. There's a second loss tranche of CHF 9 billion, thereafter, and that is also still that we have to further document, it's a 50/50 sharing agreement.
That's. The other question was the return.
The run rate. In terms of like, by the time we get to the run rate, just think of it as being consistent with our run rate on the mix of businesses, being consistent.
Thank you.
Next question is from Piers Brown from HSBC. Please go ahead.
Yeah. Good evening, everybody. Thanks for taking the questions. I've just got two. One is on the liquidity support. I wonder if you could just elaborate on whether you anticipate drawing on that liquidity support and what the drivers for needing to draw on that support would be. Then the second question is just around some of the asset disposal plans. Is that completely within your choice, or could there potentially be competition requirements which might need you to dispose of particular assets? I'm thinking, you know, specifically in the Swiss market. Obviously, you're gonna have quite a dominant position in parts of the retail sector there. Thank you.
On the last one, to begin with that, no, debt is cleared. It's an important element for us. Clearly, we were not seeking this, so that's why it needed to be cleared for us as well. That's where we got clearance. On the, on the framework of support, so to say, from the SNB, these are all standard facilities, basically. It's a normal ELA facility, and there's an ELA Plus facility where there's an extended definition of the eligible assets that you can liquid assets that you can offer, and then there's the public backstock backstop on top of that. It's standard. Do we anticipate in drawing them? Yeah, preferably not, but let's see how the markets develop.
I mean, we didn't need them this year, this week. On the contrary. It's, yeah, we'll see. The important thing is that it's there as a signal to the market that what we're doing here is the full support of the authorities here and the central bank here as well, so that both Credit Suisse, who also just opens tomorrow, right? And ourselves, that the market sees the full support and all of that is also known by the other regulators as well in the world. Okay. The next.
Next question is from Anke Reingen from Royal Bank of Canada. Please go ahead.
Yeah. Thank you for this call, and thank you for taking my questions. Sorry. First is just some number questions. On the day one core Tier one ratio, is it basically as simple as adding the CHF 56 billion of badwill, which would lead to an 18% core Tier one ratio? Then if I try to square this with the tangible book value on the 74% increase, is it basically just the same CHF 56 billion and an additional 170 million of shares?
Coming back to the cost reduction, is it fair to say the $8 billion are on top of the cost savings that Credit Suisse already had in its plan? Will the reduction costs they announced be similar to what we should basically be assuming? Probably just lastly is in terms of this deal must be disruptive to your strategy and how do you assure that the people in your operation aren't disrupted and continue with your growth in U.S. and so on? Thank you.
Thank you. The last, two. Yeah, the CHF 8 billion is on top of that, right? Because these are synergies, right? These are things that we actually think are created by this deal. I think that's an important one. I think you have a very good question as to how do we focus the existing team also on our existing strategy. Clearly a part of our existing strategy is filled in by this inorganic move, right? As we have indicated that Asia Pacific was an important area for us to grow and a large part of that growth, we have now been able to fill in through this acquisition.
In terms of the scale improvement in, for example, asset management that we have been discussing about next to the fact that we wanted that we are working on making our asset management much more a specialized player. That is also filled in by this as well. There is quite some gaps or objectives that we had in our strategy, organic strategy, that we are accelerating through this.
Also in the U.S., where we want to grow as a wealth manager, you would probably find it find the strength that I'm saying this, but part of the growth in the U.S. that we want to do as a wealth manager is in the global family and institutional wealth space, for which our plan was and is to develop banking, you know, banking, investment banking activities. There are capabilities in specific sectors that we were focused on, where we were even hiring and plan to hire. Quite some gaps there are filled both on the research side as well as on the banking side with this acquisition, through which we can actually accelerate part of our growth that we were planning for in the U.S. as well.
There's quite some elements in this inorganic move that help us to support the original plans that you all know so well. For us, it is important that the way we start organizing ourselves going forward is that we truly focus on those areas where we can easily integrate to do that. Some of the integrations will come with quite some restructuring plans as well, right? To be developed. But the complementary side, so for example, in Asia, Latam, the U.S. banking activities, et cetera, et cetera, et cetera, that's pretty easy. I mean, you just make sure that they work together.
Clearly, you know, we'll have to reach out to our new colleagues when we are basically merging, and then start executing those plans that we had already on the inorganic side as well. There was one more question I think that.
Yes. On the day one, quarter one, you have the right starting points, you do need to do the purchase price marks, both on the change from the U.S. GAAP to the IFRS, as well as just the purchase accounting, as well as any views on marks on Ralph mentioned litigation, for example. That is what you would take. There will be part of the restructuring costs that will be immediate and some will come over different phases. It's that way that you end up starting with the initial number.
