Earnings Call: Q3 2020

Oct 20, 2020

Ladies and gentlemen, good morning. Welcome to the UBS Third Quarter 2020 Results Presentation. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Martin Ozinga, UBS Investor Relations. Please go ahead, sir. Good morning, and welcome to our Q3 2020 earnings call. Before we start, I should draw your attention to our slide regarding forward looking statements at the end of our presentation. For more information, please refer to the risk factors in our latest annual report together with the additional disclosures included in our quarterly reports and related SEC filings. And now over to Sergio. Thank you, Martin, and good morning, everyone. We were all hoping to be in a better place on COVID by now. The state world is still facing a difficult situation with Europe confronted with a wave of infections. I hope you and your families remain safe. On our side, we remain committed to supporting our employees, clients and the communities in which we operate. In this context, the clients continue to turn to UBS as a stable and trustworthy custodian of their financial assets for advice, the quality and breadth of our products and for our capacity to continue to land. Our operational resilience and financial strength are critical to enable us to deliver for them, while we continue to execute against our strategic priorities. As for the Q3, I think the numbers speak for themselves. Pretax profit was the highest in a decade. Net profit doubled from last year and PBT adjusted for items of a one off nature rose by over 40% compared to the Q3 of 2019. Our balance sheet remains strong with capital ratios above our guidance even after establishing a capital reserve for potential future buybacks worth 50 basis points on our CET1 ratio. We have had good momentum all year with strong performance across the 1st 2 months as well as since the pandemic began to dislocate markets in March. For the 3 quarters to date, the return on CET1 reached 17.6%, helped by increased client activity, intense client engagement and our readiness and capacity to deploy balance sheet. This was achieved despite having to absorb COVID related headwinds, such as lower credit card revenues in Switzerland, higher credit provisions and lower dollar interest rates. Positive operating leverage was supported by disciplined cost management, which contributed to a 6 percentage point increase in the costincome ratio to 73%, the lowest level since 2,006. The way we have been able to manage in this environment highlights our strength and is a testament to our winning strategy and business model and the quality of our people and infrastructure. It demonstrates once again our ability to deliver in all market conditions and is the result of sustained front to back investments over the years. Our revenues are well diversified across segments and regions, providing earnings stability and enabling us to capture opportunities where they arise. Our business mix is highly capital accretive, also thanks to our industry leading returns on risk weighted assets. All of this reinforces our balance sheet for all season and our ability to build out our loss absorbing capacity. The pandemic and its economic consequences are leading many people to fundamentally rethink their financial plans and positions. This has translated into higher client activity, as you can see on this slide. The continued progress in bringing together the whole firm with an increasingly integrated offering is also enabling us to develop deeper relationships, which helps to support these results. Our approach is rewarded by our clients. They are choosing to invest more with us to transact more through us and borrow more from us. UBS' commitment to APAC and its client has spanned more than half a century and building out our competitive advantage has been a strategic priority. We continue to be a premium brand for clients and for talent with a market leading integrated offering spanning wealth and asset management as well as investment banking. We have shown we know how to build and grow a successful franchise in Asia, even when, as we anticipated, growth has become more volatile. In this new paradigm, we continue to balance profitable growth with investments for the future. This year's performance in APAC is a validation of our strategy with PBT nearly doubling and with APAC being the largest contributor to the group's earnings so far this year. You cannot be the leading wealth manager without a meaningful presence in the world's largest market, the Americas. There, across our three businesses, we generated $1,700,000,000 in profits through the 1st 9 months of the year, up 42% year on year. In addition, the deferred tax assets we have in the U. S. Mean that pretax profits accrete into CET1 Capital 1 for 1, a unique feature for UBS. In the Q3, the Americas was the largest contributor to the group's earnings, generating 3 quarters of a $1,000,000,000 in PBT, double its 3 quarter performance from a year ago. Much of this success can be attributed to collaborative efforts across the divisions, including in capital markets for middle market institutional clients led by DIB and Wealth Management and the successful partnership between Asset Management and Wealth Management to expand their separately managed account offerings. Our full commitment to the Americas is paying off, and we expect cross division collaboration for the benefits of our clients to continue to be a distinguishing factor for us in the region. Our results are not only strong in absolute levels, but as you can see on this slide, also relative to the best of our peer group, in particular when you include the full cost of credit that has to be factored in when comparing performance over any cycle. Since 2011, without raising new equity, we have generated $33,000,000,000 in capital, of which we delivered or accrued $22,000,000,000 for shareholder returns, including $18,000,000,000 in cash dividends. The remaining $11,000,000,000 was retained to meet higher regulatory requirements and underpin growth. Today, we reconfirm our plans to pay out the 2nd installment of the 2019 cash dividend with an EGM scheduled for next month. Going forward, we remain committed to paying out any excess capital. And as communicated in July, for 2020 beyond, we plan to adjust the mix between cash dividends and buybacks. In line with this, we have been accruing at about half the rate of the 2019 full year dividend. We have also built a $1,500,000,000 reserve for potential future buybacks on which our regulator has been informed and raised no objections. This amount has been carved out of CET1 capital to reflect what we would otherwise have used to buy back share this year. We may make further accruals for buybacks in the 4th quarter, and we are hopeful to be allowed to resume buybacks in 2021. Turning to investor sentiment, our most recent survey, which we will publish tomorrow, tell us short term optimism improved slightly this quarter. Unsurprisingly, COVID continues to be the number one concern globally, followed by politics. The U. S. Election remains a key catalyst in the short term. With respect to clients and our potential and our operating model, COVID has accelerated a number of pre existing trends, and we are responding and adapting to the new environment. We are seeing increased digital usage among clients, and we are accelerating to meet their needs today and tomorrow. Sustainable investing remains top of our clients' minds, boosted by outperformance year to date and a growing emphasis on tailored investments. It's an area where UBS has been a leader for years, and we continue to set the pace. In the quarter, we become the 1st major global financial institution to prefer sustainable over traditional investments for wealth management clients investing globally. We also rolled out climate aware asset management strategies across additional asset classes. And lastly, with interest rates across developed markets likely to stay low or negative for longer, our clients need our advice on investing in an environment where regular savings return less than the rate of the inflation. To support our clients in their search for sustainable risk adjusted returns, private markets offer interesting opportunities, and we are investing to further enhance our capabilities. In addition, the smart users of leverage can help to enhance returns. Again, the banking industry is changing rapidly, and there is no room for complacency. We have to make further strides to become more efficient and effective. Adapting is something we are good at. For example, we are constantly reassessing our front to back processes and what the bank and the workplace of the future will look like, along with the implications for our real estate footprint. In addition, we are reaping the benefits from being ahead of the curve on cloud migration, which is propelling us forward on our digital journey. To summarize, UBS is stronger than ever, strategically, financially and operationally. We remain vigilant in the face of risk in the market and potential weaknesses in the broader economy. In the face of these uncertainties, we are focused on delivering for clients, executing on our strategic priorities and building on our momentum to prepare the firm for the future. With this, I'll hand over to Kurt to take you through the Q3 results. Thank you, Sergio. Good morning, everyone. Net profit for the quarter was 2,100,000,000 translating into a 21.9 percent return on CET1 capital. On a reported basis, PBT was $2,600,000,000 with around $60,000,000 net year on year benefit from foreign exchange moves. Our 3Q results include the net impact of $526,000,000 from items that we have called out due to their one off nature within the context of the quarter. This compares with a single one off gain of $600,000,000 that we had previously flagged relating to the Funds Centre sale. Adjusting for the items that we've called out, PBT was up 41% to $2,100,000,000 On this basis, our cost to income ratio improved 6 percentage points to 73% with 12% income growth outpacing expense growth of 4%. We've provided an overview of these callout items in our deck, which you can find on a 3Q 9 month basis in the appendix. I'll highlight a few of these items. First, we realized a 631,000,000 dollars gain related to the sale of Fawn Center, which closed in September and mostly benefit asset management with a smaller part in GWM. There was no net tax expense recognized on the gain, which is the main reason why our group tax rate is lower this quarter at 19%. 