Welcome back from the break and to UBS's 2018 Investor Update. It's nice to see so many familiar faces as we meet with many of you regularly. Thanks for giving us your time today. We couldn't pick up a more appropriate day to run an investor update with the S&P down 3% to set the right tone for our journey. Today, I will cover our strategy and business model, what we have achieved in the last four years, and the lessons learned, how we are driving efficient growth and executing on our strategy over the next three years, and how we are managing the bank for the long term to deliver sustainable performance. You will not hear about a new strategic direction. Our strategy is the right one. Instead, our focus is on the best possible execution to achieve sustainable growth, a key priority for us.
While our strategy is well understood and we have delivered good results over the last few years, it's clear that our targets are either not well understood or not well explained. Today will be about addressing the valuable feedback we've gotten from a number of you, and also some myths out there. We will giving you far more details on our plans and better explaining the level of our ambitions. We have refined our targets, the philosophy and intent behind them, a focus on sustainable growth and superior returns are not changing. We are, however, making them more specific and relevant to our objectives. Today, we will show you how we plan to realize our full potential and why my team and I are so confident that UBS's best days lie ahead. We present some version of these slides every time we get together.
That's because we think it's important to keep in mind the unique value of the UBS franchise. We are the world's leading and only truly global wealth manager. The number 1 Swiss bank, enhanced by an Investment Bank that excels in areas of focus and a successful Asset Management. We have a good profitability mix, more than half of our PBT comes from capital light asset gathering businesses. I would say that of the G-SIBs, we have one of the best business models and return profiles. Our business divisions are strong on a standalone basis. Crucially, they also work for and with each other. All of them are critical to the success of our strategy. Each is a source of competitive advantage to each other. They share clients, products, and services, which gives us both revenues and cost synergies.
In addition to the balance we get from our business divisions, we also benefit from our global footprint with a strong presence in the world's largest and fastest-growing markets. You can see the strong profitability we have delivered over the last four years in the Americas and APAC. The value of that diversification only becomes clear over the cycle. Considering our results over the last seven years, it's evident that our model is successful under a variety of market conditions. It is true that our geographic and business diversity comes at a cost, which when measured on a cost-income ratio basis, is structurally higher than our peers. We are happy to make that choice because the model offers stability and superior returns on capital. Today, UBS is in a very different place to when I started as CEO seven years ago.
Despite all the change that happened since our last investor update in 2014, we have delivered CHF 18 billion in net profits over the past four years. With restructuring behind us, UBS is a far more profitable business today. You can see the convergence of reported and adjusted profits as we manage our legacy issues and restructuring comes to an end. We are also much stronger and more resilient. We have built robust capital ratios and increased total loss-absorbing capacity by CHF 50 billion-CHF 80 billion. All this is reflected in top quartile rankings from credit rating agencies. The investments we need to restructure our business, put substantial litigation behind us, and respond to an unprecedented increase in regulatory demands were significant, as you can see on the slide. To achieve this, we did not have to ask for further capital from shareholders.
We also performed in an environment that has regularly presented new challenges. That performance has allowed us to keep our promise on capital returns. No doubt, we benefited from strong financial markets, but client sentiment was not always strong. We had also to deal with negative rates, with cross-border outflows, and the phasing out of retrocessions, just to name a few. I have to admit that the expense and management attention required to address these topics exceeded our expectations. We had to balance the size of implementation of regulatory change with our determination to invest for future growth. These challenges taught us a lot, and the experience will allow us to execute even better going forward. The good news is that the cost of the regulatory overhaul has peaked.
For example, we had to rework our corporate legal entity structure, and we won't be doing something of that magnitude again. This slide shows the progress we have made running UBS more efficiently from a cost and capital perspective. As capital and efficiency ratios have improved, we have delivered a nine percentage point increase in return on tangible equity excluding DTAs. This one is one of my favorite slides because it best illustrates our philosophy for managing the trade-off between capital growth and cost efficiency on an absolute and relative basis. This approach has helped us to generate superior overall returns, despite having a structurally higher cost-income ratio than some. We benchmark ourselves against the best, and as you can see, we are among them. Higher returns in the future will be a function of improving both cost and capital efficiency.
We will show you today what we are doing to improve on both. When measuring efficiency, it's important to include risk-adjusted returns and not look at the cost-income ratio in isolation. Taking too much risk to fix short-term profitability issues or reach unrealistic growth ambitions usually leads to the wrong outcome over time. In this respect, we are risk-aware, but for sure not risk-averse. We are well-positioned to take advantage of two of the great secular trends. First, the unprecedented wealth creation and transfer in the world today. Second, the continued economic growth in Asia, in particular, the opening up of China's financial markets. As a consequence, and combined with further beta factors like U.S. dollar rates rises, we believe we can grow group revenues at least as fast as real GDP. We are not just going to passively ride beta.
We are acting with determination and intensity. We have a number of alpha levers we will pull to grow. You will hear about the active steps we are taking in Global Wealth Management and our other businesses to fulfill our growth potential. At the same time, we will continue to manage the cost line. Over the next three years, we will take out CHF 800 million of Corporate Center cost, including restructuring, and over CHF 300 million from the business division to self-fund growth and create operating leverage. Earlier this year, we already gave the business divisions greater ownership of Corporate Center, not only to make us more efficient, but also more effective in how we operate. In summary, we want to keep costs, excluding performance-driven variable compensation, broadly flat over the next three years while funding significant investment for growth.
Technology is taking over from regulation as the main driver of change in our industry. As a result, growth and cost are of particular importance. We will deliver short-term efficiency. We will also not neglect investing in the future of the firm. We know that some of the investments we are making today will only pay dividends for the next generation of leaders at UBS, and that's the right mindset for the franchise. Sabine will take you through that in more detail later. Finally, we are also revising our capital allocation framework. Our approach has always been to allocate what the businesses are able to control and optimize. We started with risk-weighted assets, added LRD when it became our binding constraint, and then incorporated HQLA after the LCR guidelines were clarified.
Now that our legal entity transformation is pretty much complete, it makes sense to push down more of the buffers that remain in Corporate Center so that the business divisions can further optimize. This is also allowing us to redefine the expected return target for the Investment Bank. First, let me clarify again that the strategy of the Investment Bank and its role within the group remains the same. We continue to expect the IB to consume around a third of the group's resources. While our financial objective for the IB is also unchanged, we want it to cover its cost of equity over the cycle, we will move away from a minimum return to a performance target that is higher on a like for like basis. Kirt will provide you with more details on that later on.
I'm aware that there are open questions as to why we combined our wealth management businesses. For me, the story is straightforward. We created GWM because there is no longer a reason to run two separate divisions. Both have optimized what they can on their own. Client needs and business models have converged. We have to combine the scale and knowledge of the businesses. We will just stay the sum of our regional businesses. Smart use of resources and better collaboration clearly make sense. Ultra-high net worth in the Americas, U.S. clients outside the U.S., and fully globalizing the GFO capabilities are just some of the initiatives you will hear about. The new setup hardwires, incentivizes, and industrializes collaboration rather than hoping it will happen.
Working this way creates new opportunities and makes existing ones easier to deliver, allowing us to grow at the higher end of our 10%-15% profit growth target. Of course, while this was not meant to be a cost story, I consider $250 million in savings, which we'll be reinvesting in growth, a clear benefit. While our business have very strong standalone value propositions, we are at our best when we combine our strengths to the benefits of our clients. Clients don't care about business divisions and how we are organized. The key words are client focus and collaboration. Don't worry, I will not walk you through this complex web. It's only to make a point here that interactions between our businesses to best serve clients is how we run UBS.
We want to be, and we are already in many cases, the bank for U.S., Asian, and European entrepreneurs and corporates for their local and global needs. These clients require advice and solution for both their own wealth and their businesses. They value when we connect them with each other. I want them to continue to think of UBS as the leader. To achieve that, we need to take collaboration to the next level. Why? Because we know it leads to better results for clients, and better results lead to more capital generation. We have generated around $23 billion in capital over the last six years, returning over $14 billion to shareholders. We did this while building $9 billion of CET1 capital and solving regulatory and legal matters that cost us almost $9 billion.
We are still awaiting to resolve a couple of legacy litigation issues, the timing of resolution is not in our hands. As you know, I can't really discuss in public, our aim is to handle these matters in the best interest of shareholders, even if this means going to court. Having said that, the key things for you to take away from this slide is that we expect to generate almost as much free capital in the next three years as we did in the previous six. Maintaining a very strong capital position in a finalized Basel III world will continue to be our priority. Excess capital that is not necessary to address short-term outlook developments or underpin growth will be available for shareholder returns.
We have a track record of delivering on our capital return promises, we remain committed to a sustainable, progressive dividend targeting mid-to-high single-digit growth. We also remain committed to return excess capital through share buybacks. As you can see, we already bought back $650 million worth of UBS shares, more than the $550 we targeted for this year. My message on this is clear. Please don't confuse the size of one share buyback program with our ambition and potential. It's important to understand the mechanics under Swiss rules and reflect why taking a step-by-step approach is in the best interest of shareholders. Going forward, we will adopt return on CET1 as our key performance metric for the group. This reflects that CET1 capital is our binding constraint. The measure is simpler and more transparent.
It's consistent with our equity allocation framework and is aligned with how we manage returns to shareholders. Let me close with a topic that I don't cover much in public, but that is an important element of understanding who we are and how we execute our strategy. Our three keys. My colleagues and I are frequently asked what they stand for. We redefined them six years ago, and I'm proud to say that they are embedded across UBS today. The first key represents the pillars. These make up the foundation of a successful bank. Capital strength, efficiency and effectiveness, risk management. The second key represents our principle: client focus, excellence, and sustainable performance. We have been privileged to bank some of our clients for three or four generations, so working in partnership with them is part of our DNA.
Focusing on excellence means, for example, aiming to deliver the best quality products and services and having the best people. Achieving sustainable performance is critical to us. It means not maximizing short-term gain because that inevitably leads to long-term pain. Instead, our focus is on consistent return for our stakeholders and on managing our resources prudently. The third key represents our behaviors. They are integrity, collaboration, and challenge. This is about how we deliver. The emphasis is on doing the right thing, working together across the bank, and speaking up to identify opportunities and risks. The three keys are at the core of the bank for all of us, every day. In a fundamental way, they represent our philosophy and culture of the organization. Summing up, the strategy is clear and compelling.
Over the last 10 years, we have reconfigured UBS while delivering strong results, and we are excited about the potential for the next decade. I will be available for questions at the end of the day because I first want you to hear the full details of our plans from my colleagues. Kirt will walk you through the details and in more depth. Many thanks for your attention. Kirt?
Thank you, Sergio. As Sergio said, driving growth, cost, and capital efficiency are key objectives for the group. Today, I would like to explain the planning and performance management framework that we use to achieve our targets. In addition, I will highlight how we are increasing front-to-back alignment and adjusting our targets to create even more accountability and clarity on delivering against our performance objectives. Over the next three years, our aim is to drive positive operating leverage, and we expect to further improve our already high capital efficiency. We view our overall returns as best in class versus peers, but we are targeting further improvements, which in turn will accelerate our capital generation in the future. This will allow us to continue to maintain strong capital ratios while supporting both our growth as well as our capital return objectives.
Clearly, what is most critical for our performance going forward is to drive business growth. Our plan includes a balance between specific management actions and benefits we expect from market factors. The business division presidents will tell you more about the actions that they will take to drive improvements in their performance. On the beta side, our business model and exposure to the largest and fastest-growing segments provide us with great potential for future growth. We've also provided sensitivity to key market factors, with equity markets being the single most important driver for us. Our measurable management actions, along with model tailwinds from beta factors, underpin our performance management framework and allow us to dynamically manage resource deployment. Simply put, we have the ability to identify when performance is deviating from plan and to adjust investments in resourcing accordingly.
As I highlighted earlier today with results, our functional currency has changed to US dollars to better reflect the balance sheet and the risk composition of the group. This will reduce the volatility in our earnings as we will report in the currency with the greatest PBT contribution and will allow us to more effectively risk manage our currency exposure at a lower cost. As a result of the change in our functional currency, we are able to invest a greater proportion of our capital and liquidity in dollars. In the current interest rate environment, that should increase our net interest income by around $300 million from year-end 2019. The majority of this benefit will be passed on to the business divisions, with no significant benefit expected in Q4 due to incurring fees related to repositioning our balance sheet and hedges.
In addition, and unrelated to the change in functional currency, we could see an incremental $600 million in net interest income in 2021, based on implied forward rates and compared with the last 12 months, assuming, importantly, a static balance sheet. To ensure our revenue growth translates into positive operating leverage, we maintain a disciplined and dynamic P&L performance management process. As Sergio already mentioned, we expect around $800 million in savings from our central functions on a reported basis, which Sabine will address shortly in her presentation. This, alongside additional cost savings from the businesses, will fully fund our investments that underpin our growth targets. You'll hear more from each business division president later. The first objective in our capital planning process is to determine any additional capital we need to meet our regulatory requirements.
This includes ongoing regulatory and accounting-related increases, such as the $11 billion that we expect over the next two years, as well as anticipating Basel III finalization, which we continue to estimate at around $35 billion on day one. What is critical here is that this is prior to any business optimization and final regulatory guidance on open items. For example, once FRTB rules are defined, we expect that the IB will optimize the overall impact which is consistent with their track record. We then assess the capital required to underpin our growth ambitions, ensuring that the planned returns for deploying this capital are well above target hurdle rates and that we prioritize capital allocation in a way that is consistent with our strategy, which includes funding growth priorities such as the Americas and APAC, particularly China.
Through 2021, we expect an increase of $25 billion in RWA and $95 billion in LRD to support business growth, with about 75% being deployed to GWM. As I mentioned earlier, if the revenue growth that we plan does not materialize due to either weaker benefactors or variations in timing and benefits from management actions, we can take specific measures, including slowing the pace of our investments and reining in the resources deployed, along with natural reductions in performance-based compensation, in order to minimize the effects on profit and loss. The final step is allocating the excess capital to meet our shareholder return objectives. As Sergio mentioned, we look to maximize total returns to shareholders based on our short-term outlook.
Our legal entity structure build-out is nearly complete, and as we now have better visibility on our regulatory capital requirements, we will attribute more capital to the business divisions starting in the first quarter of 2019. We have more transparency on the full liquidity requirements that the businesses need to operate across legal entities, including trapped resources. Previously, we've held trapped liquidity and funding centrally. In addition, we have significantly advanced the development of our treasury risk management capabilities across our legal entities, enabling more dynamic balance sheet management, business division attribution, and the ability to optimize at the legal entity level. We have better clarity on our final CET1 requirements and what our risk density will be. This positions us to take the next step in our equity attribution journey.
With the increase in attribution from corporate center, we will allocate nearly 100% of the group's CET1 capital to the business divisions. This puts us in line with peer best practices. The capital retained centrally, mostly underpins tax loss DTAs, our dividend accruals, and other smaller CET1 deduction items, which are not relevant with how we manage business division performance. In line with our current practice, we will further allocate AT1 and TLAC-related costs based on the increased attributions. After which, the business divisions will incur nearly the entire cost of our current $46 billion in AT1 in gone concern capital. With the increased group and business division alignment and transparency, we expect each division to optimize both the additional cost and capital, as we observed when we first attributed liquidity-related equity to the businesses in early 2017.
We expect that further transparency by legal entity will result in better decision-making regarding where activities are booked, which will allow us to better optimize entity resources. This is a good example of how we intend to improve our cost and capital efficiency. We have taken the opportunity to review all of our costs that are held in corporate center, we are further pushing out a large portion of the residual group-related cost to the business divisions. These include, for example, cost for our board of directors, group internal audit, group governance, and the like. With these allocations, we expect that centrally held retained losses will reduce from $1.5 billion to around $950 million in 2019. With subsequent additional optimization action by group's ALM, we should be able to further reduce the retained loss to around $800 million by 2021.
With these changes, we will be aligned with peer best practices. Given the overall magnitude of these changes, we intend to restate prior periods to improve overall comparability. The pro forma impact on the business divisions will increase their last 12 months cost-to-income ratios by around two percentage points, and this change will be reflected in the updated targets and ambitions for 2019 and beyond. The ambitions for our business divisions remain within previously communicated target ranges. The combined reduction in PBT, along with the increased equity attribution, reduces the division's pro forma last 12 months return on attributed equity by between 3%-8%. For the IB, the pro forma impact on returns is six percentage points, which on a like-for-like basis, would reduce their current target to more than 9% versus the 15% we currently have, as you can see in the appendix.
We expect an over-the-cycle return of around 15% for the IB. Going forward, our overall group return target will be based on CET1 capital rather than tangible equity excluding DTAs. As Sergio mentioned, CET1 is most closely aligned with how we risk manage the group, what drives our decisions regarding capital retention versus returns to shareholders in the capital that underpins our division performance. Return on CET1 has the additional benefit of being a far simpler metric to understand and calculate. It's also the primary driver for future growth in our book value based on the around CHF 5 billion in capital we intend to retain over the next three years. As CET1 capital will converge with tangible equity over time as we amortize our DTAs, we will continue to disclose adjusted and reported ROTE.