Okay.
Okay. Thank you.
The next question is from Magdalena Stoklosa from Morgan Stanley. Please go ahead.
Hi. I have two questions. First of all, could you confirm that all the debt instruments of Credit Suisse at its HoldCo and OpCo will move to the UBS HoldCo and OpCo? Second question, you may well refer me back to FINMA on this. Credit Suisse has a Tier two CoCo at the OpCo, which appears to have the same write down language as its AT1 that are clearly getting written down. Can you confirm that that Tier two CoCo will not be zeroed like the AT1s have been? Thanks.
The first one is yes. The second one we'll have to come back to you.
Okay, thanks.
Yeah.
The next question is from Benjamin Goy from Deutsche Bank. Please go ahead.
Hi, good evening. On the CHF 8 billion and the glide path of the cost savings. You mentioned the CHF 6 billion is coming out of FTEs, and you operate in countries with fairly flexible labor laws. I was wondering, how much you will realize in the over next two-three years already and how this CHF 8 billion and how you get there. Okay.
It does grow over time. That's why we gave you the 2027 number for two reasons. Some of it is because of the timeline. Some of it is because there are some people which are gonna be needed. There are some system, for example, where we will need to operate on those system for a period of time and then transition to our systems. It is a phased exercise which we will be organizing.
Thank you.
The next question is a follow-up question from Andrew Lim from Societe Generale. Please go ahead.
Hi, thanks for taking my questions. First of all, I'm just reading through the headlines today. It seems like you are increasing your offer for CS Equity from CHF 2 billion to CHF 3 billion. I'm just wondering how you came to that CHF 3 billion number. It seems quite generous in light of the fact that FINMA wiped out the AT1. Any comment that would be grateful for. Secondly, can you be a bit clearer on where you expect your new management CET1 ratio floor to be, I guess north of 13?
Okay.
And then-
The first question,
Mm-hmm.
Well.
Yeah. Sorry, go ahead.
I'm not going to give you insight in the negotiations, but, you know, we don't just give things away, right? That's the only insight I'm going to tell you there on that one. But this is what we feel is an equitable deal. We should all realize that this is a deal that we have to make under circumstances that are not necessarily the best. And therefore, you know, you look at all the elements that this transaction provides, the different supports that we are receiving as well, and the opportunity the acquisition brings as well, right? We can talk about it that, you know, we were not, we're not, basically focusing on it, which is we weren't.
But then if asked to take it seriously, clearly you start working on it. And we feel, you know, as I said, you know, it does accelerate quite some elements of our inorganic of our organic strategy. And then you make it work, and then we. Basically, you start making calculations as to what is it worth to us as well in terms of accelerating some of our organic strategy. That's how you come to these things. The second question was around-
Yes. Basically, just think of it as our target in terms of CET1 remains the same.
Same. Exactly. Exactly. Okay. Good.
Well, you anticipated being the same at 13%. I think there was some kind of illusion that the CET1 ratio and LCR requirements will be higher given that you're larger SIFI now.
The transition period is extensive. Think of it.
Yeah, that's it. That's clearly, you know, as I said, you know, so there's elements, there's different elements that you work with in a transaction, right? This is one of those elements. Thank you for being here tonight. I know that there must be still questions that we have not been able to answer, and I understand that. I even want to apologize for it, but this is how far we got in the couple of days that we had in order to work on this.
Now, clearly, we would like to take you along on this journey, which basically means that, you know, when we are clearer, when we are closer to the transaction, when we, when we are continuing our due diligence, when we can further kind of, when we can get more, more information, when we have more experience, et cetera, et cetera, et cetera, we can be more precise. The whole team here is working hard to make sure that the questions that you have, also tomorrow and also on Tuesday, that we at least collect them and make sure that one way or the other, we come back to you at a moment where we feel equipped to give you those answers. That's my promise. It's an important way to go on this trajectory, together.
You knew us very well. You've been following us. We will change, but we will not change that much. We will still be Swiss. We will be an even bigger wealth manager in the world. We will have an even bigger platform for investing, where we want to bring leading wealth clients and institutional investors together. From that perspective, we're making a giant step in terms of our strategy to grow to what we once indicated to you as the aspiration to be a $6 trillion network for private money. This is a big step into that direction. From many different perspectives, this helps us strategically as well. With that, again, thank you very much for being on the phone.
Again, we will be ready to work with you on your questions and come back with answers. I wish you, for the ones that are still in the time zone, where it's Sunday, a great Sunday and otherwise, go to bed quickly, and then we'll open tomorrow morning. Thank you very much.
Thank you. Goodbye.
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