2nd, in order to provide additional career flexibility for eligible employees, we modified the forfeiture conditions of certain outstanding deferred compensation awards for voluntary leavers, which accelerated $359,000,000 of personnel expense into the Q3. There will be a corresponding savings spread over future periods, most of which over the next 2 years. And lastly, in the IB, we booked a $215,000,000 gain on the sale of intellectual property rights associated with an index family. The impact of these callout items mostly cancel out in the business division's P and L, except for asset management, given the size of the bonds that are gained. Global Wealth Management produced its best 3rd quarter pre tax profit since 2011. PBT grew 18% fueled by transaction activity and loan growth. Performance was consistent throughout the quarter with revenues at around $1,400,000,000 in each month. Expenses were down 1% compared with 3% higher revenues, leading to a 3 percentage point cost to income ratio improvement. We had our highest net new loan volume on record for a single quarter at over $10,000,000,000 with all regions contributing and especially strong growth in the Americas. Year to date, net new loans were $18,000,000,000 consistent with our strategic focus on this key growth driver. Our loan portfolio quality remains high and we have achieved this substantial loan growth without increasing risk on a portfolio level and with no build in stage 1 and 2 credit loss reserves and an overall net credit loss recovery in the quarter. There is also significant further upside potential as lending penetration remains low at just 7%. We continue to gain momentum with our 1 firm initiatives. Year to date, collaborative efforts between GWM and the IB produced nearly $50,000,000 in revenues from 47 deals. Our separately managed account initiative in the U. S. Drove $8,000,000,000 of inflows into asset management in the quarter and over $35,000,000,000 since inception in 4Q 2019. In TFO income across GWM and the IB was up 27%. Recurring fees decreased slightly as the benefit of higher invested assets was offset by lower margins. Part of this margin compression was driven by clients moving into lower margin funds, including shifts in our fund offerings to address a new U. S. Regulatory requirement. Sequentially, we were up 10% if the billing base increase and recurring margins were stable. Our U. S. Business moved to average daily balances for client billing on advisory accounts as of October 1. Billing now better reflects the actual value of a client's assets through the quarter. This change will also remove the lag effect the prior billing convention had on recurring fees in the region. This was made possible by the technology enhancements we are implementing with our Broadridge partnership with full conversion to take place in the second half of twenty twenty one. With this initiative, we are building an entirely new state of the art technology platform on component architecture, which will allow us to add more new in house and third party services and functionalities, while also generating substantial cost savings. Net interest income was down 2% from 3Q 'nineteen and 6% quarter on quarter. Sequentially higher net interest income from loan growth was more than offset by significant deposit margin compression from the U. S. Dollar rate cuts, mainly outside the U. S, along with increased liquidity costs related to COVID that were passed on to the business during the quarter. We have now absorbed the majority of the impact from these rate cuts. Over the coming three quarters, lower dollar rates will continue to be a headwind to deposit NII sequentially. We are confident in our ability to offset this with loan growth. Transaction based income was up 16% on continued high levels of client activity. Our research, solutions and investment content are resonating with clients as they seek advice and guidance to navigate the current uncertain environment that presents both challenges and opportunities. We have now seen 3 consecutive quarters of strong year on year transaction revenue growth, also driven by a series of actions launched by Tom and Iqbal coming into this year. We will continue to focus our on dynamically developing and deploying tailored solutions for our clients, leveraging our market leading CIO and integrated IV Solutions platform. Moving to the regional view, we had growth in all regions with record 3Q PBT in the Americas and APAC. In the Americas, we recorded 12% higher PBT despite a decrease in revenues as costs declined more on the back of both lower personnel and G and A expenses. We also had a credit loss recovery on a position impaired over the previous two quarters. Mandate penetration rose sequentially and net new loans were an impressive 5,000,000,000 dollars helped by a fixed rate securities backed lending product we offered clients in July August that generated significant demand. PBT was up in both EMEA and Switzerland, partly helped by gains from the bond center sale. Loans were up sequentially in both regions. Sergio has already highlighted APAC's impressive performance for GWM in the group. We broke the $500,000,000,000 mark for invested assets, PBT was up 57%, transaction based income was up 72%, and we improved the cost to income ratio to 63%. Moving to P and C, PBT was down 13%, partly as a result of credit loss expenses of CHF84 1,000,000. Income before credit provisions was down 1%, mainly reflecting CHF40 1,000,000 lower income from credit card and foreign exchange transactions on reduced travel and leisure spend abroad by clients due to COVID. Net interest income came down on lower deposit revenues related to dollar interest rate headwinds on our corporate and institutional clients, while recurring net fee income rose on higher custody fees. Of the $84,000,000 credit loss expense, dollars 54,000,000 related to a case of fraud at a commodity trade finance counterparty affecting a number of lenders. P and C now has only minimal remaining exposure to this counterparty. Operating expenses decreased by 3%. Our business momentum in P and C remained strong. Net new business volume growth in personal banking was 5.6% for the quarter and a record 7.5% for the 1st 9 months of 2020. For corporate and institutional clients, we saw more than 10% annualized lending growth from net new loans year to date excluding COVID loans. We wanted to give you a quick snapshot of our high quality Swiss lending portfolio. About 65% of our exposure relates to mortgages. The vast majority is residential, most of which owner occupied where we do not see signs of stress. We're carefully managing our risk in our commercial retail and office portfolio, but this is less than 5% of our Swiss mortgage book. Dollars 31,000,000,000 of our exposure is to lumbar loans. Remember that in March, we went through a real life stress test on this portfolio with barely any losses. We have $14,000,000 of loans outstanding to small and medium enterprises. Under the government COVID loan program, our clients have credit lines of $3,300,000,000 with us, of which $1,700,000,000 is drawn. One interesting observation here is that we saw only a small increase in utilization of these COVID credit lines between July when the program closed to new applications and September from 48% to just 52%. We also saw very limited increase in drawdowns by SMEs generally. This speaks to the relative strength of the Swiss economy. The quality of our lending book and our strong financial position allow us to support our clients through difficult times, which in turn supports the economy. For asset management, given the magnitude of the call out items I referenced earlier, including the font center gain, my comments here will exclude these. Asset Management had another great quarter with PBT up 42% to $191,000,000 in 6% positive operating leverage. Operating income was up 27% on strong overall performance with exceptionally high performance fees, primarily driven by hedge fund businesses. Net management fees rose 12% to the highest level in over a decade with continued excellent momentum in net new run rate fees. Since the start of 2019, net new run rate fees are in excess of $150,000,000 annualized, highlighting both the strong