To changing the denominator, we are also transitioning the numerator from adjusted to reported results. This further aligns our interests and also recognizes the adjusted and reported results will largely converge in 2019, absent any major new one-off adjustments. This change has no impact on the level of a return target, which remains around 15%, despite the new methodology shaving off one percentage point on our return on the last 12 months basis. We are refining our targets to reflect the corporate center attributions that I highlighted, incorporate updates for our 2019-2021 plans, and to provide increased specificity for our ambitions. Let me highlight some of the key refinements. For the group targets, we've established an around 15% reported return on CET1 capital and around 77% adjusted cost-to-income ratio target for 2019, and an ambition to deliver around 17% returns and 72% efficiency in 2021.
We intend to drive an average of two percentage points in positive operating leverage per year over the next three years. Our business division targets naturally align to and underpin our group targets. Each division has a 2019 cost income target and an ambition for 2021. Importantly, we expect all business divisions to deliver positive operating leverage over the three-year period. I would also highlight that Global Wealth Management expects to operate at the upper end of its 10%-15% growth target over the next three years, while retaining its 10%-15% target range over the cycle. We have replaced P&C's net new business volume growth target with a PBT growth target of 3%-5% through 2021. In addition, we realigned P&C's net interest margin range to 145-155 basis points, reflecting the increased funding and liquidity costs, partly related to the incremental attributed equity.
For the IB, as I already highlighted, we have replaced our greater than 15% return on attributed equity threshold with an around 15% target. The business division presidents will further expand on the actions they will take to deliver their targets and missions. I realize that I have covered a lot of technical details. That's my job. Let me review the key takeaways. While we currently operate at best-in-class return levels, we aim to deliver significant improvements in cost and capital efficiency over the next three years. Our planning and performance management process ensures resources are appropriately allocated to achieve our performance targets and accelerate capital generation. We have embedded further discipline into our resource deployment process to ensure alignment with realization of our growth plans and take action if we see any deviations to protect profits and returns.
We have further attributed and aligned equity and related costs to the business divisions to drive front-to-back optimization, one of our key actions to improve overall efficiency. Lastly, we have adjusted our target framework, provided greater clarity and specificity to drive accountability and discipline execution. Now I will hand over to Sabine, who will take you through the actions we are taking in corporate center to become more efficient and effective.
Thank you, Kirt, good morning, everyone. With CHF 8.9 billion, our corporate center services cost make up roughly one-third of our overall group cost. Today, I'll outline what these services include with a specific focus on technology. I also share how we operate, how our cost base has developed, and how it will evolve over time. There are three things I want you to remember. Firstly, a look back. Over the last five years, we have achieved significant cost reductions. However, as we reinvested them into technology and major regulatory initiatives, our overall cost base stayed flat. Secondly, looking ahead. Over the next three years, on a reported basis, our costs are expected to decline by CHF 800 million. Thirdly, with regard to technology, we will continue investing to enable growth in our businesses and to capture additional efficiencies, we will keep our current spend level.
You will hear all division presidents today underscore the importance of further investments into technology for all of our businesses. Let's take a closer look. Our corporate center functions provide services to the entire group globally. The largest function, both in terms of cost and people, is technology, and this includes our group-wide IT change budget, as well as our global IT infrastructure and production services. The second largest in terms of cost is real estate and services. This includes our group-wide real estate portfolio as well as the operations of our facilities across the globe. Finance and risk come third, followed by group operations and central services, which include communications and branding, group regulatory and governance, as well as legal and internal audit. Finally, our human resources and sourcing functions.
These services are provided to all business divisions based on clear service catalogs. More than 95% of the CHF 8.9 billion costs are allocated out on defined allocation keys. As such, the allocated costs are an integral part of each business division's P&L, and therefore, the expected cost reduction of CHF 800 million will significantly contribute to driving down cost-income ratios. Let's now look at our operating model and how it has evolved over time into its current state. Before the financial crisis, what we now call corporate center services didn't exist. Instead, these services were decentralized and scattered across the whole group with each business division running its individual functions. These duplications resulted in significant cost inefficiencies. Even more importantly, due to the way risk and finance matters were spread across the group, there was a lack of checks and balances.
One of the first things we did post-financial crisis was to centralize. The objective was threefold. Firstly, it was about implementing the necessary checks and balances with a clear focus on how risk was managed across the group. This was done by separation of duties between control functions and the businesses. The second objective was getting our cost base down and improve service excellence. A very obvious example for achieving cost efficiency through centralization was the move to a single sourcing function, which benefits from consolidated purchasing power and the leverage of key supplier knowledge in negotiations. Thirdly, to comply with the too big to fail regulatory requirements, the centralization enabled us to move our corporate center services to our standalone service company, UBS Business Solutions AG, in 2017.
With all this in place, we felt it was the right time to further evolve our operating model earlier this year. In April, we went live with a business division aligned model, which brings our service functions and the businesses a lot closer together. In practical terms, this means that the majority of corporate center services headcount is now aligned to a business division and managed in a robust matrix. For our non-control functions like IT and operations, the business divisions have clear cost ownership and investment decision power for the aligned parts. A good example of how this works is our digital factory in Zurich with its joint development teams. Under business leadership, IT developers work together with client-facing staff in an agile way to enhance digitization of our business.
At the same time, the current operating model enables us to continue to exploit synergies in shared services, set group-wide standards, and meet resolvability requirements. Looking at the cost savings we achieved over the last five years, there is more than meets the eye when it comes to the overall flat cost line that you see. It's worthwhile taking a closer look. During and post-financial crisis, we reduced the level of investment. As a result, we needed to invest to get our technology estate back up to speed. Digitization of banking became more and more a game changer for maintaining and improving our competitive positioning. You see this reflected in the 27% increase of our technology cost to the current CHF 3.5 billion.
To highlight just a few of our recent tech investments, last year we launched our strategic and client-centric global wealth management platform, which Tom and Martin will cover later today. We are a clear leader in digital banking in our Swiss business and have been so for years, which Astrid will talk about. For the IB, we accelerated the development of electronic trading platforms, and you will hear more about this in Rob and Piero's presentation in the afternoon. For asset management, we've implemented a new core operating platform, which Uli will cover. We will continue to invest by keeping our current spend level. Our focus will be to further modernize our technology estate and accelerate digitization of the businesses. Looking at the non-technology cost, you see a decline by 11% from 2013 to 2018.
We expect those costs to further decline by CHF 800 million or 16% by 2021. With this, our saving efforts will become more visible as the overall cost line will go down significantly. Let's look at this in a bit more detail. As you can see here, we absorbed a significant increase of 67% in risk and regulatory expenses between 2013 and 2018. Since 2013, we invested to deliver a resolvable legal entity structure for our group and to comply with the different regulatory regimes we are operating in globally. Just to mention a few, in 2014, we established UBS Group AG and transitioned UBS Limited to a more self-sufficient model in the U.K. In 2015, we transferred our Swiss booked personal and corporate and wealth management business to UBS Switzerland AG, which required the separation of the IT platforms for our Swiss banking business and UBS AG.
This was followed by the go live of our UBS Business Solutions AG in 2017, which I mentioned earlier. In addition to this, we've made significant investments to comply with several other regulations like CCAR, MiFID II, EU GDPR amongst others. With the cost reductions of roughly 20% across the other corporate center services areas, which included cutting our restructuring spend, we more than offset this big increase in risk and reg cost. Real estate costs declined by 29%, mainly by reducing workspace in expensive financial centers, complemented by our offshoring activities. Operations costs came down 22%, even while absorbing increased volumes. For example, operations processed 20% more payments and handled a 25% increase in security settlements in the same period. Costs for our finance function came down 15%, and HR sourcing and the other central functions reduced cost on average by 8%.
As I mentioned before, in the next three years, we expect to reduce our non-technology cost base by CHF 800 million to CHF 4.6 billion, including cutting our restructuring portfolio. How will we achieve this? Firstly, as Sergio mentioned, our risk and regulatory cost line is expected to go down as the build-out of our new group and legal entity structure is largely complete, and we don't need to duplicate. In addition, some of our other big regulatory initiatives will be mostly implemented by either year-end or during 2019. However, having said that, it is important to know that we do expect continued investment into new regulatory requirements, but we expect these to be lower compared to what we have seen in the past. Let's now look at the other three main levers.
Today, more than 30% of our staff is offshore and will continue to shift further activities from high-cost to low-cost locations using our own offshore and nearshore shared services centers. With the opening of the second site in Pune today, literally as we speak, we now operate six offshore service centers in India, China, and Poland, and two nearshore centers in Switzerland and the U.S. Our newly implemented real-time occupancy measurement tools help us to optimize workspace utilization, which in essence allows us to increase density by square meter in both low and high-cost locations. Also for our outsourced services, we continue to consolidate third-party vendor locations from 35 as of last year to only nine by 2020. This reduces cost and improves risk management. We are internalizing selected activities currently performed by external providers to enable higher productivity, lower our cost, and to build critical in-house knowledge.
Over the last 12 months, we've increased internal staff by 4,000. The majority were hired into our offshore centers in India. This increase was more than offset by a reduction in external headcount, leading to an overall decline of roughly 1,0000. We do expect this trend to broadly continue. In addition, we will reduce the external headcount further through automation of processes, and this specifically in operations and IT. Complementing our centralized procurement model, we have reduced vendors by 45% since 2013, and we aim to push this above 50% over the next two years. In addition, we've recently implemented new measures to further tighten our internal demand management. To say it in very simple terms, we will buy less, cheaper, and smarter. Thirdly, we'll unlock additional efficiency gains by investing into advanced technology. Let's now look into this in a bit more detail.
As you will see later in all divisional presentations, the big focus of our technology investment is in front-to-back digitization, driving client experience. This works hand-in-hand with business growth, security and stability, as well as cost efficiencies. On this slide, you see a few snapshots of some of our recent developments in the digital space. I won't go into these here, but to make it more tangible for you, we've installed 19 technology booths upstairs, and there you can experience some of our innovations live during our breaks today or in the evening. We've already moved roughly one-third of our applications to private cloud, and we started to accelerate our journey into the public cloud space. In about four years, we aim to have our estate shifted to roughly one-third traditional data centers, one-third private cloud, and one-third public cloud.
In doing this, we push for higher standardization and reduce the number of costly traditional data centers further from the currently 25. It will also speed up time to market and allow us to process volume peaks a lot more efficiently. One example where this is already working successfully is Rates Broy, one of our primary risk calculators used within our investment bank. It used to consume more than 1,000 servers hosted in our data centers, and this capacity was needed to cover volume peaks but left idle capacity when volumes were low. By hosting Rates Broy now in the public cloud, we pay computing power as we go rather than maintain servers to meet peak demand. Cloud technology also improves risk management. For example, just think of cybersecurity. Instead of patching thousands of applications separately with the required security updates, which takes time and is costly.
A single patch can be run for all applications on the cloud stack. Another efficiency measure which reduces end-user servicing costs is the replacement of the traditional desktop technology with a virtual desktop solution. We call it internally A3, as it can be used anywhere, anytime, and with any device. These virtual desktops are maintained centrally and can be updated or patched in one go. We are continuing to decommission selected applications to save maintenance costs and avoid non-strategic follow-on investments. In parallel, we lower software development costs and shorten time to market through standardization and automation. We reduce the number of developer tool chains for our top 1,000 applications from currently 54 to just three by 2021. We're accelerating automated testing from around 50% today to above 70%.
Automation is a key driver for cost efficiency and at the same time reduces operational risk as it excludes human error. We already have 700 robots in production, we will increase this number to around 1,000 by year-end. This year, we took a step 2 by focusing on cognitive, which means image and voice recognition as well as natural language processing. We'll soon launch our virtual agents, our chatbots, for example, to support client advisors with self-service queries. Some of you might have seen the pilot where our Chief Investment Officer for Switzerland, Daniel Kalt, is seen as an avatar answering client questions around economics, investments, and more. The real game changer in the coming years will be step 3. This is where we'll more broadly leverage machine learning and AI-powered engines to automate more complex tasks and allow for better and faster decision-making.
We are currently looking into opportunities in the risk organization in the area of AML. In the IB presentation later, you'll see that the IB is already using this technology for certain areas. Our fourth key lever to reduce technology spend is to engage in partnerships within and outside the industry, so-called utilities. This will allow us to leverage best-of-breed technology and mutualize future investments. You can imagine utilities are similar as to the automobile industry. They are platforms used for joint production of commodities along the value chain. These commodities can then be commercialized and offered to third parties, for example, other banks. This further increases scale and drives down cost. For us, this is organizationally possible due to the setup of our UBS Business Solutions AG.
We are already engaged in a couple of partnerships for existing services, and we're in discussions with different providers and banks to explore new opportunities for joining forces. Later today in the U.S., we will announce a new strategic partnership with Broadridge, a global fintech leader. Together, we will create a scalable back office, an industry back-office utility that supports the growth strategy of our wealth management business in the U.S. This afternoon, Tom will provide you with more details on the benefits of this new partnership. When I started my presentation, I said I wanted you to remember three things, and let me close by coming back to them. One, over the past five years, we've achieved significant cost reductions, which we reinvested into technology and regulatory initiatives. Secondly, over the next three years, reported costs are expected to decline by CHF 800 million.
Thirdly, we will continue investing into technology. Thank you for your attention. Kirt and I are happy to take your questions now.
Very keen. Hello, everyone, again. I just want to make a few reminders before we start the Q&A because not all of you were here this morning at Q3 results. First of all, the Q&A is for investors and analysts. Secondly, please hold down the button on your microphone when you're speaking. Otherwise, we can't hear you. Thirdly, please unmute yourselves. Jacques and Rui, what can we do for you?
Thank you, Caroline. I have two questions. Jacques Audigier, two questions. The first one, are we going to have in the new era the same time of reporting with three subdivisions of the corporate center or are you going to simplify it a little bit? The second, I'm sorry, banks are becoming more complicated, and I'm becoming older, so it's probably me being completely stupid. However, on slide five of Sabine's slides, we have the objective, obviously, of cutting the cost by CHF 800 million. The first question is, are we going to see them? Are they going to be actually passed to the divisions? Which means it will be difficult, in effect, to identify them. B, for Kirt, can I reconcile this number somehow with the slide 10 of your presentation, where I end up with also a reduction in the pre-tax profit of the corporate center?
Sorry, it's just a matter of we run the circle here.
Yes. Jacques, I'll take your first one, which is an easy one. By the way, you can't take the microphone with you. Yes, we will simplify how we report corporate center. We do expect, if you look at NCL, it's gotten to the point where it's become relatively de minimis in terms of its overall size vis-à-vis the overall corporate center. Having said that, I would remind you we still actually have RMBS that sits there, so it's subject to volatility, and there still is a runoff in our portfolio, so there will be ongoing costs. We are going to amalgamate that into corporate center services. What you'll see in the future is corporate center services that encompass NCL and Group Asset Liability Management. Maybe I'll turn Sabine over for 2A.
Your question was where we will see this CHF 800 million. As I said, these corporate center services costs are almost entirely allocated out to the business divisions, therefore, they are the integral part. The way that obviously we manage them is through our cost management initiatives. We are tracking them internally, you won't see them separately reported in corporate center, but as part of the division results.
Perhaps if I could take 2B, I think if you look at slide seven that we put up, what you see there is that the corporate center saves the CHF 800 million, plus some saves that we expect in the business divisions. We look to fully offset our investments. As I mentioned, we have a performance management process to balance that. What you saw on slide 10 is completely independent. In addition to that, we have existing corporate center costs, which includes a portion of that, a little bit more than half is related to the equity that we're pushing out. It's the funding costs, it's the additional liquidity costs and the like that will be pushed out to business divisions, that will help to shrink the size of the overall corporate center.
On the one hand, the business divisions will benefit from the CHF 800 in saves. On the other hand, they will have push out of further costs.
Andy.
Thanks very much. On slide eight, Kirt, of your slides, you put there that you are expecting CHF 95 billion extra leverage, with a little note there to say that 75% of that goes to GWM. Just want to check, at maximum, the marginal balance sheet allocation that could go to the IB would be less than a third. It would be more like 25%. My second question is on the IT. How much larger will the innovation budget be on technology by 2021? It sounds like while the overall technology budget might stay flat in absolute terms, actually, you have got a lot of automation, you have got the benefits of cloud, benefits of robotics coming through on IT and operations, such that it should be percentage-wise or CHF amount or USD amount increase in the innovation budget would be interesting to me as well, please. Thank you.
Yes, Andy, on your first question, I compliment you with your math. 100 minus 75 is 25% nicely done. That is correct. Although I would also remind you that we do expect some allocation to our P&C business. You saw that we are looking for P&C to grow 3%-5%. Naturally they will require some level of resource.
Just to say thank you for complimenting me on my math. My parents will be very, very proud. Added another tenner to my Christmas present. You have got a target to say around a third of the overall balance sheet would go to the IB.
Correct.
Marginal from here is going to be below that number.
The around the third holds, remember, it's a balance between LRD and RWA. Around means it could be slightly less, it could be slightly more, and it's going to vary, of course, as we go through the quarters.