volumes and the high quality of our net new money flows. We had inflows of $18,000,000,000 excluding money markets, contributing to a record invested assets, which are now within striking distance of the $1,000,000,000,000 mark. Our consistent investments and strategic execution over the past years have come together to create strong momentum for asset management. In Greater China, we are ranked as the number one international managers based on our market share of over 9%, we continue to invest and expand our unsure product offering. We have more than doubled our sustainable and impact investing focused AUM globally over the last 12 months. And we just launched some exciting new products in the sustainable investment space like our expanded suite of Climate Aware strategies, which builds on our award winning passive offering to include active equities and fixed income funds. Another example is our in house hedge fund O'Connor's new environmental focus strategy. We already talked about the inflows related to our initiative with GWM on separately managed accounts in the U. S, which continue to be well ahead of our plans. Clients are recognizing our differentiated capabilities in innovation, and we see it in the net new money inflows of nearly $60,000,000,000 year to date or 9% annualized with positive contribution from all channel and regions. The IB had another excellent quarter and delivered its best operating income over 5 years and the best 3Q PBT since we restructured our IV in 2012. Revenues were up in all regions and nearly all products. Global Markets revenue increased by 26% on the gain on sale of intellectual property rights that I mentioned earlier. Execution in platform, derivatives in solutions and financing were all up year on year. Derivatives and solutions drove the biggest increase with particularly strong equity derivatives and credit performance. Execution and platform was up 18% with higher client activity levels in cash equities, especially in APAC and higher volumes of fixed income e trading. We also believe we gained market share in electronic training and FX, a testament to the investments we have made in our platforms over the years. Within Global Markets, using the traditional split of this business, equities rose 43% or 19% excluding the gain. FRC increased by 41%. Global Banking delivered its best quarterly performance since Q1 2018 as revenues increased by 44% with substantial growth in Equity Capital Markets and Leveraged Capital Markets revenues. All products outperformed their respective market fee pools, including advisory where the fee pool contracted by a third. The IB's cost to income ratio improved to 74% as the increase in revenues significantly outpaced cost growth. IB risk weighted assets came down by $6,000,000,000 during the quarter on the back of lower stress and regulatory bar, reflecting less volatile market conditions in the quarter as well as risk management activity. We took advantage of good market conditions to derisk positions primarily in LCM, freeing up capacity for new underwriting activity that helped boost our revenues this quarter. Throughout the 1st 9 months, we maintained our focus on deploying capital with discipline and for appropriate returns. The numbers on this slide speak for themselves. At the group level, we booked credit losses of $89,000,000 in the quarter, of which $8,000,000 related to Stage 12 and $81,000,000 related to Stage 3 positions. Updated macroeconomic factors resulted in a small recovery in Stage 12 expenses. However, given the significant uncertainty that remains, we consider the release premature and applied post model adjustments to overlay and offset these effects. Stage 3 impairments are concentrated in P and C as I previously mentioned, with a partial offset from the GWM recovery that I highlighted. Our capital ratios remain substantially above regulatory requirements. That's without taking into account any of FINMA's temporary relief measures. Our CET1 capital ratio is 13.5% and would have been 14% before establishing the $1,500,000,000 reserve for future buybacks. Much like dividend accruals, this is stripped out of CET1 capital, but still sits in our tangible equity. Our CET1 leverage ratio was 3.8%, excluding Venmo's temporary exemption for site deposits at central banks. Before the reserve for buybacks, it would have been 4%. Now back to Sergio for his closing remarks. Thank you, Kurt. Before we move on to Q and A, I'd like to share a few reflections on my 9 years as the Chief Executive of this incredible organization. Since I took over, we have made great strides to transform UBS. The quality of our people and the strength of our culture today are both testaments to that. According to our most recent employee survey, 86% of our people are proud to work for UBS. This year, I have felt particularly proud and humbled by the dedication, flexibility and stamina that my colleagues have shown in the face of unprecedented personal and professional challenges. I would like to sincerely thank everyone here at UBS for their hard work, their loyalty and their passion to deliver for our clients. I would also like to acknowledge and thanks our clients. They have always been and will remain at the heart of what UBS stands for. I have had the pleasure of knowing many clients through my time here, and today, I would like to thank each and every one for their continued trust in the bank. To our shareholders and the analysts who have been with us on this and the previous 36 earning calls of my tenure. While I haven't always agreed with some of you, I always valued your perspectives and various inputs to our debates and never took your support for granted. I'd like to thank you for your support and for challenging and encouraging us to strive for more. Also many thanks to the Investor Relations team at UBS for their outstanding support. Last but not least, a special thanks to those who served with me on the Group Executive Board over the years. Together, we made this challenging, but rewarding journey to turn UBS into what it is today. UBS has all options open to write another successful chapter of its history under Ralph's leadership. With warm feelings and keen interest, I'll be keeping an eye on UBS from across the street. Thanks. And now let's move to Q and A. We will now begin the question and answer session for analysts and investors. The first question is from Magdalena Stoklosa from Morgan Stanley. Please go ahead. Thanks very much and good morning. Now two questions from me to start, one on NII and another one on kind of investment priorities. So on NII, kind of let me return to your NII strategy, and that's particularly in Wealth. Now volumes have been very strong year to date, and you clearly kind of plan for more. But in other words, could you kind of tell us how much volumes do you think you need, particularly in 2021, to offset the U. S. Dollar kind of rates pressures? And secondly, I suppose, Sergio, if you could kind of share with us the when you think about kind of incremental investment dollars as you look at the business now, kind of what would be your investment priorities as you hand over to Ralf Hammers? Thank you, Magdalena. I'll take the first question. In terms of net interest income, as I highlighted in my speech, we have seen substantial momentum in our lending revenue. In fact, overall, our loans are up 14% or $25,000,000,000 So there's also some foreign currency translation impact in addition to the net new loans of 18,000,000,000 dollars That helped us offset a good portion of the U. S. Dollar interest rate headwinds. So quarter on quarter, I think is probably the best place to focus where we did see $100,000,000 of headwinds from lower dollar interest rates. And then also you might recall, I indicated we were going to push out COVID related liquidity costs to the business divisions, which we did during the quarter and there's another $25,000,000 there. Now we're actually we actually saw that peak during the quarter. And so therefore, the U. S. Dollar related headwinds will begin to taper as we get into Q4 and also into 2021. And we believe that we'll fully absorb it by the end of Q2. Now also as I indicated in my speech, we expect that the continued momentum from the loan volumes we already generated and we expect to generate will allow us to fully offset any remaining headwinds from U. S. Dollar interest rates. Thank you, Magdalena. In respect of priorities on investments going forward, I guess, you mean more the cost side of the equation. I think that's we need to continue to be very balanced in our front to back approach and how to invest the money. I think it's very important that, first of all, we continue to generate the capabilities and the right to invest in our future by creating efficiencies and effectiveness in the way we look at it. I think it's the COVID experience has demonstrated that the validity of having a strong infrastructure and a resilient infrastructure that supports higher volumes when necessary, but also a necessity to be to reflect the technology and the digital developments in respect of how we face clients, what we offer to clients and what is also very important, how we give the tools to our front people, being client advisors, being sales people in the IB or investment bankers in the IB and asset manager and so on, to be able to be more productive and more informed and better equipped than