On your question with regard to the budgets, we are not reporting our numbers in sort of these subcategories within technology. Just giving you a bit of direction of travel, there are two shifts currently happening. One is the shift, as Sergio mentioned in his speech as well, is moving from regulatory initiated regulatory tech spend more on the business side. There's a swing that you will see, and that is a shift. While the overall landscape stays flat, you will see a reduction on the one side, and we are able to focus more on the business divisions. Innovation is a very difficult thing to say what is innovation, because a lot of what you see, for example, in the IB later on or in all the other divisions, is just the continued development and enhancing.
If we were to look at kind of really innovative step changes, I would say you would see an increase. That piece is nothing we are managing centrally. I would assume it's roughly about 10%, 15% today, and we will see that one increasing, but as part of the overall trend moving away from reg into more strategic.
Morning. It's Andrew Coombs from Citi. Two questions, please. One on buybacks for Kirt, then one again on tech for Sabine. On the buybacks, Sergio included the bar chart slide, which obviously gives you quite a lot of flexibility. That was slide 12 of his deck. My question would be, when do you think you can provide more quantitative guidance? He also referred to the two outstanding legacy litigation items. Is it the case that you want to resolve those before you quantify the additional potential? Is this something that could come as early as Q4? How are you conceptually thinking about that? My question on tech, again coming back to slide five. You show that you expect the OpEx balance relating to technology to be stable from here.
If I look at your CapEx over the last four years relating to capitalized software balances, I think that's gone up from CHF 0.5 to CHF 3 billion off the top of my head. That's obviously moved up quite a bit as well. From here, the extra charges, how much is taken through the P&L versus how much do you expect to capitalize, and should that balance also stabilize from here?
Thank you, Andrew. In terms of your first question, just to remind you of a couple of points that Sergio made. Firstly, of course, we're at CHF 650 year-to-date, that's above the CHF 550 that we targeted. I think he also importantly highlighted that the CHF 2 billion is a program, that gets into mechanics in the Swiss context. It does not coincide with our aspirations, you guys can work out the math of some of the expectations around the capital that we look to return. I think he said importantly, that we take this as a step at a time, because stuff can happen out there that we're going to have to react to.
In terms of the point around any unforeseen events or items, I would just highlight that we actually look at a short-term time horizon when we think about what we are going to repurchase. We don't consider what could happen over longer periods of time. As is typically our case, it's likely that we'll have an update overall on topics like dividend and share buybacks as part of our fourth quarter earnings.
On the question related to CapEx. What you will see, and we'll see in the flat numbers that while overall staying flat and with a P&L impact. Obviously, when we said we reduce certain areas where we have new spend, we will see a slight decrease on the CapEx side, we are obviously already seeing a slight uptick on the amortization given the significant investments, which over the next two years, two, three years, will then flatten out.
Okay, thank you.
Thanks. It's Andrew Lim from Societe Generale. Really appreciate all the detail on IT that you've given. Appreciate, as well, you can't give exact figures for your IT budget. We'd like to understand how you feel about how you compare versus peers. What kind of initiatives do you think you're doing, which are at the forefront of the whole IT game, as it were? Secondly, I think slide six of your deck, Kirt. If I look at the net yield of UBS Group as a whole over the past three years, it hasn't actually changed that much. I'm trying to square it with your guidance that you're giving here, where NII goes up on forward rates.
I'm wondering whether the differences in what you've achieved over the past few years, despite U.S. rates going up versus what your guidance is here, is due to maybe hedging, which will be less costly going forward. Maybe there's some perimeter differences as well. I think in your guidance here, you're excluding the IB, which I would imagine would be substantially wholesale funded. I was wondering if you could give a bit of color on that.
Yes, please.
How we are comparing. I think it's always a difficult thing to say how do we compare because you know it, you're doing these measurements and ratios, and I think if you're looking at the percentage of revenues, percentage of costs, et cetera. I would say we are definitely well-positioned around the middle. If we are looking what we are doing in our investment, and this was the part I tried to cover earlier on, and I'm sure you will see a lot more with when my colleagues talk about their businesses. I do believe we are extremely well-positioned when we are looking at the digitization of our client front end. I do believe, looking at our status today, already having brought one third of our estate into the private cloud and already started.
I think we are really well-positioned, and this is why we said we will continue on our current track.
In terms of your second question regarding NIM, I think with the important caveat, you're right. It's really hard to look at NIM when you have investment banking that creates volatility and sometimes distorts what actual underlying net interest income is doing. To your point, what you've seen in terms of our trend historically is there's been a very more recent tailwind that we've had from the US dollar. There's also been some offsets from the TLAC and the funding costs that we built up. We've also highlighted the fact that there was a macro hedge that rolled off that had quite a significant impact as well on the business division, and also as well, we've had a big buildup in liquidity resources.
The overall margin on the liquidity resource buildup that we have is going to be far lower than the margin on the core businesses of our accrual businesses. Now, if you look at what we calculated, I would just reiterate the fact that it's important that this is based on current balance sheet, so we have no structural changes in implied forwards.
If I could just add with regard to the technology question, I really invite you all to go upstairs because we have 19 stations. It is including our blockchain development we.trade we did. We have really tried to give you a bit more a lively feeling with these 19 booths, and this is where you can see yourself and you can really look at that. You cannot really play around, but it is very close. I just invite you to make the effort just once, they are upstairs, and then you see that. Here.
I have to figure this out. This is a question for Sabine on slide five. Just to understand the numbers, you spent $6.3 billion on corporate center costs in the first nine months. Your run rate is about $2.1 a quarter, and it looks to me you are going to spend $2.7 based on your guidance in the fourth. I am just trying to understand $2.6. I am just trying to understand why is the fourth quarter run rate higher than the historic run rate? The $800 million, as I understand it, and please correct me if I am wrong, includes $400 million of restructuring charges, probably roughly. You are spending about $100 million a quarter on restructuring. As Kirt said in the past, I think you spend about up to $500 this year, $150, $200 next year, and then zero. Make sure, are those numbers still intact?
If they are intact, then really the net cost savings is more like $400 million on a higher cost. It is really only 7% rather than 16. About two and a half a year. Is my maths correct or am I totally off?
I think, what you need to see is that you cannot reconcile this slide with non-technology, technology with the numbers and figures you had. Just example on the restructuring, the budgets you are seeing, and the numbers you are stating across the entire group, including what we had in all the business divisions. What is true is definitely that, as you have seen from Kirt's presentation, and Kirt you can pick it up later on, is that we are moving together with reported and aligned. The overall cost that is going down and as a net cost going down are this $800 million. Restructuring is a part of that one, absolutely, and these are the costs that we are still having, for example, on the regulatory side, continuing these initiatives, which will go down and which then obviously be part of our reported net cost reduction.
Our savings portion, the real savings, is significantly higher than the CHF 400 you stated.
Maybe just to add to that. I think if you look at the CHF 800 and the fact that the restructuring cuts across Corporate Center in the Business Divisions, the restructuring reduction contribution is about CHF 300 of CHF 800, that's CHF 500 in savings. Important to note, the actual gross savings, because that's a net number, will be quite a bit higher because a lot of the investments in order to support the Business Divisions, we are spending in Corporate Centers, we'll absorb that increased investment as well. To turn to your fourth quarter question, I think hopefully, as you have observed over time, the fourth quarter is our most volatile quarter from an expense perspective. We do have a seasonality in the quarter itself where there are spikes in overall costs. Sometimes they frustrate me, but they're there.
In addition to that, we typically actually have a bit of a buildup of technology spend as we go through the year. We actually incur a higher than 25% of our total program related costs in the fourth quarter. All of that contributes to fourth quarter being a bit higher, and then you tend to see it come down in the first quarter.
I mean, CHF 500 million net is roughly, if I get this right. Can you just me on
The restructuring charges in total are about CHF 500 million this year is what we guided.
Yes.
We expect them to be a couple hundred million CHF next year. Of the reduction of the CHF 500 over the next couple of years, roughly about CHF 300 of that sits with the corporate center and contributes to the CHF 800 million in savings. Therefore, the difference. Andy can help you with the math. The CHF 800 minus the CHF 3 gets you to the CHF 500.
Yeah. No, that's very helpful. If you would put the CHF 300 in next time, and full disclosure is also very helpful. In terms of why only CHF 500 on a cost base of almost CHF 9 billion? Why can't you do more? I mean, we're talking 3% per year cost decline net. Restructuring we leave out because nobody cares about the restructuring. It's already in our model.
I think if you look at our overall ambition in terms of what we're delivering from an efficiency ratio and from a return ratio, we think that that takes us from already being best in class and actually puts us further ahead of where we are today. We do anticipate to continue to have best in class industry returns overall. If we look at, as I said, the need for us to continue to reinvest, the gross save number is larger than the CHF 500 net save number, and that's required to support the business division. We think that that best balances the need to grow the business with investments and also to prudently manage our costs and our efficiency.
Stefan.
Yes, good morning. Stefan Stalmann from Autonomous Research. I was wondering if you could talk a little bit more again about technology spending, and in particular, about how you actually look at the economics of what you're spending. Obviously, the amounts are very large and impressive, how do you actually decide whether it's worth it? What are the criteria? What are the time horizons? How do you decide today that you will actually spend CHF 3.5 billion in 2 or 3 years' time? Are you very confident that you will have a much larger amount, even of very economically attractive ways to spend this money or is it just driven by, let's say, top-down considerations of what you can afford to spend? I would be quite curious to learn a bit more about how you approach this, please.
Ultimately, this is part of our, I would say, IT spend governance process, it's the entire Group Executive Board, which based on what the plans are, what business divisions want to achieve in the businesses, what the growth is, that obviously requires funding what is regulatory required. The entire mix is ultimately discussed and agreed and decided by GEB, taking into account a couple of points as well, as you said, was it necessary to be achieved? What is the turnout of investments? What is the affordability? A lot of factors being discussed there. We have a process where we are very tightly monitoring what we are calling the Group Strategic Investment Portfolio, which is really our game-changing investments for the entire group, That is regularly discussed and part of our planning.
If you break it down into all these different initiatives, we have a very clear process where we look either a technology is just required to be compliant or a technology that's invested has to deliver growth, We are tracking these growth figures, or it has to lead to an efficiency measure, which again, then is tracked as well. This is what we are constantly reviewing. If we are not seeing progress, we are looking in detail, We feel fairly confident, I hope you will see it from the business division presentations later on, is technology is so interwoven today. What the businesses are doing is not like a couple of years ago, you have what if the IT head who just said, "This is what we are doing," The business was operating on a machine.
It's so a fundamental, integral part in a front to back way, that this is a process you can only decide together, Technology is a big, significant investment. I think that going through today, you will just see that it is part. In a nutshell, it's part of the overall planning, This is a collective decision taken by the entire Group Executive Board.
Maybe just quickly, the reason three years is because it coincides with a three-year planning process, we certainly recognize that stuff could happen that actually will require a change in those plans. Also importantly, a lot of our investments are longer term, and they take three, four, five years to be able to fully deliver. Therefore, you do need a little bit of a longer time horizon to be able to think about the investments. Also importantly, from my perspective, the reason why the three-year plan is critical is because I want to see the saves and the revenue increases committed to in the plan. If they're not, then I discount them. I don't count them as saves or as revenue increases.
Could I maybe just follow up? Is there a way to put an ROI in or a payback or something against this technology spending budget?
Well, we do actually run ROIs on all our programs. Also when we look at the benefits overall, for example, we'll count cost benefits that are hard one for one. Revenue benefits we'll discount. Then we have related benefits that they could actually be, for example, improved capital that we won't incorporate into the actual return metrics, and we track this closely.
Jeremy.
Hi there. Two questions, please. The first one picks up on the discussion earlier on about the investment bank capital allocation. Clearly it's getting much less than its one-third share of LRD, you said that would be compensated by the risk-weighted side. Is the intention that the IB will have to absorb things like FRTB within its one-third share of group capital, group balance sheet? That's my first question. Second question is on your slide nine, Kirt. It's great that you're allocating really quite a lot of the corporate center. I guess my question is, why not allocate all of it conceptually? Why wouldn't you allocate 100%? Ultimately, it's the business divisions that have to price that balance sheet to customers and get their business model right so that at a group level that is covered.
Why not allocate the whole of the Corporate Center balance sheet?
Yes, in terms of the first question, it also to address straight on because we get this question all the time. It is like we are targeting a third for the IB, and if they get a little bit less, it means we are going to give them more later. If they have a little bit more, we are going to take it away. That is not the case. We look at what the business requires to operate. We target around the third, and we know it is going to fluctuate based on circumstances. If you do look at the next three years, first of all, you also have to look at RWA. A portion of the CHF 11 billion REG will accrue to the IB. Also, if you do look at the CHF 35 billion, naturally, a portion of that will actually go towards the IB.
As I mentioned in my speech, if you take FRTB, which is probably the biggest component of the increase, first of all, we do not have the final rules. Secondly, once we have the final rules, I fully expect that the IB will actually bring down that considerably. I think that CHF 35 billion is a high number, and it is going to be a lot less by the time we get to 2021, and then we will factor it in. It is three years away. We will look at the broader overall allocation to the business divisions. The second question, why do not we allocate everything? We basically have allocated out about all of our CET1 capital. We said that is how we risk manage the group. That is how we look at our regulatory capital requirements. That is how we weigh whether or not we are going to return capital to the business divisions.
That is the base off of which the business divisions actually have capital to deploy and invest. The main other components, DTAs, we do not manage the business divisions on a post-tax basis, so it would make no sense for us to allocate that to the business divisions. Then we have retained earnings to pay for our dividends. It makes no sense to push that out to the business divisions. We have a bit of hedging volatility that is included in there. At present, there is a little bit of buffer that is being held by GAM. Part of that will get optimized, but also we do have some group overall liquidity and funding requirements that the business divisions do not control.
On the ROE target, can you just help with the tax rate of your assumption? Did you releverage to a 13% quarter 1 ratio, or what assumptions did you make on the capital ratio given your ROEs on a quarter 1 capital base? Sorry, to follow up on the cost savings, the CHF 500 million net, that doesn't assume anything on litigation coming down, or is it basically on a clean basis? Sorry, lastly, on the replaced
It's okay, you can ask. Oh.
You replaced your 2018-2020 targets with 2019 targets and the 2021 ambition. What was the thinking about it? Thank you.
Yes. For RoCET1, what we include there, and importantly, the denominator is going to grow over the next three years, we said roughly around CHF 5 billion. You can actually expect that to come into play in terms of our overall return target. If you look at the numerator, the denominator is based on what we said is we're going to manage our capital ratios at around 13% and around 3.7%. That's been factored into the plan in terms of how we're looking at the denominator trajectory. In terms of the numerator, I guided that we expect our tax rate to be around 25%. That's the actual accounting net profit number. I also indicated that the cash tax is only 12%.
What we'll see is that the DTA coverage, the 13% that's actually non-cash, will accrue to our capital, and it'll help the accretion of our capital going forward. Maybe I'll just very quickly, in terms of the CHF 500 million net, litigation expenses aren't part of that corporate center stack. The litigation expenses sit in corporate center services, which it's what we hold centrally. It's apart from the corporate center functions that Sabine talked about, or they sit in the business divisions. They don't really impact the volatility overall of that CHF 500 million. In terms of our targets overall, what we've done is that we've gone away from the ranges, and we've established a specific target that we have for 2019, and this is aligned with our planning period.
We've indicated an aspiration, which is in a round number, which again, gets away from the broad target and gives all of you a little bit more specificity. We've phrased those as targets because we've got more certainty next year and more comfort, then we recognize that three years ambition is appropriate because there's a lot of volatility that could take place. I talked about the beta factors. The beta factor evolution could be different than we forecast, and in fact, it usually is.
Thanks very much. It's Jernej from Goldman Sachs. I have two questions. The first one is simple, which is, you referred to being able to run the ALM better, more efficiently. Could you just expand on that? What do you think could be done better, and what is the quantification of that? The second question I have, and I'm trying to make sure this is not taken in the wrong way, because I think we all agree that UBS is one of the most profitable banks in Europe, et cetera. You've now changed the definition of your target for the fourth time since 2014, right? We started off with ROE, then we had return on tangible, then we had return on tangible XDTA, and now we have return on core equity tier one. Yeah.
The denominator conveniently is lower every time the target is communicated, but the return target stays the same at around 15%. I remember that this time around last year, we had this big debate whether the return on tangible XDTA is the right number or the wrong number and why you guy differently than everybody else. I want to ask you two things on this. The first thing is, why does it make sense to keep changing the definition of your target? Secondly, are you convinced that this is the last time we're changing this? Because you've indicated that you're going to tally this to the return on tangible in any case. That when you report results, we're going to get that as well. Wouldn't it be just easier to go back to the return on tangible guidance in line with everybody else?
Yes.
I don't mean this in a negative. It's still a good target and a high return, yeah.