our competition. So it will continue to be a balance between in investing front to back and creating through that also cost synergies because many areas, of course, we need to make sure that we also capture the opportunities that technology can offer to become more efficient. Absolutely. And if I may, Sergio, since it's kind of last earnings call, I also just wanted to say that it's been an absolute pleasure for us kind of working with you over years and wish you all the best with the SwissVee chairmanship and they're lucky to have you. Thank you, Magdalena. Same year. The next question is from Kian Abousen from JPMorgan. Please go ahead. Yes. Thanks for taking my questions. First of all, Sergio, thanks for all the support and clearly the calls, the early calls that you joined with us, highly appreciated. And hopefully, it gives you an opportunity not to start the call. It's too early going forward, but we very much appreciate your support. I have two questions. The first one is related to total payout because clearly you're changing the mix. You also mentioned that in the Q4, you might take further reserves. And I'm just trying to understand how I should think about payout policy. I think you say any excess capital will be paid out, but clearly just for us to think about how should we think about that quantitatively. And in that context, how should we think about the pace of buybacks? Because clearly, you're reducing the cash payout or cash dividend absolute. And as a result, clearly you're substituting part of that with buybacks. I'm just trying to understand, pay for buyback, should we think about gradual as of 2021 or how should we think about the whole process of reserving and buying back? The second question is really more of a general question about your view of what you think you was the biggest change in the group, which had the biggest impact? And also, what is it that you would have liked to have done looking backwards, looking at back mirror and something that maybe didn't happen? Well, thank you, Kian. And for sure, I won't wake up so early in the future. So in terms of payout policies, I don't think that we the intention here is to continue to distribute and add any excess capital that we don't need to grow the business. And also, I think that the key levers for us are also very highly determined by not only the guidance we have been giving you on in terms of where we think we're going to be in terms of CET1 ratio until full Basel III is implemented because of course in 2 or 3 years' time, my colleagues will also have to reassess and rebalance this around 13% to whatever is appropriate, because if you look at pro form a since I started, the fact that we are now running at 19% CET1 ratio. And so the older regulatory inflation that is coming in makes the 13% that we are used to talk about a little bit of a relative game here. So and most importantly, Kian, is the stress. So stress is the very our own stress assessment and also the regulatory stress models that we get are also very indicative of how much capacity we have for capital returns. So I don't think that it's going to be strictly driven by a payout ratio set of numbers, but those two elements. So in terms of timing, the pace will be determined in 2021 by 2 factors. Of course, the most important in respect of even this €1,500,000,000 or whatever we're going to accrue in Q4, determine by regulatory framework internationally, you will see that there is a clear desire at this stage and we understand also that the uncertainties are there and to some extent, we need to wait before we establish a more significant capital return plans. But I would say that as soon as regulators are starting to differentiate between banks in the respect of who needs more capital and who needs less capital, and also they look deeper into the business model of banks, I believe only by then we can resume capital share by banks. So hopefully, we believe at the beginning of 2021, of course, you need to take in consideration some idiosyncratic legacy issues that we will need to manage, but there is ample capacity here through the reserves and the cash generations that we have in the business to create enough buffers to manage any kind of scenario for UBS going forward. Look, in terms of changes, I don't bore you with numbers because at the end of the day, you can look at the numbers, they speak for themselves. And of course, we went through a lot of changes and transformation, derisking, repositioning of wealth management to a new paradigm. But I would say that's probably the most the thing that I see and I feel with my colleagues has changed a lot is we brought back the culture to the bank in a more homogeneous way. I think that's we pretty much everybody here in the bank knows what we stand for, the way we want to what we want to achieve, but also how we want to achieve our results. And in my point of view, this is probably one of the biggest change that's together with my colleagues, we brought to the bank and most importantly with the contribution of my colleagues. Now regrets, well, there is always regrets when you look backwards because I don't think anybody can basically look at 9 years and pretending everything has been going right. But I think that's Rosaldo, I think that's the regret is that Paduan has to leave twice in order to capture maybe the opportunities that I think UBS has still ahead of it itself. I have the regret of having a little bit of a better market environment that's but it's definitely not maybe for another life. I will have better environments as a CEO of a bank, not this one. We hope so all. Thank you very much. The next question is from Jeremy Siggy from Exane. Please go ahead. Thank you. Good morning and thank you as well from me, Sergio. Thank you for everything you've done with us over the years and best wishes for your next steps. Just two questions, please. So one is just picking up on the comment you made a moment ago, just around the sort of regulatory and political process for approving the resumption of buybacks. And you mentioned the international dimension. And I just wondered to what extent a Swiss decision on restarting buybacks will be constrained by a need to sort of coordinate that with what the Fed is doing and what the ECB is doing? So whether that is a constraint on the process? And more broadly, what do you see as the constraints or where do you see the political debate in Switzerland about allowing some or all Swiss financials to resume share buybacks? So if you could just sort of talk us through the domestic and the international politics on that, that would be great. And my second question was more sort of nuts and bolts about the cost accruals in the investment bank and just how you feel you are accrued at this 9 month stage. In other words, do you think that you've got sort of conservative accruals with scope to claw back something in 4th quarter? Or if we get a normal revenue level, will we see another sort of 70 ish percent cost income? So just how you think you're accrued in the investment bank for costs? Thank you. Thank you, Jeremy. I'll take the first I'll take the first question and I'll pass the second to Kurt. Well, of course, I can't speak for FINMA and how they make their decisions. So I think that's I would probably refrain from doing that, but it's quite clear that at this stage, there is a necessity to steal. And as I mentioned before, to some extent, I do understand the necessity of trying not to single out or create a stigma in the system around who can pay dividends, who cannot pay dividends and do share buyback, who cannot do share buyback. But over time, I do hope that internationally and domestically, there is differentiations. I think that it's very important to, number 1, reinforce the credibility of the regulatory regimes that we introduced and we are managing today. And I don't think that's one side's feet tall in terms of capital returns policies going forward is the right solution. I think that it's also very important for all of us and for you guys particularly to make this industry an investable asset class by basically trapping unnecessary capital in the banks, you either going to make it not attractive or you're going to force the system to deploy capital in a way that over time cannot be constructive, no matter if it's used for organic or inorganic growth. If you basically don't allow the right amount of capital returns to be put back in the system, it is dangerous, particularly when you have banks that are trading below book value and there is an opportunity to utilize share buyback as a very flexible and efficient way to return capital to shareholders. I think that there is way too much and now I'm going into potentially the political, but not only the more the media side of the equation that there is a tendency to demonize share buybacks. I think that share buybacks are a very efficient way to retain flexibility, regulatory flexibility, prudential flexibility, while returning capital to shareholders. So I don't see any political aversion in Switzerland in that respect as long as we demonstrate like we did that we are able to support the economy and put a very proactive having a very proactive role in doing that and funding the economy. There should be no doubt that there is an advantage for Switzerland, particularly to maintain a very strong financial center and an investable asset class