In terms of Group ALM, what you've seen, I talked about the fact that we built out our legal entity structure. That introduced substantial inefficiencies in the group's overall HQLA and funding. You've seen actually that we've been running an LCR ratio of often above 140%. As we have built out our infrastructure across those legal entities, we have daily liquidity information. We built out a collateral funding hub that we are able to better manage the allocation, the use of our collateral centrally. We built out risk management capabilities that allow us to better manage our balance sheet and our funding in each of the legal entities. All of this will allow us to create greater group level efficiencies on the buffer that we have to keep, and we'll be able to reduce that buffer over time.
In addition to that, we fully expect that as we continue to build out our capabilities in group asset liability management, we'll be able to improve the effectiveness of how we manage our balance sheet overall. All of that together gives me great confidence that we'll be able to improve our overall returns. The final one is, I told Carlo that his bonus depends on it, so I expect him to deliver. In terms of your second question, I think importantly, when we look at our shareholders' equity, what we recognize is we are very unusual. There's a slide in the appendix that compares us to all of our competitors. We have by far in a way, the highest concentration of shareholder equity in DTAs and some other items. The U.S. banks, their common equity pretty much equals their CET1 capital. That's about 100%.
Therefore we felt it was important to be more comparable on how we looked at returns, that the excluding DTAs was appropriate. When we did that, the calculation became complex because we changed the numerator and the denominator. When we re-looked at our return targets now, in particular, we made the decisions on DTAs, or we expect to in the fourth quarter, I should say. We're going to begin to amortize DTAs going forward. That balance will converge and reduce over time. We felt when we looked at what's most important to us, and we believe our shareholders and our regulators, it's our right capital. That's what we manage. We think the return on CET1 is our more appropriate number for looking at our returns, and best aligns with how we manage the group overall.
Because of the calculation dynamics, actually, if you compare last 12 months, even though the denominator is a bit lower if we use CET1, the numerator effect means that actually there's a 1 percentage point that we shaved off the target on a like for like basis. So that means that with the 15% and above, it's slightly more ambition, but we just left the 15% target, and you see we're targeting 17% as our ambition.
Just very quickly, can I just ask a final question? Do you hold your divisional management to account on the return on core equity Tier 1 targets as well or not?
Absolutely. We hold our business divisions accountable for their return on CET1. I mean, for us, you think about the group targets, returns, efficiency. The business divisions have their own targets for both of those dimensions. When you look at all the math for the targets and the ambitions, they underpin, and they roll up to the group target. So we're fully reliant on the business divisions delivering against their targets. For one of them, the IB, we of course, have a specific return target, around 15%.
Amit.
Hi. Yeah, sorry, just a follow-up on the targets and the ambition. Just to be clear, in terms of the difference between a target and an ambition/aspiration, does that make a difference in terms of people's compensation or in terms of how people are held to account in terms of the medium term? That's the first question. Second question, I just wanted to understand a little bit better, maybe I'm not completely on top of it, but in terms of the change in functional currency and the incremental $300 million per annum of net interest income, how exactly that works.
Thank you.
Yeah. Our plan, and it's not surprising that we're coming out at this point because we're completing our three-year planning process. What we're trying to do is to communicate what is in our plan, and all of us are compensated on delivering our plan. Absolutely. Our performance, our scorecard, our own benchmarks are completely tied into the plan itself. Therefore, of course, the targets that we communicated, and naturally it's the next year that's the hardest because that's what you're closest to, and that's what you're going to be managing immediately too.
Also it's a three-year plan, and we do look to maintain the delivery of our three-year plan. The fact is that we all know we're going to forecast data factors and as good of forecasters as we might be, we know that they're not going to be exactly as we forecast. They're going to vary, sometimes substantially, which is why we said, rather than call this a target, we're going to refer to it as an ambition. We're going to recognize that there's some uncertainty. As I said in my speech, we have a performance management process to adjust our resource allocation, and we take steps to ensure we have the right trajectory from a P&L. Still, there's uncertainty there, and that's basically the difference in definition. In terms of functional currency, it's really, really simple.
When we change to US dollars, that's what we pivot and we base our risk management on. Probably the most important component of our risk management is how we manage our capital and the degree of variability we allow under stress scenarios for our capital fluctuation. Under US dollars, it means that we can invest more of our capital in US dollars rather than Swiss francs and euros, as well as more of our liquidity in US dollars. Under the current interest rate environment, that's accreted to net interest income.
We've got time for maybe one more question. Yeah. Please go ahead.
Yes. Hi, good morning. Benjamin Goy from Deutsche Bank. Just to follow up on your comment on the 15% return target for the Investment Bank and the higher hurdle rate, which was quite pronounced for the division. Just wondering, how does it impact the businesses? Essentially, you increase it by six percentage points, as you mentioned. What's the proportion of income, for example, that is sitting between the old and the new target in the IB? Thank you.
Well, what I've commented on, first of all, what you've seen is our Investment Bank. The target that we communicated before looked at the 15% basically as the floor, what we expected at a minimum. The IB has been consistently delivering above that 15%. When we look at the rebasing and the effect of 6% reduction overall as a consequence of pushing out both our capital and our cost, that's about a 6% drag on their current return on attributed equity restated, which is why we changed the target to around 15%. We're very confident that the IB will continue to optimize and manage very aggressively their business to deliver at least around that level as we go forward.
Thank you all very much. We're going to have a coffee break now. We'll be back at 11:30 A.M. As Sabine has said a few times, there is quite a few things to play with upstairs. Thank you.
Okay. Would like to get started. Welcome back, good morning, everybody. Today, I walk you through our plans and ambitions for Personal & Corporate Banking. The last time we presented our Swiss business was seven years ago. It has delivered strong and steady profits ever since. Now we are aiming for a 3%-5% annual profit growth over the 2019 to 2021 period. It's a business we are proud. It's a cornerstone of our universal banking model in Switzerland. It is at the heart of UBS. Switzerland is an attractive market. Its economy is strong and diverse, with a high proportion of wealthy individuals with a wide range of globally successful companies as well as SMEs. It consistently holds top positions in competitiveness and innovation rankings. Negative interest rates have been and still are a significant headwind for all banks operating in Switzerland in recent years.
Despite that, Switzerland as a home market has plenty of opportunities. UBS is the number one bank in the country with an unrivaled universal banking model, commanding leading positions with Personal & Corporate Banking at its core, complemented by our regional Global Wealth Management, Asset Management, and Investment Banking businesses. P&C's leading market positions translate into strong profitability driven by both cost and capital efficiency. It generates high returns with low risks, which places it best in class compared with other Swiss banks. For reference, we have also plotted UBS region Switzerland with our universal bank delivery model. As it includes the Global Wealth Management, Asset Management, and Investment Banking businesses with Swiss-domiciled clients, it is thus a better proxy to our Swiss peers. However you measure the business, we clearly are ahead of our peer groups in Switzerland.
Our returns also compare well with most European banks with a retail and corporate focus, despite them operating in different interest rate environments and much larger markets in many cases. P&C has delivered steady profits to the group year after year, reflecting our success in offsetting the very substantial impact of negative Swiss interest rates, higher regulatory funding, and TLAC costs. Our revenues are well-diversified, with a balanced mix between Net Interest Income and recurring fee and transactional income. Our current profit run rate translates into an adjusted return on attributed equity of more than 20%. Around that level, taking account of the incremental cost and equity allocation we'll be carrying from next year. P&C is often referred to as our Swiss retail business. In reality, the corporate side of our business is bigger than the personal banking side, making for a healthy, balanced mix.
Our corporate and institutional clients serve 121,000 clients. These range from corner shops to multinationals. We are the only Swiss bank that supports its clients with international business activities via local hubs. We have shops in Frankfurt, New York, Hong Kong, and Singapore. Personal banking has about 2.5 million clients. We engage with them via multiple channels and have a comprehensive life cycle-oriented offering. 1.9 million personal clients with basic banking needs are primarily served through our call center agents and digital channel. 0.6 million personal clients with more individualized needs are also served by dedicated client advisors. In addition, personal banking provides core banking services and significant customer development opportunities for Global Wealth Management and our corporate and institutional client segment. On this page, you can find some additional information about our CIC business.
Switzerland is the only country where we operate across all four of UBS's business divisions. Working in partnership is key to our success. Personal banking directly feeds into GWM, as I just mentioned. The power of universal bank delivery model goes much further. Overall, we see very large volumes of referrals or business leads across all divisions. This is also particularly true for our corporate and institutional segment, which I call CIC from now on, where we serve multidimensional needs. For example, working in close partnership with asset management, we can provide pension fund solutions to our CIC clients. Such referrals also play a crucial role between CIC and global wealth management. CIC referred CHF 100 million invested assets from just one client to GWM recently. I could give you plenty of more great examples like this one.
As you can see, collaboration is an essential part of our DNA. Building on our strong track record, we aim to keep generating more than 20% of our revenues in Switzerland stemming from cross-divisional collaboration. On the tech front, we have substantial synergies and scale effects with global wealth management. Its WMP platform was built on the Swiss IT platform and has since been rolled out in key locations globally. Today, the digital client interface is essentially the same, whether you are a P&C client in Switzerland or a global wealth management client in Germany, Hong Kong, or Singapore. Being the number 1 bank in Switzerland reflects the success of P&C and UBS's strengths, which are valued by our clients. The most recent customer surveys confirmed this, along with continuously improving customer satisfaction levels. Looking ahead, we have 3 strategic priorities to strengthen our business and to drive efficient growth.
In personal banking, we want to further enhance efficiencies while maintaining strong momentum in net new client growth. In corporate banking, we see a number of growth opportunities, which I'll cover in a moment. Finally, we are committed to investing in digital data and technology. With nearly half of P&C's income not tied to interest rate, our revenue mix is much more balanced than that of local peers. For NII, based on today's interest rate levels, we would expect some decrease from current levels, reflecting continued pressure on net interest margin, as well as our prudent approach on lending. On the other hand, we have the ambition to grow non-interest income, including fee and transaction income at 3%-5% per year based on our current real Swiss GDP growth projections. I'll walk you through our plans just in a moment.
As I mentioned, we would expect net interest income to decrease slightly from current level, in part driven by our prudent approach to lending. An important feature of the Swiss lending market is the fact that we compete with a number of quasi-state and cooperative banks, which together make up about half of the market. Many of these competitors are willing to operate with returns below cost of capital, which has led to some market distortions. Nevertheless, we have a sizable loan portfolio, of which over CHF 110 billion mortgages. We manage it with a focus on quality over market share. For residential mortgages, in recent years, we have focused on single-family homes and deliberately shrunk our exposure to multifamily homes as we are less positive about the outlook for that market. The quality of our loan portfolio is very high, with minimal credit losses.
Only 7% of our mortgages for single-family homes and 2% of our mortgages for our multifamily homes have a loan-to-value ratio of above 80%. In terms of stress, more than 99.7 of the volume of our residential mortgage portfolio would still be covered even if collateral values were to fall by 20%. As I mentioned, we operate in an environment of historically low and negative Swiss franc interest rates. Our plans are based on implied forwards, yet if rates were to increase, the upside would be substantial for us. Such scenario is not imminent, but it is worth me sharing examples of what interest rate moves would do to our revenues.
From this chart, you can see that a 100-basis point parallel increase compared to today's implied forwards would lead to incremental net interest income of around CHF 500 million in year three, or expressed differently, our cost income ratio would be below 50%. Let me turn to our use of technology. UBS is the recognized leader for online and mobile banking in Switzerland. Expanding our digital lead is therefore a priority for us. As part of my job, I speak with many foreign executives of Swiss-based corporates, many praise our superb digital offering that often goes far beyond basic banking and beyond what they have experienced with other banks. We initiated a multiyear digitization program two years ago. We pioneered video onboarding in Switzerland, for example, and more than 60% of our personal banking client relationships are now completely paperless.
On data and analytics, we are forming a center of excellence internally and also collaborate with external partners, such as the Swiss Artificial Intelligence Lab in Ticino. We work very closely with a number of fintechs to stay ahead of the curve. For example, we use video identification for clients working with a German fintech. We also initiated a close collaboration with an accounting software provider that allows a seamless and convenient integration of SMEs accounting and banking activities. We are looking into a number of further opportunities in the fintech space and through cross-industry collaboration. There are some stalls at our tech demo outside, I encourage you to visit. Our investments in digital have been significant and will continue to be so with a cumulative spend of nearly CHF half a billion over the 2018 to 2021 period.
We expect these investments to protect our revenues, generate additional income, and achieve efficiency gains through the entire value chain. Overall, we expect the benefits from technology investments to start outweighing cost from next year. We are also making good, steady progress in terms of efficiency. We have lowered personal costs, reduced the number of branches and ATMs, deployed more than 50 robots in operations, and increased productivity in both personal banking and CIC over the last four years. Looking ahead, we aim to realize further efficiency gains and to decrease the cost-income ratio by a net three to four percentage points by 2021 on a like-for-like basis. We expect to decrease costs in absolute terms over that period. As part of this effort, we have recently launched a new efficiency and effectiveness program.
Initially, we will focus on key processes such as payments and asset servicing, enabled by investments into robotics and artificial intelligence. Let me say a few words about our branch network, which we share with Global Wealth Management in Switzerland. We continuously look for optimization potential, and yes, may close some of them over time. This said, we want to be smart in the way we reshape our physical footprint. We are rethinking existing branch formats to suit evolving client needs and convert some of our smaller branches to access branches, which will serve as hub for marketing and sales activities as well as digital support. In addition, we are shifting more and more basic banking services transactions from branches to contact centers and digital. The success of our digital offering is the driving force behind net new client growth, where we enjoy great momentum.
Since 2015, we more than tripled the number of net new clients every year to 42,000 in the last year, I'm confident this year's client growth numbers will be similar. We aim to grow our clients' wealth and eventually transfer them to Global Wealth Management. Our ambition is to shift at least CHF 5 billion of invested assets and loans to Global Wealth Management annually, even if this means forfeiting a CHF double-digit million amount of profits every year for P&C. It's the best answer and the right thing to do for our clients and for UBS. Looking ahead, we see growth opportunities in the mortgage market through an improved and technology-enabled advisory process. We see advisory as a key differentiating factor and the key reason why clients choose UBS as a financing partner. We have also refined our pricing model and provided more autonomy to team heads.
We are increasingly using advanced analytics to identify cross-selling opportunities. For example, our new next-product-to-buy approach allows us to proactively contact clients with the right product via the right channel at the right time. UBS is the market leader with corporate and institutional clients in Switzerland. We have many avenues to grow. Our Investment Bank is the source of a very big competitive advantage for us, allowing mid to large-size corporates and multinationals access to our state-of-the-art capital market solutions. Joint revenues with the Investment Bank were about CHF 300 million last year, of which two-thirds generated by CIC-owned client relationships. We have a very strong pipeline of revenue growth initiatives in corporate and institutional. Across segments, we believe we can improve both client acquisition and client retention through data analytics.
We want to increase the share of wallet with our clients, either by achieving main bank status or by taking cross-selling opportunities. We are focusing on an integrated advisory approach for entrepreneurs with strategic dialogue at the core. By this, we mean our capacity to be on top of key topics such as potential acquisitions or succession planning as part of building long-term relationships with clients. Most of our Swiss competitors cannot provide a comparable offering due to their lack of scale or expertise. Looking at individual segments now, our global reach is another key differentiator. As I said earlier, we run several international hubs to support our export-oriented clients all over the world. We have also pioneered a new blockchain-based trade finance platform together with other industry participants.
In the real estate, we are expanding the service offering of our mortgage platform, UBS Atrium, which connects institutional investors with Swiss mortgage holders without using our own balance sheet. In August, we passed a milestone with more than CHF 1 billion of mortgages managed by our UBS Atrium offering. We see significant potential in the market for small business. The group of clients has historically not been a focus for UBS, leading to a comparatively lower market share in this segment. This week, we launched dedicated new and highly efficient digital value proposition for small corporates called UBS Digital Business. It is the tech investments we have made that allow now us to serve this market much more efficiently, and this segment has become more attractive for us. In our new UBS Digital Business platform bundles our offering for small corporate and newly founded companies.
It is based on self-service channels and call centers to maximize scale in servicing smaller clients. UBS Digital Business also brings state-of-the-art corporate solutions such as fast credit functionality, for example. With this new offering, we want to increase our momentum and gain market share in the small corporate segment. We have kicked off our marketing efforts this week to attract innovative and digital-savvy small business owners, aiming to markedly increase our market share with startup companies over the next three years. Looking at performance targets, our Net Interest Margin objective has been recalibrated to reflect pressure from higher regulatory fund costs, notably. We do expect some compression from today's levels. As I mentioned earlier, we are confident we can offset this and grow overall revenues by increasing recurring and transactional income.
On cost efficiency, our ambition is to decrease our cost-income ratio by three to four percentage points over the next three years. As I mentioned, we expect our absolute cost base to also decrease over that period. Supported by continued low credit losses, this should lead us to deliver a 3%-5% profit growth over the 2019-2021 period. I'm confident that we can do that. With this, I'm happy to take a few questions from the audience. Thank you.
Stefan, do you want to go ahead?
Yes, thank you very much. I have one question, or actually two questions I have to say, regarding potential developments in the Swiss mortgage market. There's quite a possibility that PostFinance will enter the market in the next couple of years, and there's also quite a tangible possibility that the treatment of houses and mortgages for tax purposes will change. Could you maybe comment about what this could possibly do to the domestic market, and in particular, the domestic mortgage market?
Yes. When you look a little bit to the development of the overall mortgage market in Switzerland, that has grown quite significantly. The volume of mortgages is close to CHF 1 trillion. That is bigger than Swiss GDP. That is in part driven by, of course, the low/negative interest rates we have in Switzerland that make buying a house and apartment much more affordable on one hand. On the other hand, we have that special Swiss tax regime, where when you are a homeowner, you need to pay a notional rental income. To offset that, you can deduct interest payments, for example, or maintenance costs, interest payments on the mortgages and maintenance costs. This is now under discussion.
From our perspective, I think would be good, certainly also from a pure economic perspective, definitely you could expect that probably, the mortgage market will maybe contract a little bit. That would be not at that point of time our major concern. The reason for this will be that, in Switzerland, a lot of homeowners have a mortgage just to optimize their tax returns, and less because they really need the money to finance their apartment or their house. You have PostFinance in Switzerland, which is a state-owned. It's the arm of the state-owned Swiss postal office. Yes, the Swiss government has indicated an intention to partially float, potentially, PostFinance, and to allow them to enter also the credit market and the mortgage market, which would be obviously a new, quite significant competitor in the overall marketplace.
They have a balance sheet of roughly CHF 110 billion-CHF 120 billion. They could probably add up to 7%-9% of the Swiss mortgage market. Look, as long as they don't stay in state ownership, that would be at least partially or hopefully entirely a publicly listed company, that is all fine with us, it definitely will increase competition, yes.
Can you hear me? Yes. Okay. Question on slide 10. The outlook for fees or, let's say, non-Net Interest Income is quite positive in your slide. If I think about some structural trends for fees for universal banks, I would be more inclined to be negative in the sense that I see fee compression when it comes to trade finance with blockchain, when it comes to payments, potentially Wealth Management, if you are on the mass affluent side of things. What drives your conviction into this 3%-5% growth per annum number?
Yeah, no, fine. We are also observing what is ongoing in the marketplace, also from a competitive perspective. That is why I think we prepared. This is not basically a new strategy. We built up that muscle to grow fee and transaction-based income over the last year. Part of our digital investments go clearly into that, part of our product offering. When I look to what we do and how significantly we could grow, for example, our business with institutional investors, with asset servicing, custody activities that we have, what we built up in terms of mid-market advisory. I was referring to some of the initiatives we have when it comes to succession planning and other initiatives. When I look to what we do in Personal Banking, where we now have a machine that is shifting this year nearly CHF 1 billion of custom deposits into investment funds.
That number was in a very low CHF 100, CHF 1 million range two, three years ago. We have a machine build up that is really focusing that type of growth. That gives me really good confidence. When you look to our third quarter numbers, you see that fee income went up roughly 4%, transactional income went up roughly 8%.
Thank you. If I can have a second question. If I think about the Nordic market, which is quite advanced technologically, digitally, the cost income ratio there or the most of the advanced banks target below 40%, 35%. Why do you think Switzerland is structurally very different considering that the revenue margins are quite high? I would expect structurally, a much lower cost income ratio.
Yeah. I think there are two different effects or three. When you look at it, I was speaking to digitization, when I look a little bit to where we are as a Swiss market to compare, for example, the Nordic markets, they are further ahead when it comes to digitization of their offering. We want to be, I think, the market leader in Switzerland when it comes to digitization. I don't need to be the European or even the global leader in digitizations. Secondly, they have positive, we have negative interest rates. That is obviously a significant drag on our NII respectively. Obviously, you can translate that also into a cost-income ratio.
As I was showing you with the scenarios, an instant 100 basis point shock on implied forwards would mathematically increase our NII by roughly CHF 500 million, which is close to 10.8, 9 points of the cost-income ratio. Which is obviously, a modeled number, that shows you where we are. Certainly, the structural. Also Switzerland is a very mature and call it a very rich market. When you look to average income, average assets and things like that, it's still relatively small marketplace. I think these are the three key factors.
Okay.
Yeah. In terms of the mortgage multipliers, do you think the Swiss regulator has now reached a point where this basically will end? How confident are that the higher risk ratings would basically be already covering what Basel IV might try to implement? Thank you.
Market is interesting. On one hand, we have the Swiss National Bank that is obviously depressing interest rate levels, and they are the most vocal to warn about a certain overheating of the Swiss mortgage market. You saw on my slide that we still feel carefully optimistic about the single home mortgage market, where we had good growth, maybe slightly below market growth. We deliberately were shrinking our, we call it the interest-producing real estate portfolio by close to a quarter, 25%. That means that overall we have lost market share when it comes to the mortgage market. The SNB, also FINMA, are really looking into that situation in particular of the multifamily mortgage market. They are asking at that point of time for industry self-regulating measures.
I would not anticipate at that point of time or speculate if there are any further capital charges in this regard. One thing I can say for sure, they are certainly not focusing our portfolio, and I think that it's probably also well-known in the marketplace. I think you have seen our numbers.
My guess is just a follow-on from that question. Note that your income-producing real estate is down 24%. Clearly, the risk there seems to be more with some of the cantonal banks, perhaps than yourself. Given that prices are still heading up, yet rents are coming down, vacancy rates are creeping up, it would appear that your 0.003% average credit loss over the last five years is clearly unsustainable. If I could just push you on what you think your, through the cycle, cost of risk is for your division.
Of course. When the weather is nice, then your credit losses are much lower. Frankly, I think I was alluding in my presentation to, I think, the strict credit underwriting standards we are applying. We are not shy to lose market share if needed. To lose 25% in the multifamily home, that is really hurting. Some people in the marketplace think that UBS has basically pulled out of that market, which is tough for us as the market leader. I have quite a good confidence level that the level of our low credit loss expenses will go through the overall cycle. I see no reason that we have significant uptick. Let's keep in mind, on absolute terms, these are CHF 50 million, CHF 60 million. Don't ask me if they are CHF 70 million, CHF 80 million or CHF 30 million, CHF 40 million next year.
There's obviously some volatility in that number, but I would say very low level.
Slide 15. You say we aim to shift CHF 5 billion invested assets to GWM per year. CHF 15 billion in the next three years. How should we see that? Like, the revenues will be taken from your division and into GWM? Do your targets include that?
I think that's integral part of our universal banking delivery model. What we do, basically, in personal banking, we have basically a sales growth engine that we have, and part of the other core of the strategy is that develop the customer, and then the ambition level is to shift them into Global Wealth Management. Yes, that is somewhat impairing, call it, the growth opportunity you have in the personal banking sector, but it's an integral part of their performance management framework, and it's part of the strengths that we have, that we can develop clients and then they shift into Global Wealth Management. I think that's part of the beauty of our universal banking model. Yes, when you look then to personal banking, of course, when you shift every year the most wealthy customer into another division, you go back to zero and you start with clients.
That is the mechanism. I think overall from UBS, these are all UBS clients. That's the best solution.
In the quarterly report, you will see that we make reference to shifts and referrals quite frequently between Wealth Management and Personal & Corporate, so you can follow the numbers moving from one side to the other. Nick, how about you?
Thank you. Just a question on, you remarked that you're spending CHF half a billion cumulatively on IT through 2021. Could you give us a flavor for what is the mix of that between amortization of past spend and what is going to be new spend? Thank you.
Yeah. No, no. Sure. Obviously, this is all the amortization capitalization effect. This is all included in our numbers.
You have a follow-up? Very happy to take questions from rating agencies as well. I know they're here. Jeremy.
Hi there. Yeah, Jeremy from Exane. To follow up on the interest rate sensitivity chart, which I know you've shown before, but just coming back to that. I assume that it's the forward curve negative CHF 200 million that is baked into your targets and your planning assumptions. I just wondered if you could talk about what are the main assumptions within that, the main sort of squeeze points that cause that negative. Also, how much you factored in any ability to reprice or to mitigate the negative impact. Whether it's an aggressive assumption or a sort of conservative assumption.
It's the standard plan assumption, as Kirt was alluding to, implied forward , this is our base case, the planning assumption. You see the numbers here. We have somewhat to the internal curves that we have as a good protection against a potential further downshift, and then the upshift is very significant. The most critical part for us is in that phase, where you go from assuming the forward goes up, is between the -75 to 0, because everything above 0 we have against spread income. What we will lose, obviously, in that trajectory from the -75 to 0, some of the fees that we charge, in particular for corporates and larger corporates. That's a process we need to carefully manage. It's embedded in the overall plan that we have.
The real sweet spot is when we go through 0 and then have a spin against the spread income. The most delicate on that chart is between now where we are, up to when the gap to 0 is closed. And that depends, obviously, all on timing, on the steepness on the curve, and things like that.
Further questions for Axel? In which case, Axel, thank you very much, and I'd like to invite Uli up to the stage.
Good afternoon, everyone. When I spoke at the Investor Day in 2014, my management team and I had just initiated our review of our business, and the definition of our new strategy. Since that time, we have completed a very fundamental and significant transformation across all different parts of our business and alongside the whole value chain of the firm. I'm proud of what the team has achieved through the transformation in turning around the firm. While we are not yet where we want to be or need to be in terms of PBT growth, we are better placed than ever to deliver significant value to UBS Group and its shareholders following our successful transformation and with our clearly defined strategy. With today's presentation, I would like to leave you with three key takeaways about UBS Asset Management.
First, we have completed our transformation and are back on the competitive landscape. We are now well-positioned to profitable growth. Second, years of asset loss have been successfully turned into an asset under management growth rate of two times the industry. Furthermore, we are performing well in an industry affected by significant structural change. Third, our strategy is specifically geared to areas with above-industry growth, therefore supporting our 10% PBT growth target. Let me quickly start with some important characteristics of our business. Almost three-quarters of our assets are with third-party institutional and wholesale clients. We have a deep institutional DNA, and while being a strong partner for Global Wealth Management, we are much more than an in-house asset manager. In terms of regional distribution, we are diversified and, compared to most of our competitors, a truly global asset manager.
There are few firms in the world that can provide the breadth and the depth of our capabilities, and therefore are able to provide tailor-made solutions to clients globally. Within UBS, we are an integral building block of the group's business portfolio. Asset management has highly attractive financial characteristics with a high return on attributed equity, and notably, with hardly any use of capital. Our business strengthens the group investment and asset gathering position, since we have very deep investment expertise. We also serve as a product innovation and development hub leveraged across the group. Finally, asset management provides significant revenue and cost synergies with other divisions. Talking about working in partnership, we have a deep and comprehensive collaboration with other businesses. Just to highlight a few examples for you.
For Global Wealth Management, this includes delivering the necessary product building blocks for the management of discretionary mandates, tailoring customized institutional solutions for our most sophisticated Global Wealth Management clients, and providing significant platform services. For example, Clearstream Fund Centre is a platform for more than 50,000 funds from different providers, and therefore supports Global Wealth Management in running their leading open architecture model. We are also one of the Investment Bank's largest clients, driven by trading, currency, market-making, and securities lending. Last but not least, as Axel was saying, there are significant joint coverage efforts of corporate and institutional clients with P&C in Switzerland. After a short description of UBS Asset Management's profile and also role within the group, let me set the scene as to where UBS Asset Management has come from, as this is absolutely critical to understand our way forward.
Through the global financial crisis and the idiosyncratic situation of UBS, the asset management business declined from a top-tier position into a stagnating and fragmented firm. In the subsequent industry recovery from 2008 to 2013, UBS Asset Management did not participate at all. In fact, it lost significant ground, and a huge gap to competitors was established. In 2014, we defined our new strategy and our transformation program across the whole value chain. We started execution towards the end of the same year. By the end of 2017, we had completely transformed our firm from a multi-boutique, siloed organization into a fully front-to-back integrated asset manager. Also from 2014, while executing our transformation, we started to catch up, and since 2016, our invested assets have been growing twice as fast as the industry. In other words, after a decade, we are now back on a strong growth trajectory.
Before I come back to the PBT development over the same period, let me quickly comment on our transformation. Why is this important? Quite simply, without this fundamental transformation, we were just not able to leverage the strengths of our firm and to deliver them to our clients. Let me give you some examples of the work we did along the value chain. We have invested significantly in upgrading our operating platform, centralized and streamlined our middle and back-office operations to drive further efficiencies and cost savings. In products, we established a global organization, introduced active product portfolio management, and also rationalized our shelf, thereby increasing the average assets per fund by more than 40% and bringing us back in line with the industry benchmarks. In investments, we brought together all traditional asset classes and enhanced our focus on delivering high risk-adjusted returns for our clients.
These measures are bearing fruit, as I will show in a moment. To better serve our clients, we established a client coverage organization along global segments, and also integrated our platform service capabilities as a cornerstone for our future wholesale offering. All in all, during the course of this fundamental transformation, we made more than CHF 200 million of self-funded investments into our business. In parallel, we have refocused our business portfolio and further reduced complexity through the sale of ancillary businesses. With all of this work completed, we are able to bring now the best to our clients and accelerate profitable growth. As a result of the measures taken on the investment side, we are seeing strong improvement in terms of top-performing fund assets, as you can see here, based on Morningstar and Lipper data. This isn't just nice to have, as you all know.
An improvement of more than 35% in both five-star Morningstar ratings and first quartile Lipper funds puts us significantly ahead of industry average and increases the attractiveness of our products. This, in turn, allows us to protect margins and supports future PBT growth. While we have made good progress in many areas, we have not yet delivered the sustainable revenue and profit growth to reach our ambitions. I'm not satisfied with 1.5% PBT growth annually, even though this is broadly in line with peers when you take into account M&A activities, differences in business mix, in particular, the share of wholesale business, as well as the necessary self-funded investments. As some of you might remember, at our Investor Day in May 2014, we set our ambition to achieve a CHF 1 billion PBT in the midterm. Clearly, we missed this ambition.
The main reasons for that have been, A, nobody anticipated at the time how severe the structural industry changes would be. B, we clearly underestimated the situation the business was in and the task at hand to turn it around. Why is it different now? Why are we now strongly positioned to accelerate PBT growth in the years ahead? Let me demonstrate that with the next following slides. In terms of the foundation for growth, firstly, we have a highly differentiated offering mix across high alpha and alternatives, index and alternative beta, and our platform services. Secondly, within each of these areas, we have best-in-class capabilities that we can offer to our clients. As a result, there are few firms in the world that can provide the breadth and the depth of our capabilities and combine them to bring tailored solutions to the clients globally.
Building on this differentiated client proposition as our foundation, our growth strategy is focused on six clearly defined priorities. The growth priorities are wholesale, including platform services, investment solutions, sustainability, China, and index, including ETFs, and all underpinned by operational excellence, which includes initiatives focused on IT, on data management, and operations. The important point to understand is that our growth priorities are targeted to capture areas of above-industry growth. The overall expected industry growth is at 7% per year in terms of assets under management. Our priorities focus on industry sectors that are expected to grow up to twice as fast as the average of 7%, namely between 9% and 15%. By successfully executing our priorities, we expect to capture growth in line or above industry growth rates to achieve our ambitions. Let me do a deep dive on a few examples. First, wholesale and platform services.
This will be an important factor in accelerating our PBT growth in the coming years. In the peer group, the wholesale segment has generated 80% of revenue growth in recent years, and the margins are about three times higher than in the institutional business. The landscape is also changing fastest here, driven by technology. Currently, our situation is the weakest in our peer group, with a share of only around 10% of our overall business. Why do we believe we are well-positioned to significantly increase our business here? There are two key reasons. First, we have repositioned the business. We have set up a dedicated segment coverage globally and built out our client analytics and interactions. All of this to create the necessary focus and to be able to respond to client needs in a targeted and very timely manner.
After the launch or repositioning of a number of dedicated wholesale products, together with improvements in investment performance, we are already seeing increased momentum. Second, we can now provide a comprehensive set of platform services. This includes Fund Centre , our fund management services, which you might be familiar with. From my perspective, one of the most exciting developments in this space is the launch of UBS Partner, our new and innovative offering in the advisory business for retail banks and insurance companies. We successfully introduced UBS Partner to the market this year. Our first clients, including Global Wealth Management, are now actively engaged, and we have a further strong pipeline of potential clients at different stages of interest. I would encourage you to have a look at what UBS Partner can do in the tech demos outside.
As a second example, let's focus on our global index and alternative beta business, including ETFs. This business is a significant net new money engine as well as an important profit contributor. In tangible terms, we grew our index assets by more than 50% over the past three years, while at the same time, our cost-income ratio for the business has dropped by around 25 percentage points. As a number 2 Europe-based index house, we have strong roots in the regions, and we have increased our market share significantly over the past few years in the European ETF space. Looking ahead, we will continue our strategy of being a leader in product innovation and differentiation. This separates us from competitors, has proven to be successful in the past years, and is particularly relevant in the alternative beta and ETF space, which are areas of high expected growth.