in the banking industry. Yes. So Jeremy, just in terms of your second question. So mechanically, what we do across all of our business divisions is that we accrue after economic contribution before variable comp or bonus. And so therefore, we take into account the cost of capital that we deploy and the businesses use. And year to date, we've accrued on that basis and we feel like we're fully accrued in the IB, but also across all our businesses for the results that they've generated year to date. Now having said that, just like all our peers, as we get into the Q4, we learn more about what the market is likely to do and there are other factors that get taken into account for finalizing our compensation levels overall. But as I said, just to be clear again, we feel very, very comfortable that we're fully well accrued for the investment bank based on its performance year to date. Okay. Thank you. The next question is from Benjamin Goy from Deutsche Bank. Please go ahead. Yes. Hi, good morning. Two questions, please. First, one more on payout. Your cash dividend reserve is about 20% payout ratio. Just wondering how we should think about it going forward given your very strong net profit level this year. So should we think like it's a bit at the lower end to ensure progressiveness in the future? Or is that a good run rate also going forward? And then secondly, a smaller one on Asset Management, in particular, in within your Equities business, another quarter with very good inflows. I think partially that is driven by the separately managed accounts, but also the underlying business seems to be doing well. Just wondering what is what are you doing there specifically? And on the cross selling of these SMAs because I guess that's the main story there. Thank you. So on the payout ratio, as we outlined, this policy that you see the accruals clearly indicates the new base for our cash at dividend going forward. As we outlined, we believe that the payout ratio for cash will be similar to our U. S. Peers. And we will, of course, also continue to strive for very low nominal increase year on year to reflect the profitability and so that we improve a little bit our cash dividend. But as long as the stock trades below book value or tangible book value, I think that it's quite clear that we will prefer to do share buybacks. Also in order to retain, as I mentioned before, going forward, more flexibility in terms of how to navigate any challenges that the industry and we may face going forward. So I think you can see that resetting of the payout being closer to our U. S. Peers levels going forward. Yes, Benjamin, in terms of asset management flows, as you indicate, they are very strong in the quarter, but they're also very strong year to date with 18,000,000,000 dollars excluding money markets. And as I referenced, that's an 8.9% annualized growth rate. But the $50,000,000,000 excluding money markets is 8.2%. And while clearly there's been a benefit in positive flows from the SMA initiative with our U. S. Wealth management business that has exceeded our expectation. If you look at the totality of the flows, they're actually a quite broad base and of high quality. So we've seen good flows across all our channels, institutional wholesale where we've invested as well as GWM across all of our strategies, including because we've seen very, very good performance in our in house O'Connor hedge fund and seeing good flows there across hedge funds. The flows on the active side have been more concentrated in equities also as you mentioned. And the testament to that quality is the fact I highlighted in my speech, our net new run rate fees on a cumulative basis year to date are 150,000,000 dollars And I think that just speaks to the quality of the close overall. Thank you very much and all the best for the future and specifically your new role Sergio. Thanks, Benjamin. Also thanks to Jeremy. The next question is from Anke Rangan from Royal Bank of Canada. Please go ahead. Yes, thank you very much for taking my Just two questions, please. First, on capital return. I understand your 20% comment or your dividend accrual. And in terms of the buyback, the €1,500,000,000 should we think about this being a 30% ratio, taking the total capital return to 50%? Or is the buyback more as a fixed amount in terms of executing on your 2020 buyback as you're executing on your 2020 buyback as well as on your 2021 buyback? And then just secondly on the tax, could you talk us through about the moving parts if the tax rate would go up in the U. S? Thank you. So thank you, Anke, as well for your comments and remarks. So in terms of total payouts, I think it's a good question because we need to clarify this topic. So we have no intention to reduce the payout ratio that is available to shareholders. We have no intention to have a fixed payout. The payout will be a function of the excess capital that we believe we have on our balance sheet based on our future plans on how to grow organically the business and the stress scenario we have. So the total payout ratio can be very similar to the one we had in the past. So we will not retain excess capital and that's the beauty of the share buyback. Share buyback can function and reflect in a much better way at this stage our flexibility to move around this payout ratio. But there is no constraints. We are able to grow our businesses by self generating capital and all excess capital above those levels will be returned. So there is no fixed percentage in mind or implied in any numbers that you saw being accrued or communicated? Yes, Anke, in terms of your tax question, so maybe if we use what has been put forward as the buy in tax program, the increase in the corporate tax rate from 21% to 28%, That would result in a write up of our DTAs of around $2,000,000,000 and an increase in our overall tax rate of around 2%. But very importantly, because we do have the advantage of our DTAs in the U. S, first of all, we would continue to pay 0 tax or almost 0. There's still state and local taxes that we would incur in the U. S. Market. And also, the overall cash taxes that we would pay at the group level would not change at all until the full expiry of our DTA. So you wouldn't see any change in our cash tax position, which would allow us to continue to accrue the same level of capital that we're generating today and also help the other question that you had around buybacks and cash dividend. Okay. Thank you. The next question is from Stefan Stalmann from Autonomous Research. Please go ahead. Yes, good morning. And first of all, Sergio, all the best, and thank you very much for the last 9 years. Never a boring moment. Much appreciated. I have 2, I guess, nuts and bolts questions left. The first one relates to the changes to your deferred compensation, the €359,000,000 If I understand it correctly, you're amortized as you're accelerating the amortization of an existing deferral. And €359,000,000 seems like a pretty big acceleration. You only had about €1,000,000,000 of compensation that needed to be amortized at the end of 2019. So I'm trying to understand what this is actually reflecting. Are you trying to facilitate the exit from UBS of a group of, let's say, highly paid MDs that are not performing so well anymore and then Wootelen maybe like to leave voluntarily. Maybe you could give a bit more color on what you try to achieve with this move? And the second question relates to the commodity trade finance fraud in P and CB. I appreciate you cannot tell me which company that is, which counterparty that is. But can you maybe say whether this fraud actually occurred in the Q3 or if it's dealing with a fraud from previous quarters? And is it reasonable to assume that this is a Swiss counterparty? Thank you very much. Thank you, Stefan, also for your words. And yes, it was never boring. You're right. So in terms of acceleration in respect of the deferred compensation, This is not about managing underperformer. We do manage this over the cycles or we look at our underperformance. I think it's more reflecting of 2 issues. We have realized and although we continue to believe that a more restrictive vesting and policy in our deferred compensation plan is appropriate. We have realized during the COVID times that many of our colleagues in the bank and not just highly paid MDs across the board because this is touching different segments are maybe thinking about reprioritizing their lives. And I don't think that it's appropriate for people that have an intention to do something completely different in their lives outside the financial services industry and banking to be restricted by the fact that we have longer vesting conditions than many of our peers. So I think it's a realization. Together with that, we also recognized in the bank that there was a necessity to thank all the people that less senior ranks in the bank for their efforts during the COVID environment. And so that's the reason we, for example, granted 1 week of salary to all employees. So around 25,000 people are touched by that. So it's part of a more broader issue and it's not about underperforming or overperforming. It's our realization that COVID has changed the lives of many people and we should not stand in the way of people's lives decision. So of course, if they want to reenter the industry and join a competitor, they would have to forfeit any compensation. In respect of your