We are also further strengthening our footprint in Europe and in APAC and continue to invest in our platform to enhance the scalability. With respect to operational excellence, we have done a lot to re-architecture our global IT, data governance, and operations platforms, as well as to further optimize our processes for client coverage, but also investments. We have further work on this underway. Furthermore, we will see increased benefits from the cost actions we took earlier this year and the programs we initiated as part of our transformation. The centralization of our mid and back office operations has resulted in cost savings of CHF 10 million. The targeted cost actions taken earlier this year are expected to result in annualized cost savings of approximately CHF 40 million by 2019. The replacement of our core portfolio management platform will yield another CHF 25 million of cost savings by 2021.
In addition, we expect further reductions across other corporate center functions in line with what Sabine said earlier this morning. It's important to note that while these measures will support us to achieve our cost-income ambition of 68%, some of these savings will be reinvested to support future business growth. Our further three strategic priorities, investment solutions, sustainable and impact investing in China, are in full implementation mode and delivering strong initial success, as you can see on the slide. As a result of our strategic priorities and the measures taken, the adjusted PBT growth target of 10% per annum over the period to 2021 is backed by robust financial drivers. In detail, a significant part of our revenue growth is driven by our strategic priorities, and we have high conviction and good momentum in these areas of high growth.
With respect to gross margin, we continue to carefully manage our margins with a strong focus on active capabilities and the expansion into higher margin areas. This is also supported by enhanced investment performance. Having said that, we are not immune to the structural headwinds and expect gross margin to decline in line with the industry going forward. With respect to net new money, we expect to continue to develop within target range, with 80% of our future net new money to be generated by our strategic priorities, areas of high growth and good momentum for us, as I said earlier. On the cost side, we will see increased benefits from the cost actions taken earlier this year, the programs we initiated as part of the transformation, and we will continue to strategically manage our cost base. This will help us to balance the necessary investments in growth.
As presented by Kirt before, this slide summarizes our financial targets. Starting from the new base, UBS Asset Management aims to achieve an adjusted PBT growth of 10% per annum, an adjusted cost-income ratio of 68% by 2021, and a net new money growth rate of 3%-5% per annum. To sum it up, we are well-positioned for profitable growth. Years of asset loss have been successfully turned into an asset under management growth rate of two times the industry, and our strategy is geared to areas with above-industry growth. With that, I'm at the end. Thank you very much for your attention, and happy to take questions.
Jacques-Henri .
Thank you. Two questions, maybe. The first one, you've detailed very well how you're going to get to your objectives in light of the fact that it didn't really go according to plan. What do you think could go wrong? What's your biggest risk at this stage, maybe over the next three years? The second point, as your business is more and more an affair of scale, and considering that you're actually quite big, wouldn't the solution be to get bigger, particularly in light of the collapsing market caps of some of your competitors? Thank you.
Thank you very much. The conviction, this is important to understand, I think this is different from, as I said a few years ago. The transformation is done. The business is in different shape. We found back to the growth path in terms of asset growth. The strategic priority is geared to areas of strong growth. Cost measure is underway. This gives us confidence for the PBT target. What could go wrong, as you were saying, you have seen, and obviously market environment plays quite a role in that planning, as for nearly every other business, I would say. If market turned completely from our overall identical assumptions, so to say, that obviously would create havoc, which we cannot foresee today. In terms of scale, as you say, I think with that growth, we are in a good shape in terms of size.
Consolidation in the industry will go on. In my eyes, it's no question. I would see firms and both borderlines obviously being completely wrong. I would say see firms like between $50 billion and maybe $500 billion, really being in focus of this consolidation process going forward. In our case, again, this strategy is an organic strategy. What is different here compared to the past three, four years ago, following our setup, as I said, it was not possible for us to even consider inorganic growth. Today, we could, I would say.
Gentleman with the beard at back. Thank you. Sorry, could you introduce yourself, please?
Hello. Daniel Regli from MainFirst.
Hi, Daniel.
Hello. Thanks for taking my question. My first question is regarding your AUM growth versus the industry. Could you maybe break this a little bit down into what was coming from AUM and market performance-driven growth and what was driven by net new money compared to the industry? My second question is regarding industry trends we're seeing. I think we heard some competitors of yours seeing some margin pressure raising. How do you deal with this, and are you seeing this as well? Thanks.
You're referring to two slides of assets. If you look at our, I talk about our net new money growth between 2014 and 2017, that was above 2% annually. If you look into 2018, as you have seen this morning, I would say in relatively difficult market environment, if I look over the last two quarters, at least, growth was above 5%. That's as an indication for you, and obviously, as I said, between 2016 and 2019, we were clearly outgrowing the industry. In terms of margin pressure, you heard me saying, also with all what we have done in terms of improving investment performance, we feel quite good about that we can even stronger place our active, strong active products going forward. Nevertheless, as I said, we have at least figured it in our plan, so to say, a margin decline in line with the industry.
Eleanor.
Eleonore Jonassohn, Union Bancaire Privée in Geneva. How do you balance giving yourself an identity as an asset manager, a clear identity, with the desire to grow, in the sense that if you grow, you need to be everything to all men, possibly. If you have a stronger identity, you may be more clearly recognized on the market for what you do.
Thanks for the question. It's a very good question, Eleanor, and plays a significant role in our, I nearly had said daily conversations. We had an intense debate around it. In my eyes, and I'm not saying that I'm right, in my eyes, I think there are basically two models in asset management which will be attractive going forward, and which will survive. The one, call it the boutique model, few products, high quality, call it asset managers, up to maybe CHF 50 billion, CHF 60 billion assets under management. The other model is relatively large in scale, holistic offering, which can be offered to high demanding institutional clients and wholesale clients across the different asset classes. We obviously belong in the second camp and are quite convinced of the value prop we have for clients.
How to create focus, this is exactly the debate we had, or create more identity if you want to. This is why we have defined our strategic priorities as, call it a certain overlay of the overall offering, and also focus ourselves in execution.
Correct me if I'm wrong, but I think the share of the distribution channels with Global Wealth Management and your Swiss bank is roughly stable, if not slightly down over the last year. Just wondering whether this is kind of saturated to some extent, or how your discussions are with your other colleagues within the group.
Two or three things. The first one is, as you are fully aware of Global Wealth Management runs an open architecture, since many, many years, which is in my eyes, absolutely the right model. Secondly, the share which we may have, I must say, based on our competitiveness with Global Wealth Management is quite significant. If we can more or less keep that share, with their growth, obviously, which is also quite significant, I think this is a pretty good outcome.
Sorry. I just wanted to follow up on top line progression from here. Clearly, as you said, your AUM growth has actually been better than peers, but on the flip side, your gross margin pressure has been more acute than peers. Going forward, you're talking about margin pressure consistent with the industry, and I just wanted to get a feel for what's changed. Assuming that's because of a pivot in your strategic priorities. With that in mind, on slide 11, given the five areas that you focus on, can you give us a feel for what the gross margins, broadly speaking, are on those areas?
Okay. The development in gross margin which you're referring to, was very much driven on the one hand, from the strong growth in passive, call it a shift somewhat which you have seen in the overall industry from active into passive in the last year. You have seen that we have been growing very strongly but very profitably in that business as well. That is one important thing. The other important thing to bear in mind is performance fees. If you go back into 2014, the share of performance fees and operating income was about 8%. If you look into 2018 year to date, it's about 4%. A relatively small amount, but nevertheless, a decline, which you clearly can see here.
In terms of cross margins for the different strategic priorities, we do not go further here in disclosing gross margins for individual asset classes or parts of our business.
A quick question from me, and I think the room will find it interesting. What is the MiFID II impact so far, you think? If I can ask it in a different way, what would your ambition be instead of 68% if it wasn't like as part of the picture?
MiFID impact in general terms, so to say, as you know, the regulatory demand coming to the industry has increased dramatically, I would say, in the last three to four years. MiFID is obviously a prominent example out of that development.
Overall, there are additional costs coming out of that in the order of magnitude of CHF 20 million, I would say, for us, for MiFID. Second question, can you repeat that?
Exactly that. What's the incremental cost that you have on the back of MiFID? CHF 20 million, you said.
We're slightly early, which is good, which means we can have a longer lunch. I'll see you back here at 2:00 P.M. Thank you.
Good afternoon. Martin and I are delighted to be here to have the opportunity to share our confidence and the optimism that we have for Global Wealth Management. Today, we want to spend our time together taking a deep dive into our business and sharing details about how the creation of Global Wealth Management strengthened our ability to deliver on our global growth ambitions.
Good afternoon, everybody. It's great to be here. Today, UBS is the only truly global wealth manager in an industry that is growing twice the rate of GDP. We are uniquely positioned in the largest and fastest-growing wealth markets and segments. We have an opportunity to leverage this position to deliver even more value to our clients and to our shareholders. Creating Global Wealth Management at the start of 2018 was an important milestone for us. We are targeting strong growth in the U.S., Asia, and the key ultra segment. These are areas where we already have an established presence, a track record of being able to capture growth, and where favorable market factors support us. The creation of Global Wealth Management also allows us to reduce costs by roughly CHF 250 million per year, or in total, more than CHF 600 million over the next three years.
These savings will fund most of our growth initiatives in the coming years. By working as one team, and through a combination of global and regional management actions, we have a clear plan to significantly increase PBT, attract net new money, and reduce our cost-income ratio. Between now and 2021. We are confident in our goal to increase pre-tax profit by 10%-15% per year through the cycle, and we expect to operate at the upper end of that target range by 2021. We are also committed to achieving net new money growth of 2%-4% each year, with at least 3% in 2021. Over the next three years, we aim for a 500 basis point improvement in our cost-income ratio, resulting in 70%. We operate from a strong leadership position. UBS is the world's largest wealth manager with about $2.4 trillion in invested assets.
What is more important than our size is the fact that we are the only truly global wealth manager. Our competitors fall into one of two categories, larger players, but with less geographic diversity outside of the U.S., and firms with broad diversity, but without our scale or without our U.S. presence. Our uniqueness is a benefit. We can serve clients better, and particularly those ones that have global needs. We get advantages from our scale. That means we can offer clients benefits they hardly can get anywhere else, such as preferential pricing or exclusive access to products. This gives us a valuable competitive advantage. The size and the diversification of our client portfolio is difficult and very expensive to replicate. When you look across geographies, you can see our business is well-positioned for both short-term and long-term market trends.
Wealth in Asia is expected to double between 2017 and 2022. North America remains the largest wealth market and is forecasted to grow by at least 6%. Most importantly for our business, the higher the wealth spent, the faster the pace of wealth accumulation. The ultra segment, where we as UBS are the clear number 1, is outpacing all other segments at 11% per year. We believe we are rightly positioned. This morning, you heard Sergio and Kirt discuss our third quarter numbers, and despite a mixed quarter, we had the best nine months to start a year in a decade, with record invested assets, record mandate volume, and record mandate penetration, and net money flows that are significant in terms of volume, but relative to our size, are not good enough, particularly in the U.S.
Our cost-income ratio, now at 75%, also continues to improve, underscoring our commitment to efficiency while investing in the future of our business.
Looking back to 2014, we've made solid progress. Pre-tax profit grew by 5% per year from $3.5 billion to $4.2 billion. That's a significant increase, but it does fall short of our target. We've benefited from strong markets and a favorable rate environment in the U.S. Our success was driven by our focus on increasing mandate penetration, revenues from banking products, in particular in lending, and the strength of our ultra-high net worth offering. All this was achieved while we invested significantly in technology and in our investment capabilities, something that we view as essential to long-term success in our industry. We also faced a number of significant headwinds, some of which we underestimated or for which we couldn't fully compensate.
Although we took an early and proactive approach towards offshore transformation and automatic exchange of information, the speed at which this happened was faster and far more reaching than the industry first anticipated. For us, we saw roughly $70 billion of outflows between 2012 and 2017. Another headwind has been the negative interest rate environment in Europe and Switzerland. Approximately 40% of our deposits are in EUR and CHF, much higher than most of our peers. We also moved to a retrocession-free model. Again, this is something that we did proactively and ahead of our peers. Finally, there were costs associated with evolving regulatory requirements. The important thing to understand is that many of these headwinds have now either disappeared or reduced significantly.
We won't see the same drag on profits and distractions for our team, and we believe our early actions on some topics have created a competitive advantage. We're ready with the setup and the ability to compete and win. With a track record of successful execution, we're confident about the future. There are three main drivers to deliver on our profit target. First, favorable market factors. Second, our global and regional management priorities, both new initiatives and many that build on growth-oriented actions we've already taken in the past three years. Finally, we'll make large strategic investments of more than $1 billion between now and 2021, including $600 million on technology. In addition to growing pre-tax profit, we'll fund our investments in growth through the savings that we realize from our cost review.
Operating as a single business enables us to deliver better service to clients, realize meaningful cost savings that we'll reinvest in our business, and to bring significant growth to shareholders. Global Wealth Management allows us to offer every client of UBS a consistent experience and the best wealth management solutions, services, and expertise, no matter where in the world that client is located. Global does not mean central. We'll succeed by adapting our global strengths and by deploying it through a multi-local model. We are not all things to all people. Specifically, we'll focus on high-net worth and ultra-high-net worth clients in all markets, affluent clients in the U.S., Switzerland, and Greater China only, and our financial intermediaries business in all markets. Crucially, Global Wealth Management also gives us the right organizational setup to serve clients who are truly global.
Ultra-high-net worth clients have homes in different parts of the world and have business interests and investments around the globe. UBS has a relationship with more than half the world's billionaires. You'll hear a lot today about how we're going to strengthen our offering for ultra clients, do more for them, and grow our market share, particularly in Asia and the United States. This focus on ultra helps us to sharpen and enhance our execution for the high-net worth segment as well, which is 30% of our invested asset base and a significant contributor to our profits.
Global Wealth Management is at the core of UBS strategy. Cross-business collaboration is essential, and it's a big competitive advantage for us. Let me put it simple. We would not have established the leading franchise in wealth management if we could not mobilize the entire power of the group. We benefit from being part of UBS and our access to Investment Bank, the Asset Management business, and Personal & Corporate Banking in Switzerland. Those businesses also benefit from Global Wealth Management. With the Personal & Corporate Banking business that Axel presented this morning, we share infrastructure, we innovate together, and we successfully support people living in Switzerland as they build their wealth. With Asset Management, we jointly design products. For example, we just celebrated the third anniversary of UBS Systematic Allocation Portfolio.
So far, this solution has attracted more than CHF 30 billion in invested assets. I think this is a great success. Our Investment Bank provides access to capital markets, execution capabilities, and world-class research to complement the work of our Chief Investment Office. This is valuable for Global Family Office clients, where we partner with the Investment Bank to jointly provide institutional-type offerings through a dedicated unit. We are also focused on operating efficiently. Since 2014, we have grown the top line by 3% a year. At the same time, we kept overall expenses under control to reduce our cost-income ratio, despite CHF 1 billion of strategic and regulatory investments. The two percentage point reduction in our cost-income ratio shows that we are progressing towards our targets. We continue to focus on controlling cost and identifying additional opportunities for greater synergies across Global Wealth Management.
In Q2, we announced that we had identified savings up to CHF 100 million run rate by the end of this year. When fully implemented, these actions will actually deliver a total of CHF 150 million per year. We are becoming a flatter organization, cutting third-party spending, reducing hiring plans, and eliminating duplicate roles. So far, we have delivered around 50% of these savings with the full impact to be realized by the end of 2019. Tom and I are pleased to tell you that we have identified another CHF 100 million in savings, giving us total P&L saves of CHF 250 million by 2021, or in total, more than CHF 600 million over that period. In terms of growth moving forward, all our regions will contribute to growing PBT over the next three years.
We expect the U.S. to contribute a greater share, close to half over the next three years, as the region's profit margin grows to 25%. It is important to remember that growing in the U.S. is especially valuable to shareholders. Our deferred tax asset allow a very large percentage of our U.S. earnings to accrete to capital. In Latin America, where we are number 2 by invested assets, we want to be number 1. We aim to get there by making the most of our global platform and by growing pre-tax profit by 10%-15% per year. Solid growth in Asia will ensure that the region becomes an even larger part of our profit in the future. We aim to take advantage of our established presence in the region to boost profit by at least 15% a year. We expect EMEA to deliver stable returns over the cycle.
Our unique scale and business drivers allow us to target profit growth of 5%-10% a year. In Switzerland, we will take advantage of our leading position in all business segments with a goal to grow pre-tax profit by 5%-10% per year. In our global ultra-high-net-worth business, we will focus on the U.S. and Asia, with the goal of growing net new money by 4%-6% per year. Everywhere we operate, we are improving the business and we will be growing our profits.
Let's start with the U.S., our largest market by invested assets. This region is the largest contributor to Global Wealth Management's pre-tax profit. If you look at the results over the past two years, you see that the operating model we introduced in 2016 is working, and it's working well. At that time, our U.S. business overturned a long-held industry practice by shifting away from expensive recruiting. Today, we instead focus on driving growth through supporting, developing, and retaining the advisors who are already here at UBS. Our model also includes driving greater empowerment to branch managers at the local level, where we're closest to clients. We target and track the economic profit of our managers, which empowers them, but it also means that they're held accountable for their decisions.
Add to this the investments we're making in next-generation technology, digital tools, and new products and services in areas like lending and deposits, we've built great momentum. Since the beginning of 2014, profit in the region has grown by 11% per year, and invested assets stand at a record of nearly $1.2 trillion, while our cost-income ratio declined 300 basis points. Importantly, client satisfaction has improved, with over 87% saying they're highly satisfied with their relationship with UBS, while we've also further extended our lead in FA productivity. While headline net new money quarter-to-quarter can be impacted by large one-offs and seasonality, our same-store advisors, those who've been with us for more than one year, continue to deliver strong net new money growth, establishing new record highs. Our strategy in the U.S. rests on four pillars.
First, closing the gap to the market leader in mandate penetration. Second, driving Net Interest Income by further increasing our lending penetration and narrowing the distance to the industry leader and carefully managing our liabilities. Third, improving our penetration in the ultra-high-net-worth segment by increasing market share with 100 million-plus clients. Fourth, extracting additional value from our operating model by boosting the productivity of our advisors, maintaining low attrition, and by selectively adding talent in key markets. Four key priorities, each with the capacity to deliver between 200 and 250 basis points in incremental profit margin, which we intend to increase to 25% by 2021. Let's take a look at each one of these in greater detail. First, mandates.
Here we've made substantial progress in recent years, increasing our penetration in the U.S. by roughly 400 basis points, which against the strong invested asset growth we've shown is an impressive CHF 123 billion. We're confident we can accelerate this momentum based on our track record of success elsewhere in the world. In Switzerland, for example, we increased penetration by 1,400 basis points between 2014 and 2017. In the U.S., we know demand is high for this offering. Our research tells us that two out of three high-net-worth investors would rather pay for advice through an advisory fee than through transactional commissions. They say doing so aligns their interests with their advisors, it simplifies costs for them, and financial planning is wrapped into the relationship.
The creation of Global Wealth Management gives us the opportunity to respond to that demand by leveraging our strong mandate product shelf developed in Switzerland, which helps to further deliver the value of our global CIO's perspective. Our long-term themes portfolio is a great example of this. Our CIO first identified three dominant global trends, population growth, urbanization, and aging, that are contributing to critical environmental and social challenges. We then designed a separately managed account offering through our asset management business aimed at investing in sub-themes to these global trends. Structuring long-term themes and introducing it into the U.S. market was only possible by having a global IPS organization, a global CIO team, and a global asset management business all working in close collaboration. To further support mandate growth, we're also adding teams of specialists to provide product expertise to our advisors and to directly engage with our clients.
We're deploying new tools and technology like UBS Advice Advantage, which those of you here in person hopefully had or will have a chance to see upstairs at the Tech Expo. This digital advice solution provides affluent clients with customized investment guidance, goals tracking functionality, the ability to talk to a team of advisors, and access to an accompanying investment advisory solution, all guided by our CIO's investment philosophy, and for one flat fee. Our momentum, combined with the opportunities created by Global Wealth Management, give us confidence that we can reach 45% mandate penetration by 2021. We're expanding our banking solutions in order to narrow the distance between UBS and the market leader. The opportunity to grow in this area is significant. We estimate that 68% of our clients' loans are held outside UBS.
If we are able to capture the same share wallet for loans that we already have with our clients' investments, that represents a $30 billion-$35 billion opportunity. Additionally, our research shows that the wealthier a client is, the more likely they are to take advantage of lending to fund a range of goals and activities. We are building out our lending product shelf to provide our clients with the products they need and want. For example, many of our clients are business owners. Think about doctors or lawyers or families that own manufacturing businesses or startups. Our lending program for entrepreneurs, which will be fully rolled out by January, helps clients with meaningful stakes in private companies to prepare for near-term liquidity events such as an IPO, an M&A transaction, or a private capital raise. Additionally, many of these clients own the real estate where they operate their businesses.
Through a new joint venture with the IB, we can now help them identify and explore financing solutions to take advantage of their commercial real estate assets. We also recently revamped our mortgage platform and in-sourced client servicing. Since the rollout of the modernized platform earlier this year, our mortgage business is seeing annualized 25% growth year-to-date, along with a material increase in client satisfaction scores and a reduction in loan closing time. It is important to remember that we only entered this business line five years ago, and there was some ramp-up time as we expanded our product capabilities and fine-tuned our service model. Today, the high-touch approach of our enhanced mortgage platform and our private mortgage bankers means we have a great opportunity to win over even more clients.
Our banking business operates at a marginal cost-to-income ratio that is significantly lower than our U.S. business as a whole, at between 15%-30%, depending on product. Growth in lending will have a big impact on our pre-tax profit. Just like in mandates, we are building our support teams to help deliver a world-class banking experience, to introduce more products, and to deliver better, faster service. For instance, last year, we expanded our banking field engagement team to include roughly 100 specialists who are dedicated to educating clients and supporting advisors in originating more loans and closing more business. In our U.S. legal entities, we also see an opportunity to improve our liability management in order to optimize our net interest margin and grow net interest income further.
We have worked to improve our interest rate risk management so we can better balance the duration of our loans and deposits and improve profitability. This capability also provides our lending business with the ability to expand a number of loan offerings to include a wider array of fixed-rate products, as we now have the tool set to better manage the resulting interest rate risk. Now, outside the U.S., UBS is the clear market leader and firm of choice for ultra-high-net-worth clients. As we will discuss later, we are the dominant wealth manager in Asia, EMEA, and Switzerland when it comes to serving the world's wealthiest. The U.S. is a bit of a different story, however. Here, we have done a great job executing in the $10 million-$100 million market.
Yet we know there's significant opportunity to grow our market share in the CHF 100 million-plus segment to achieve the same success that we've had outside the U.S. What's critical about this is that North America has more CHF 100 million-plus clients than any region globally, and we're now well-positioned to proactively capture more of that market. The creation of our global business is a critical catalyst, removing barriers to collaboration and allowing us to bring our ultra-high-net-worth expertise to U.S. clients. For example, by delivering more products and services of an institutional nature through our Global Family Office in partnership with the IB. Increasing our delivery of advice on philanthropy, tax compliance, and wealth planning support through our U.S. Family Office Services group. Introducing clients to alternative and private investment opportunities.
Helping our clients who are global citizens, as well as the next generation, to access a global network of ultra-high-net-worth peers and influencers. That's a capability that sets us apart from our domestic competitors. We believe that there's CHF 100 billion invested asset opportunity for UBS in the U.S. ultra-high-net-worth segment, and our goal is to capture approximately 70% of that in the next three years. For any of you wondering, still wondering, why we formed Global Wealth Management, here is one big reason. The reality is we were not, and we would not have captured this opportunity before. Already, in the nine months since the creation of Global Wealth Management, we're seeing the difference that an organizational structure can have for our clients.
For example, our U.S. coverage team partnered with a team in Europe to win additional business from a U.S.-based client who's the majority shareholder or owner of a number of public and private businesses around the world. The team showed them solutions and services that we simply weren't showing our U.S.-based clients in the past. The result has not only been a better experience for the client, it's CHF 250 million in net new money and nearly CHF 2 million in fees for this year alone. This is happening more and more every day and will only increase as we now operate as one global team. Finally, we'll deliver incremental growth in the U.S. by making the most of our client-focused, advisor-centric operating model. For us, the most important variable in achieving both profitability and efficiency is not head count. It's the productivity of our advisors.
While we will continue to selectively recruit to offset attrition, and in a way that's prudent from an expense perspective, our model means that our net new money growth will come almost entirely from same-store advisors as we invest in their ability to acquire new clients and gain market share with existing relationships. Our strategy no longer relies on weighing down our balance sheet with costly multi-year recruitment expenses. Since 2010, when we originally set a range of 6,500-7,000 financial advisors, we've reduced our total number of advisors while increasing our productivity. We'll no longer target a specific FA head count going forward. Instead, we'll balance productivity and head count to achieve profit and net new money growth at a lower cost-income ratio.
Now, one way we'll continue to boost productivity is by continuing to invest in digital tools that enhance the experience for clients and that improve the speed and effectiveness of advisors so they have more time to focus on growth. We're also going to focus on creating more high-performing advisor teams. The best teams include advisors and specialists, anywhere from five to 50 people, with complementary skill sets so they can provide clients with a broad array of services and solutions. A team's built-in extended coverage means that advisors can be more efficient with their time and can focus on business growth activities, such as prospecting and meeting with existing clients. Importantly, a team provides for a smooth transition of client relationships if an advisor retires or leaves the industry.
Our Aspiring Legacy Financial Advisor program, or ALFA, helps advisors nearing the end of their careers to transition their books to growing FAs who have longer career paths in front of them. What that naturally does is, one, lower overall head count, two, increase the number of teams, three, reduce client churn, and four, increase productivity. This is a good example of doing the right thing for our clients, for our advisors, and for our shareholders. By leveraging our momentum and our differentiated U.S. operating model, we're confident we can achieve our goals and further affirm the importance of the U.S. market to our global ambitions. Next, let's talk about Latin America, where we see an opportunity to become number one in the region. UBS is currently the second-largest wealth manager in the region by our own estimates.
When you look at how LatAm wealth is distributed across booking centers, we expect to see continued growth of offshore assets booked in the U.S. as clients prefer it for both time zone and proximity reasons. UBS is the best-positioned firm to take advantage of this opportunity. Our performance overall in the past few years has been resilient, despite the impact that cross-border outflows has had in our key markets. We're now focused on reinventing and reinvesting in the business, confronting some short-term headwinds, and capturing growth both offshore and on. Our clients in Latin America will now benefit from a strong multi-shoring model and a globally coordinated client coverage team able to offer solutions out of multiple booking centers. We feel confident in achieving the upper range of our 10%-15% pre-tax profit goal as a result of a number of initiatives.
Prior to the creation of Global Wealth Management, we frequently saw internal competition for clients in Latin America who could be served by advisors working out of at least three different booking centers around the world. This impacted the client experience and our ability to deliver all of UBS for our clients. Now, we've put in place a referral and recognition program for advisors that makes it clear we cover our clients with a joint coverage team, regardless of where in the world they wish to book their assets or where in the world the best solutions are located. We make sure our advisors are rewarded for that, which allows us to deliver a client value proposition that's booking center agnostic. We're also focused on leveraging our product and technology capabilities from around the globe to deliver a deeper, more holistic client experience.
By executing on each of these, we're confident that we can deliver on our profit growth target in Latin America.
Let's next take a look at Asia. We are proud to say that we are the largest wealth manager in APAC, with roughly CHF 370 billion in invested assets. This is a fast-growing region, and we are the fastest-growing firm. In just two years, our invested assets increased by more than CHF 80 billion, more than double that of any of our competitors. As you can see, the largest share of this growth has been driven by Greater China. Our performance in APAC has been very encouraging. Our pre-tax profit at the end of the third quarter grew by 9% per annum, while our invested assets increased by 11. Our cost-income ratio also improved. Net new money volumes since 2014 have been strong. We've done a good job building momentum while also investing heavily in the growth of our business.
On a per advisor basis, our invested assets, operating income, and profit have all gone up. In Asia, there are very attractive opportunities for our global business focused on the need of ultra clients. According to our last billionaire report, which by the way, will be published tomorrow, billionaires globally grew their wealth by 19% last year to almost $9 trillion. In Asia, billionaires grew their wealth by 32%. Consider these facts. 12 years ago, there were only 16 billionaires in China. Today, out of over 2,000 billionaires globally, 373 are Chinese. Last year, their wealth grew by 39% to more than $1 trillion. China alone creates two billionaires a week. In APAC, it's even three per week. Most of Asia's new billionaires and millionaires are entrepreneurs.
They are great at building businesses, but they need advice how to manage their wealth and how to think about succession planning, and that is where we can help them. Asia is heavily concentrated on offshore investing, with the majority of assets booked in Hong Kong or Singapore. This already is a huge opportunity for us. Much more wealth is held onshore, especially in China. Onshore is roughly 8-10 times the size of the offshore pool and mostly unmanaged. As access opens to the onshore market in China, we will begin to realize the benefit of UBS 50-year history in the region. China onshore is not yet a large wealth management market, but for UBS, it is an important investment that will benefit our business and our shareholders in the long term.
UBS, across wealth management, asset management, and IB, already has one of the most comprehensive set of licenses of any foreign bank. Let me also be clear. In the short term, China is not where we will generate significant profits. In China, you need to stay course, you need to keep pushing, and most importantly, you need to be patient. In the medium term, we expect to deliver our full advisory-led offer, and we will also address the market through digital by exploring partnership with Chinese technology firms. Looking ahead to 2021. Across APAC, we are targeting net new money growth of around 5% per year. We will continue to focus on increasing productivity, we are also hiring more advisors, around 25% more by 2021. Having more advisors and increased advisor education will help drive new client acquisition.
We will grow wallet share with existing clients by meeting more of their needs. For example, in collaboration with the Investment Bank, we will expand our Lombard offer for top-tier clients and deliver more bespoke lending for the ultra segment. We will deepen our existing relationships to drive recurring revenues. We expect to deliver a 5 percentage point increase in mandate penetration, driven by superior digital experience and support from additional product specialists. Net new money, lending, and mandates. They will all contribute to APAC achieving its goal of at least 15% pre-tax profit growth per year by 2021. Turning to EMEA. What we see in EMEA is a mature and steady source of earnings, though one that was impacted by our cross-border transformation, which is now complete.
Despite that, we delivered high profitability as we tightly controlled cost, increased invested assets to now over half a trillion, and generated solid net new money growth since 2014. For UBS, this is not only an offshore business for clients from Europe and CEMEA, we are also an established player in the major European markets domestically. That gives us a unique position despite increasing regulation for offshore businesses. When you look at our footprint, we have three main businesses on the continent. First, our international European business booked in Switzerland. After several years of outflows, largely due to cross-border issues, this business has now stabilized. Second, our European domestic business is present in eight onshore markets in core European countries. This is an advantage for UBS over many of our peers. Third, CEMEA.
Here we operate in 30 locations and offer clients comprehensive wealth management services and a choice of international booking centers. Across all of EMEA, we will continue to focus on moving beyond investments and having more holistic client conversations. We aim to achieve 5%-10% PBT growth per year by growing revenues and staying efficient on cost. Limited market access in Europe means we expect only moderate growth in our international European business in the future. However, the strength of our advisory capabilities and the depth of breadth of our Swiss-based offering will protect assets and gross margins in this area. Our European domestic business is the largest and fastest-growing part of our EMEA operations. We aim to take advantage of those trends by onboarding additional locations onto our state-of-the-art platform, wealth management platform, to more fully leverage our best capabilities and to give us greater scale.
This will allow us to compete with domestic champions. Finally, CEMEA. Here we will maximize synergies to accelerate top-line growth. This brings us to our home market, Switzerland. We are the number one bank in Switzerland with an unrivaled universal banking model, very well explained by Axel, built on truly utilizing the strengths of our group-wide capabilities. Since 2014, pre-tax profit was stable, though impacted by the negative interest rate environment. While solid net new money growth helped invested assets to climb to CHF 215 billion. Our cost-income ratio is excellent, thanks to a state-of-the-art platform and a highly efficient operating model. In the future, this will also be available for our domestic E.U. locations. Our Swiss business is highly profitable and operates in a mature wealth market. We expect it to generate annual PBT growth of roughly 5%-10% over the coming years.
We see several attractive opportunities that will help us to achieve this. For example, payouts from pension funds are expected to meet more than CHF 50 billion between now and 2021. We will be ready by doubling the number of UBS pension planners over the next three years. As the population ages, we will further strengthen our family banking offering for all generations to capture a larger share of the roughly CHF 150 billion in inheritable assets. We are also setting ourselves up to make the most of client liquidity events, like the sale of a small or mid-size company. By 2021, we plan to hire 30% more advisors focused on entrepreneurs and executives to capture part of that CHF 65 billion opportunity. While we are doing all this, we will increase the efficiency of our operating model through further digitalization, especially as partnering with our colleagues from P&C Banking.
Let's turn to our global ultra business. Actually, a fascinating opportunity for Global Wealth Management. Here we have performed well and seen strong profit growth of 16% since 2016. Our cost-income ratio has steadily improved to 70%, which is lower than for Global Wealth Management as a whole, reflecting the scale and efficiency of this business. Invested asset growth by 12% per year over the same period, driven by strong net new money. We want to capture a greater share of this highly attractive market, while also growing our share of wallets by offering more institutional capabilities. For example, we can give ultra clients asset servicing, M&A advice, or direct trading. This is what they expect from their wealth manager, and this is what they will get from UBS. In APAC, EMEA, and Switzerland, we are already the market leader in the ultra-high net worth segment.
These regions, our focus is fully on capturing strong market growth rates, expected to be 13% per year overall and even 17% in Asia. This is a significant opportunity for UBS. In these markets, 57% of our invested assets are from ultra-high net worth clients. Look at the red box on the chart. Two-third of the assets in that 57% are from clients served by our dedicated ultra unit, who are best placed to deliver the full range of UBS capabilities. In the U.S., the picture is different. As mentioned earlier, the U.S. has the highest number of individual with CHF 100 million or more, while we have a relationship with 40% of these, our share of wallet is much lower than elsewhere. This is a big opportunity for us, we realize by enhancing our ultra offering and coverage.