questions, unfortunately, you're right. I cannot really talk about anything other than, of course, this fraud was something that we discovered and was crystallized during Q3 and therefore is reflecting of what happened in Q3. And I think that there has been some media coverage in some specialized magazines about who may or may not be the counterparty. But for obvious legal reasons, I will not go into any further detail. But only to underline that this is not an idiosyncratic UBS situation. This fraud has impacted numbers of lenders. And we believe that in that sense, we took the appropriate provisions and our exposure on this matter is de minimis. Great. Thank you very much again. The next question is from Adam Terolak from Mediobanca. Please go ahead. Good morning. So I had one on capital and then another one on loan growth in GWM. So on the capital front, it feels like just a slight change in how you're dealing with the buyback. So previously, it was obviously coming out of each quarter's earned earnings and now you're accruing it into CET1 ahead of the buyback. Is that just caution in the face of current regulation? And will that go back to normal in terms of coming out of as you go earnings once the buyback is turned on? And then on GWM loan growth, kind of a couple of questions there. It seems like the €10 odd 1,000,000,000 of GWM loan growth has added €60,000,000 plus of revenues. But on the other side of that, the RWA growth, it seems relatively limited. Can you just talk about the economics of that sort of loan growth? And in terms of the outlook for RWA, whether that is still going to be relatively balance sheet light while still managing to defend the NII? Thank you. Thank you, Adam. I'll take the first question. So the reason why we created this reserve is also to reflect the unique situation we are in right now in terms of the regulatory constraints that we discussed internationally are there, the one that we are subject to. The intention was to really flag, if necessary at all, what is our intention, what we would have done so far if we could have basically acted without any of those constraints. And I don't believe it's necessary I don't believe it's necessary in the future to do that. But the circumstances will determine how my colleagues will react and adapt to this environment. But this is something that is more reflecting of the situation that we have right now in terms of constraint in execution and is a further more formal commitment to shareholders in respect of what we do and is a way to create more transparency again of what we would have done so far this year if we would have were allowed to do that. In terms of your question on the dynamics of lending movements in our Wealth Management business, So within the quarter on quarter on quarter, we saw around almost $40,000,000 contribution of lending revenue, lending NII that increased from 2Q. Now overall, of course, the way that the $10,000,000,000 will materialize is that we'll see that fully in our run rate in 4th quarter. So we'll see more benefit of that $10,000,000,000 in the 4th quarter than we did in the 3rd, which gives us a positive view on quarter on quarter trajectory of lending revenue going forward. Now the composition of the $10,000,000,000 it was mostly Lombard security based lending out of the U. S. As well as some mortgage and there was a smaller contribution from structured lending. The risk density, so the RWA contribution from a Lombard portfolio is relatively low. Hence, you didn't see big movements in RWA, although you did see some increase in GWM. Going forward, we would expect to see contribution across the range of our lending products, including the more structured end. Now the more structured end does have higher risk density and therefore would contribute to more risk RWA. But overall, you shouldn't see a material change in the overall risk density of our GWN business. Great. Thank you much and all the best. Thank you, Adam. The next question is from Andrew Combs from Citi. Please go ahead. Good morning. First, let me echo the thanks to everybody. I've also enjoyed reading some of your wide ranging exit interviews with the press over the past few days. As most of my questions have been answered, but let me just give a couple on the Investment Bank. You have seen a very strong quarter Investment Banking. As you said, it is across regions and across products. But I did notice that the Americas is now 40% of your investment banking revenues in the quarter. It's usually around a third. So it doesn't look like the Americas was particularly strong. So perhaps you could comment on that. And then secondly, the Banco DO Brasil agreement has been announced. Perhaps you could just elaborate on the advantages and what you see for that going forward? Thank you. Yes. Thank you, Andrew. As I highlighted, the contribution was broad based across all regions for our investment bank. Now we did see a very good investment banking quarter in the Americas and that did help in particular to have a higher level of contribution from that region. We also saw a very, very strong quarter for us in Asia Pacific, which is something we highlighted as well as in the document. You see that APAC is up considerably year on year. Within Asia, it was very driven by equities. Equities had a and I think it's really in line with the overall level of equity activity that we saw across that region. In the Americas, it was a bit more mix between some equities, but as well as equity derivatives. Equity derivatives had a better quarter for us in the Americas after a fairly weak second quarter. We also saw very good ECM, Equity Capital Markets and Leveraged Capital Markets activity that helped boost the Americas contribution overall to the investment bank. We were pleased that we closed the Banco DO Brasil transaction on October 1. We were had intended coming into the year to close that earlier. But obviously, because of COVID effects that the regulatory approvals took much longer to work their way through the system in Brazil. So now that that is launched, we've already started actively to build up and we've already, seconded staff to that initiative. And we would expect over time that this will allow us to establish a very, very competitive investment banking platform, not just in Brazil, but it is across multiple countries, including Argentina, Uruguay. And so it will allow us to leverage the strength of Banco DO Brasil's corporate franchise and the strong lending footprint that they have there with our investment banking Thank you. The next question is from Andrew Lim from Societe Generale. Please go ahead. Hi, good morning and congratulations from me also, Sergio, for the past 9 years. You certainly put UBS on a good footing for your successor. Well done. So to my questions, on the Global Wealth Management, obviously, we've had a lot of volatility these past few quarters. I was wondering if you could take stock on where you think the gross margin might move going forward. You've given quite a bit of color on the NIM side, but on the recurring fee side and also on transaction fees. Perhaps you could give your thoughts there as to how sustainable those fees are going forward and what the key moving parts are? And then a question for you, Sergio, perhaps. We've seen quite a lot of M and A activity in asset management. It definitely seems to be a trend towards consolidation. If we look towards UBS' own Asset Management business, you're closing in on 1,000,000,000,000 dollars of AUM. Just wondering what you think there in terms of its strategic positioning, whether that scale is enough or whether also there's perhaps other strategic gaps that need to be filled on the distribution front or the product offering? Yes, Andrew, I'll take the first question. In terms of GWM margin, as I noted, you've seen stability quarter on quarter on a recurring margin after quite a bit of compression from a number of mandated non mandate impacts, including what I mentioned that some of the changes that we've made in our U. S. Business to address some regulatory requirements there. Clearly, we are managing all of the levers for our recurring business. And we would look to create continued stability as we go forward sequentially each quarter. Nevertheless, there are competitive pressures there and there also are segment mix and other changes that will occur. So we would expect over time for some for there to be some continued margin pressure, although not to the extent that we've seen over the past year. If you look at our net interest income margin, that's dropped down to 14 basis points. We highlighted the fact that we've absorbed most of the U. S. Dollar headwinds and we've got some tailwind from lending. We would see that stabilizing over the next several quarters to around the current level. In terms of transaction revenue, which is really the what we saw come through to drive the growth in operating income on a more pronounced basis, up 16% year on year. Also, as we mentioned, this remains a key focus of Tom and Iqbal's and we are continuing to drive out improvements in connectivity between our CIO, our IB platform that is now much more integrated along with linking in the lending. So we would continue to expect to see good levels of transaction revenue going forward. And along with the typical seasonality, that's the margin that you would expect to see bounce around most from quarter to quarter. Thank you, Andrew. And in respect of your question, I guess, first of all, I would say that the hard work that my colleagues put together in the last few years to reshape and reposition our asset management business as a stand alone units are starting to pay off and I'm glad to see that. For us, when you look at the fact that we are getting close to the $1,000,000,000,000 markets, it's an important milestone in respect of creating some scale effect, which are necessary in that business. But most importantly for us was the ability to continue to develop kind of unique offering as part of an asset gathering equity story. So for us, asset management fits very well into our equity story because, as you know, it's very low capital consumption compared to other banking businesses. There is a high degree of synergies between asset management and the rest of the organization, particularly with our institutional and corporate clients, but also with wealth management. And the fact that we have been able to create unique segments of strengths like in sustainable finance, like in the alternative space, in passive where we have very customized and high margin passive businesses are and the alternative space in general are complementing the more traditional asset management offerings. So when you look at that M and A angle, you have to look into, okay, first of all, how is Asset Management fits into our equity story, which I believe now is quite clear that is very, very compelling and value added story. And looking at M and A, you need to while there has been always a lot of discussions around the asset management industry consolidation, the truth of the matter, it's a very complex industry to merge because of different cultures, ownerships and priorities. So you want to make sure that if you do that, you don't impact clients by doing that, that you need to find the partners that has the same culture as you have. Not an easy task. So I'm glad that we have the flexibility to always look at the best interest of our shareholders and clients without being forced strategically to take any actions now. That's great. Thank you very much. Thank you. The next question is from John Peace from Credit Suisse. Please go ahead. Yes, thank you. Let me add my congratulations as well Sergio on your time and your final quarter at UBS. So my first question is just following on from the question on Global Wealth Management Margins. You're still seeing some gross margin erosion, but how confident are you that your forward cost initiatives are going to see the net margin find a floor around the 15 basis points level over the last couple of quarters? And then secondly, your U. S. Peers have talked about seeing kind of normal seasonality with Q4 trading revenues pipeline maybe benefiting a little bit from a pickup in M and A. I just wondered if you had any comments on that similarly. Thank you. Yes. Thank you, John. As I just referred to my last answer to Andrew, I talked a little bit about the dynamics overall and on the gross margin side. And as I said, I feel pretty confident that the series of strong strategic initiatives that are already underway and starting to gain some maturity will continue to provide some support on the top line even as we see markets falter a little bit. On the other hand, you've seen very good expense discipline in the business. And I think it is a strong statement, the fact that our expenses are down 1% year on year. And I would just add to the top line comment that Tom and Iqbal remain very committed to continue to deliver positive operating leverage. So they're very focused on managing the expense line as well as the top line. And I'm pretty confident that they'll strike that balance effectively going forward. And I do expect positive operating leverage out of that business overall to continue to materialize over the next couple of years. In terms of what we heard out of U. S. Peers, and I guess if we look at our own business, I think firstly, I would just note that we have seen volatility come down in the start of this quarter. Volatility has been lower despite the fact that we're within an election period. And I guess, I suppose I would attribute that fact that Biden is so far ahead, it's created a little bit less uncertainty and volatility. But still with the potential risk for a contested election and also some of the other geopolitical factors that are going on globally, that could contribute to some building volatility as we go through the quarter. Away from that is if we look at our banking business, you heard some commentary, of course, the Q3 was a very weak M and A quarter. I think there's still a lot of uncertainty regarding M and A. There was more at least announced activity that started to pick up, but still depending on how the quarter trends, I think there's a question as to what's going to really close within the quarter. Beyond that, I won't say a lot of I won't make much comment at all about how we're seeing our overall pipeline. Yes. Maybe let me add, John. Thanks for that. And I think that assessing seasonality in our business in the last 24, 36 months is like assessing climate change. So I don't think that there is any longer a clear defined pattern of seasonality. So in that sense, it's extremely dangerous to try to project things into a 2, 3 months with all this uncertainty. So I would always refrain from making comments on quarterly outlook. But I think that the level of activities is still there. And of course, it's quite difficult to predict that the U. S. Elections won't translate into, as I mentioned before, our clients are clearly indicating that they do plan to shift their portfolios, no matter what the outcome of the election is, because there will be sectors that may or may not benefit from stimulus packages, from different tax rates that may come or not and that will probably we will probably see more movements after the elections. Great. Thank you. The next question is from Nikolov Payan from Kepler Cheuvreux. Please go ahead. Yes, good morning. Thanks for taking my question. I have 2 follow-up, please. The first one is on share buyback. You said that you actually communicated your intention to resume share buyback to the FINMA and that they raised no objection, yet you're still not allowed to do that immediately. So could you elaborate why? Did they communicate to you any criteria for you or the industry in general? And then the second is coming back on the net new loans in GWM. Could you actually tell us how much of that translated into net new money for AUM? And Sergio, thanks for the support and good luck for your future challenge. Thanks. Thank you, Nicolas. I think the reasons are the same that you have been seeing also being explained in public by regulators. And then what I mentioned before is definitely the outlook, probably that assessment would have been different 2 weeks ago 2 months ago, actually. I mean, it was different maybe if you look at the outlook for the rest of the year. But the 2nd wave coming into Europe and the unresolved that an unclear situation about the scene coming or not coming early on is putting a little bit of prudence in the equation. So it's all about that. It's the fear that the second wave may be coming and it's probably a little bit of concerns of letting things reopen shortly before a new wave of macroeconomic deterioration comes in. So hopefully, as I mentioned before, by the early part of next year, we will have more clarity on this matter. Yes, Nicholas, in terms of your question on the net new loans, the $10,500,000,000 around $5,000,000,000 of that was generated in the U. S, mostly in securities based lending. And in the U. S, unlike internationally, you're not allowed to directly leverage your investments through those loans. So therefore, there is not a tight linkage between net new money and that type of lending. Now internationally, the other half of this, the $5,000,000,000 was a bit more broad based across regions and also concentrating on Lombard lending. And there we did see some benefit for our net new money flows along with the lending and the leverage that our clients took on as part of their investment strategies. Thanks. The next question is from Amit Goel from Barclays. Please go ahead. Hi, Thank you. And yes, echoing my peers' comments, Sergio, yes, thank you for everything you've done, and good luck for the future. Just maybe I've got 2 questions, one on that note and maybe one a bit more on the business. So just curious, I mean, actually Sergio, as you do the handover and you've spent some time now with Ralf, just your thoughts in terms of his or at least the group's key priorities going forward. Where do you think most time should be spent and in which areas? And then a second, slightly more business related question. Just curious on the U. S. Part or the sorry, the Americas. In terms of the Broadridge investment, just trying to get a sense of what kind of impact you're looking for that to have as it continues to roll out in 2021? Obviously, I see the commentary on being able to charge clients on an average balance basis. But just trying to get a sense of what kind of revenue impact and or longer term cost impact that's anticipated to have? Thank you. Thank you, Amit. So I guess in terms of Andover, personally, I believe that it's going to be a kind of split approach. The first one is to basically look at new ways and we have ongoing plan and I'm sure Ralph will have to bring his views and his experience in helping us to make our front to back even more efficient using data digitalization to the next level. So we have plans, but they need to be executed and they need to be focused. So I'm sure we will find ways to optimize the way we run the bank front to back. And the second one, as we do that, as we did in the past, we need to continue to execute on our plan. So it's not that the bank can forget that quarter by quarter, we need to continue to deliver results and executing on our strategic plan, but also for our clients for our clients and shareholders. So it's a double prone approach, doing looking at day to day, but also thinking about the future. Yes, Amit. In terms of your second question, with the Broadridge partnership, which as I highlighted is where we're already deploying some of the functionality and you saw that in the Q3 with an updated billing convention and with our expectation that we will fully implement the platform during the course of 2021. We do expect to have much more flexibility in deploying services, new products, new solutions to our clients, streamlining workflow and also some of the complexity around compliance, for example, and onboarding. All of this should help to improve the productivity of our FAs in the U. S. Where we already have the most productive in the market amongst our peers. But we think that this will help us take that productivity to the next level, which again is a very key focus of Tom and Iqbal's. Now on the cost side, once that is fully deployed, we will be able to retire some of our legacy platforms that will reduce our overall IT infrastructure costs. In addition to that is we will be part of the Broadridge ecosystem when new regulatory developments come about, for example. The cost and time to implement those will be significantly lower and that will create a cost advantage for us. And then finally, in addition to that, we are looking to make that platform available to other peers within the market. And as that does take place as well, we will see an overall reduction in the cost the ongoing cost of running the platform itself. So we do think that there's quite compelling both revenue productivity opportunities along with some cost save opportunities. Okay. Thank you. The next question is from Javier Lodero from ZKB. Please go ahead. Yes, hello. This is Javier Lodeiro from Societe Continental Bank. Thank you, Sergio, for all the last years and all the best for your new challenge. I have actually two questions. First of all, on the 25th September, Julius Baer said they were forced to pay €150,000,000 to the former well, to Germany, to the on the case of the former Republic. And this is a case where it came from the former private banks UBS sold to Julius Baerbach in 2,005 and there is apparently a recourse. And now I wanted to know if you're going to take over the €150,000,000 and when we will see that charge either in the Q4 or in the Q1? And then the second one, my second question relates to the PSP transaction, that's a real estate divestiture you did in Geneva as well at the end of September. I see in your callout items that you flagged only €64,000,000 and this is on Slide 26 of the presentation. Is that really the whole amount on that on the Geneva transaction? These are my two questions. So Javier, thanks also to you. In respect of this matter that you mentioned with Julius Baer, yes, Julius Baer has notified us their intention to seek indemnification under the transaction agreement relating to that transaction. We believe that we have substantial defenses to this in the duplication claim. And therefore, as you can see, there is no necessity now and in the foreseeable future to take any provisions. Yes. Javier, I would only note that if you look at our Note 16, you will not see any mention of the Julius Baer related matter. So is it fair to assume that you don't have any litigation reserve specifically for this case? We don't talk about our reserves as they relate to specific matters. Okay. Thank you. Just in terms of your second question, I would only note that there are a number of different real estate related moves that are reflected in 'twenty six that include the sale of a property in Geneva. But then in addition to that, we've also taken some lease related impairments and we've had some write down in other properties. Okay. Thank you very much. The next question is from Tom Hallead from KBW. Please go ahead. Good morning, guys. So I guess most of my questions have already been asked. But could you just walk us through how a Democrat win in the U. S. Would impact the business? And do you get the sense that most clients have already repositioned for the likely outcome of that? And then secondly, how sustainable is the current credit provision run rate, obviously, given current needs about more lockdowns, how should we think about the sensitivity of that over the next quarter or 2? Thank you. Thank you, Tom. So in respect of it's difficult to say how the clients will really react. It all depends exactly, as I mentioned before, for example, what is the true intention to move forward the agenda on the tax on the increase in taxes to what level and exactly for what. So that may or may not determine, for example, an acceleration of profit taking in certain position to avoid or to optimize capital gain taxes. But also it depends how a Democrat or a Republican win will determine how money that will most likely come through a stimulus package that we believe is going to come in any case will be flowed into the economy. So I only can tell you what clients are telling us that almost 2 thirds of them are planning to change their asset allocation after the election. And that tells you the story in my point of view. So but how they do it, when they do it, it's not 100% clear. There are also other factors that may determine this. And the second question, what is it? Yes, just in terms of our credit provisioning. I think as you heard from our outlook statement, we still view our credit loss expense for the Q4 to be markedly below the first half levels. Clearly, if there is between now and the end of the quarter, a very significant deterioration in overall macroeconomic and outlook and expectations that we might see spikes in unemployment, for example, as a consequence of more severe lockdowns, we would have to reflect that in any updates that we would make to our models and that could very much have an impact on where we end up for credit loss expense. However, at the same time, I would just importantly underscore the fact that if you look at the quality of our portfolio, I think any change across the industry is would still likely impact us less far less than our peers. Okay. Thanks. And Sergio, all the best. Thank you, Tom. The next question is from Alastair Ryan from Bank of America Merrill Lynch. Please go ahead. Yes. Thank you. Good morning. And I guess my perspective would be, it's an absolute pleasure that UBS has avoided blowing up in a bad year, which was a cycle that really docked the company back to at least the early 1990s. So I think you do deserve the congratulations of everybody on this call. Looking forward, now that UBS is in a position to make these choices, which it wasn't coming out of previous downturns, Is there more growth in Wealth Management because the world is more uncertain? Or is it going to be a process of keeping costs tight because there's less wealth generation around the world in the next couple of years? Thank you. Thank you, Alastair. I think it's a you need to do both. Actually, but it's not just that I think in terms of growth, we have 2 opportunities. The first one is in like in the U. S, we still have room to have a higher and more representative share of wallet for what we are in the wealth management industry. And as you can see, we continue to execute on that. And I'm sure over time, we will improve our growth and trajectory. 2nd, in general, wealth creation is still a team. So no matter how you look at it, the wealth management, the asset gathering industry is set to grow twice the pace of GDP growth in the next decade. No matter who you look at, how you look at it, which sources you look at it, they all come more or less to the same conclusion. So we are well positioned to capture these growth opportunities. But of course, you can't just pretend that growth is going to come on top of the existing infrastructure and market dynamics. You will continue to we need to continue to work on creating efficiencies and managing cost because fees are likely to continue to margins to continue to be under pressure, right? So you need to really protect margins by increasing share of wallet, by growing faster than others, but also by recognizing that there's going to be a competitive headwinds. And so in that sense, I'm very positive about the need for investors and to invest assets because of their needs to prepare for their retirements, but also in general wealth creation in the emerging markets and in Asia will continue to drive the prospects of our industry. Thank you. Okay. It looks like we are we have the last questions here. So again, many thanks for everything and I wish you all the best going forward. Thank you. Ladies and gentlemen, the webcast and Q and A session for analysts and investors is over. You may disconnect your lines.