While 44% of our invested assets in the U.S. are from ultra-high net worth clients, less than half of those are from clients served by our dedicated ultra unit. We now have both the opportunity and the ability to change that by giving these clients access to our full global capabilities and the opportunity to be served by specialist teams. We have been doing this in Asia, EMEA, and Switzerland for years. Our U.S. ultra clients will now have the same offering, and more importantly, this is something that would not have happened without the creation of Global Wealth Management.
Globally, the goal for our ultra business is to generate 4%-6% net new money growth per year until 2021. The key to achieving this is investing in the U.S. To better support our financial advisors in serving existing ultra-high net worth clients and acquiring new ones, we'll take advantage of our differentiated product and service offering, enhanced by a team of ultra-high net worth specialists. First, we'll expand our Global Family Office capabilities in the U.S. This is an important differentiator for UBS. Our GFO is a coordinated global execution unit, bringing together the skills of our Investment Bank, Asset Management business, and Global Wealth Management. It provides customized, institutional-style service to wealthy families and individuals seeking access to or advice on capital markets activities.
For example, they may want to list a company, borrow against complex private company positions, or make direct investments in IPOs or debt offerings. Our plan includes hiring experienced professionals to further strengthen our U.S. GFO team. Second, we'll grow our family office solutions group in the U.S., targeting 100 million-plus clients. We're building a team of dedicated specialists to focus on providing these clients with more globally integrated solutions. Finally, we're making changes to how we operate around the world by incentivizing advisors to work as a single, collaborative Global Wealth Management team. As we said earlier, we believe we can attract CHF 100 billion in net new money and CHF 70 billion of that within three years. Around the world, our businesses are supported by industry-leading capabilities. Now, the strength of Global Wealth Management is based on the strong personal relationships our advisors have with their clients.
The intellectual capital, products, services, and technology that we deliver globally help to enhance the value of that relationship. We see scale advantages in delivering these differentiators through our three global operating units. First, our Chief Investment Office, which takes the analysis of roughly 200 investment specialists, providing 24-hour-a-day coverage in 10 key financial hubs around the world across all major asset classes to create one concise investment outlook, the UBS House View. This consolidated investment guidance is used by clients and advisors to make both strategic and tactical asset allocation decisions. Evaluating the global investment landscape through this dual lens, strategic and tactical, helps clients to maintain a well-diversified, risk-adjusted long-term portfolio while also taking advantage of short-term market opportunities. Second, our Client Strategy Office, which deepens the firm's understanding of clients' needs, behaviors, and preferences. FAs and to reposition, focus, and market their practices.
Our new global CSO organization places resources where they make the most impact, closest to the client at the regional and local level. Our CSO client research shows that clients around the world want us to help them answer three questions. What should our family do to maintain our lifestyle? What should our family do to improve our lifestyle in the future? What should we do to improve the lives of others? We help clients frame the answers to these questions through a goals-based approach focused on liquidity, longevity, and legacy. We call this UBS Wealth Way, and it's how we're helping advisors to reorient conversations with clients so they focus on the things that matter most to them, while leading to deeper and stronger relationships.
The investment analysis and thought leadership of the CIO and the client insights generated by the CSO directly inform the work of the third global unit, our investment platforms and solutions team. IPS brings together the best intelligence and research from across our entire organization. It converts that thinking into actionable investment solutions, including Global Wealth Management's flagship investment mandates, like our innovative long-term themes and sustainable investment offerings. IPS also helps to make it more efficient for us to be able to access the best ideas in an open architecture environment, while at the same time identifying and delivering the unique strengths and capabilities that Asset Management and the Investment Bank can offer. As you've heard throughout this presentation, mandates are a critical part of our global growth ambition. Our research shows that mandates offer a better investment experience for our clients and a better return for our firm.
Over the past five years, 45% of traditional transactional accounts booked in Switzerland underperformed our mandate solutions with similar risk, while only 15% outperformed them. The insights of the CIO team, the discipline of a professional portfolio manager, and active risk monitoring of a managed account all combine to deliver better client outcomes. It's not surprising then that we drove mandate growth of 9% per year since 2014. Today, roughly a third of our AUM is in mandate solutions. In some mature regions, it's more. In Asia, it's less. As Martin just outlined, that means we have a great opportunity. We expect to increase our overall penetration to more than 40% over the next three years. With a gross margin uplift of roughly 40 basis points as assets transfer from transactional to discretionary.
Well, net new money continues to power Global Wealth Management's progress. We have a clear target to achieve 2%-4% net new money growth over the coming three years. As you saw, our net new money growth for the last two years was at the lower end of that range. That reflected our belief that quality of net new money can be more important than volumes. What do we mean by quality? First, we want growth that is sustainable. We also have an expectation that cash inflows will be deployed into investments within six to nine months or even faster in the U.S. That is important because in today's environment, deposits, especially in euros and Swiss francs, are a drag on profitability and consume capital. We also think about quality in terms of where and how assets will be invested based on regional differences and preferences.
Our inflows continue to be driven by APAC and especially the ultra-high-net-worth segment, which drives more than half of our net new money inflows. That outsized share means that a small number of large inflows, or of course also outflows, can contribute to significant volatility in our net new money growth. As a result, net new money on a quarterly basis can be quite lumpy. You see that here with the diamonds on the chart. We feel it's important to understand net new money growth two ways. First, we look at it on a rolling 12-month basis. For us, it's averaged 2.2% over the last four years. Second, we focus on how we manage our net new money for sustained profit growth.
That means there are certain things we are doing to improve profitability and return on attributed equity that can also result in a drag of net new money growth. Our focus on economic profit is reflected in our targets. While we continue to attract significant net new money at any time by paying for it, we recognize that ultimately it's a costly decision for our shareholders. Let me give you an example. Last year, we started charging for large, long-term, uninvested euro-denominated deposits. This led to outflows of almost CHF 8 billion, but was actually P&L accretive. The deposit has been sitting on our balance sheet at minus 60 basis points. Removing them allowed us to reduce the amount of high-quality liquid assets that we are required to hold under Basel III.
This, combined with a small benefit from the charge on remaining deposits, meant we saw a positive impact on P&L. Additionally, in the U.S., we are focused on organic growth rather than paying significant multiples of 12 months revenue to recruit new advisors to bring in net new money. We are reviewing our corporate relationships to ensure we are properly compensated for the services we provide. For example, in our U.S. stock plan business. Our managers have the discipline to review the economic profit of our clients. This helps them ensure that we are properly balancing the total cost of serving clients, including the cost of capital, with the revenues that we earn. We've seen substantial growth in lending in past years, our future growth plan requires further balance sheet deployment. I think Kirt has mentioned this this morning already.
We are comfortable that we have sufficient financial resources to create the growth we need and to earn attractive returns on equity. Since 2014, we have steadily grown our loan volume through offerings like mortgages and Lombard lending. With APAC, the Americas, and Ultra each delivering double-digit growth. LOD has grown by 1% per year, we expect that to accelerate to roughly 10% annually in the coming years. Our credit risk RWAs have also grown, we expect this to continue as we execute our plans. As we look to strengthen our lending penetration, we'll be partnering even more with our Investment Bank, particularly around structured lending, as well as introducing new lending products in the U.S., specifically designed to meet the needs of targeted client segments like, for example, entrepreneurs.
Critical to our success is building a consistent and scalable operating model supported by two state-of-the-art platforms. By 2025, we'll streamline our systems by either leveraging or introducing technology that keeps us on the industry's leading edge. We'll serve our clients from two platforms. First, in the U.S., we're creating our state-of-the-art Wealth Management Americas platform, which will help us to deliver on our organic growth objectives in the U.S. and the services our clients and advisors require. As Sabine mentioned earlier this morning, we're commencing a multi-year initiative with Broadridge, a leading provider of technology-driven solutions to financial services firms. This effort will reimagine the advisor workstation with new and intuitive tools to assess clients' needs, advise on goals-based strategies, and actively manage assets across multiple portfolios.
We expect this offering to be delivered through a scalable industry utility that will power our back office with robust and durable capabilities, streamlined processes, and more real-time data. We see two sustainable benefits of creating this platform. First, it'll enable our advisors to improve their productivity, grow their businesses, and drive net new money. Second, we expect to realize significant cost savings by participating in a scalable industry utility. Let me give you an example of how that would work. There's a new regulatory initiative in the U.S. called the Consolidated Audit Trail or CAT, that will cost us $15 million in technology build over the next two years in order to comply. In the future, because of our ability to leverage a shared utility, the exact same initiative would only cost us $2 million. That's an 87% savings.
Outside the U.S., we're focusing on converging to a single platform by 2025. We've already made significant investments bringing Switzerland, Germany, Hong Kong, and Singapore onto the same platform. In fact, the vast majority, 79%, of the invested assets booked outside the U.S. are already on the same platform. Today, we still have 13 IT platforms across EMEA and Asia, the legacy of past acquisitions and business integrations. The immediate priorities for the coming years are onboarding Italy and Taiwan, with additional locations added after that. Although integrating onto a single platform is not a feasible option, we will adapt our best-in-class applications from around the globe wherever possible. The Asset Wizard is a great example, which you could see upstairs.
This is a digital solution developed and used in Switzerland that lets clients consolidate, monitor, and analyze their bankable and non-bankable assets at the click of a mouse, giving them a full view of their total wealth on a daily basis. Following its launch in the U.S. in 2019, Asset Wizard will be rolled out to all Global Wealth Management regions. China onshore will be an exception to the two major platforms. As we build out our onshore China client offering, we'll develop a separate and distinct platform, leveraging the best third-party components, applications, and partners. We're really excited about the investments that we've made in technology in recent years, as well as the ones that we're going to be making in the future.
At the Tech Expo upstairs, we have kiosks for you to experience and engage with a number of these new tools during the breaks or tonight over drinks. What you'll see are some of our latest offerings to improve the experiences of clients and the experiences of advisors, enhance our digital advice and investment capabilities, and drive business growth. For example, take a look at the pilot of our new social media tool in the U.S. We found that FAs using this new social media tool can generate about CHF 3.4 million more in net new money per year versus those who don't use social media. There are a number of other great examples upstairs, some already deployed, and others still in the development pipeline. We encourage you to stop by. The targets we've set for ourselves are ambitious and achievable, because we're committed to collaboration and disciplined execution.
By 2021, we aim for a 500 basis point improvement in our cost income ratio to 70%, 3%-4% net new money growth. That means adding CHF 1 billion-CHF 2 billion in net new money per week, and PBT growth of 13%-15% per year. We're in a strong position in a great industry. Global wealth management has created some cost efficiencies, but more importantly, it's given us the platform to pursue and to capture the ambitious growth opportunities that we see. We're making the significant investments that we need in our people and in our technology to be able to deliver on all of our financial targets. With that, we'll say thank you, and we're happy to take any questions.
We've got some questions for Tom and Martin then. Andrew Coombs.
Just one question to clarify, and then a broader question on the targets you've set by region. The first question on slide 43. Thank you very much for the average gross margin split. That's extremely useful. I just wanted to clarify where advisory mandates sit within this. Is the mandate a blend of advisory and discretionary? If so, could you possibly split those two out, both in terms of the invested assets split and also the margin? The second question would just be more a broader base question coming all the way back to slide 13. On slide 13, you gave a useful breakdown of the regional targets. Just trying to understand why you've decided on a PBT growth target for all of the regions, with the exception of the U.S., where you're focusing on a margin target.
Given that you are targeting 10-15 for GWM overall, if we try to back it out, it looks like 15%-20% growth for the U.S. Is that broadly right?
Andy, maybe I'll take the second question, and then maybe Martin, you want to do the first one. When we're thinking about the targets on the U.S. and we were talking about it, the U.S. was really performing well, as you saw in the historicals on the PBT growth. We weren't really seeing the type of acceleration that we wanted to see and the improvement in the cost income ratio. We thought it was a better way to focus the management team on. It's not just going to be growth. We want to make sure that we're making the continuous improvements in margin. That also forced the team to think a bit more about, well, how do you get there?
It really required us to, again, accelerate in places where we've been successful, so accelerate the growth that we've been seeing in mandate penetration, accelerate the growth that we've been seeing in lending penetration, through more new product introductions. Then in the ultra space, really focus on bringing very quickly on board the benefits of the expertise, products, and services that we have outside the U.S. for delivery into the U.S. client base. We just thought, Martin and I, in terms of talking about it, we thought it was a better way to make sure the management team was focused on the critical things we wanted to accomplish.
Andy, regarding the different margins, our mandates business here is a combination of discretionary mandates and advisory mandates. Discretionary mandates tend to be at the upper or a little bit above the upper end of the mid-range, and advisory are priced lower.
Just a couple of follow-ups then. On the first one, can I just confirm it is the implicit growth number is 15%-20%, I think, backing it out for the U.S. Would you rather avoid that?
That was my old job to check your calculations. You can-
Okay. My math isn't as good as Andy's. On the margin point, you talked a lot about increasing mandate penetration as a whole away from execution only. Is there also an opportunity to move from advisory to discretionary within that?
Of course, we also try that, but if you look at the difference here on page slide 43, getting it from a non-contracted into a contracted is the, what do you call it, is the bigger step in terms of margin.
Benjamin.
Yeah. Thank you. Two questions, please. On one of the first slides or in the morning, you mentioned roughly $50 million-$60 million is 1% of equity return, and your base assumption is 7%-9% equity market performance per year. I'm just wondering, how much is the number for GWM? I guess in times like these, the question is more to the downside. How much opportunity you have to manage your cost base, in case your assumptions fall short? The second is on the net interest income in GWM, essentially, you are ready to increase your loan growth by up to five times versus the last period to reach the same net interest income growth. Just wondering what does this imply about your deposit beta assumptions and shift to money market funds?
I'll do this.
Okay. I think in the end, you're saying, what will you do when the market doesn't perform? We showed you on one of our slides that, of course, market performance is an important part of our future profitability. Let me answer that way. Of course, you have to plan. You can't plan a downside scenario, you have to plan in the environment and with the forwards we have. Rest assured, Tom and I were long enough in the business to have seen short cycles and longer cycles, and we know that if something in the market basically turns very negative, you have to do other measures and then look at additional things you can do, especially as you mentioned on the cost side too, to offset that.
Of course, the plan you see here has baked in a certain market performance as we have shown on, I think, slides seven and eight of our presentation.
In terms of your question, Benjamin, on net interest income and thinking about that. We've actually modeled deposit betas higher than we've seen in the past because they've seemed almost overly friendly in the U.S. Deposit betas in the last hike this quarter, probably closer to about 15%. Some of this is balancing volume versus rate to try to maximize profitability. One thing just to point out that when Kirt was talking about deposit flows earlier this morning, the majority, the deposit flows that we saw were mostly initiated by us to move clients out of sweep deposits and into money market funds, not client decisions to move out. The other thing I'd mention a bit more is there's a certain limit that you want to place on the amount of model duration you want to take.
If you're taking overnight sweeps, you're modeling out duration, and you've got the model risk associated with that. Kirt also mentioned earlier that we're up to CHF 3 odd billion in CDs on the balance sheet. We're putting more contractual duration on to give us a better asset and liability match. Deposit betas we think will move higher. That's what we've modeled in the assumptions that we have here. If we see more beneficial ones like we've seen in the recent past, it would be a better result, I don't think that's likely.
Okay. Sorry to follow up quickly here. You wouldn't give a specific number anymore on the deposit beta, for example?
I wouldn't give you the model one. You could look at historicals. Historicals run closer to about 50% in the early stages of an interest rate hiking cycle by the Fed, they start moving towards 65%-75% at the end of the cycle. Some of this is where do you think we are? Where do you think we're going? So far, the industry has had relatively good discipline. I don't think that's the way we should run our planning process. We've been, I think, conservative in the way that we've looked at it.
Jeremy.
Thank you. Two related questions on costs, these follow on from what's been discussed already. The first one is I got a bit lost. You were talking about gross cost saves, some of which gets reinvested. Is the reinvestment that you have in mind, is that the advisor expansion in some areas and costs associated with volume being bigger because of your revenue targets? A specific sort of adjunct to that is you talk about extra technology spend. Obviously, at a group level, the technology budget is flat. When you talk about extra spend, are you talking about extra spend within an unchanged budget, or are you talking about costs go up because within wealth management, you're spending more on costs on IT?
On the costs, what we reinvest in, yes, on the one hand, it is, for example, advisory expansions. I mentioned that we want to grow our advisory force by about 25% in Asia. Of course, there's always some support specialists and others around that. On the technology side, we mentioned, or Tom mentioned two large initiatives. One is the U.S. platform, which we're renovating together with Broadridge. The other is basically moving the next markets onto our wealth management platform, Taiwan and Italy. These are significant investments, we will do that in the overall investment technology spend of the group. That is not a huge increase in overall technology spend that we're seeing in our division.
John.
Just add one thing onto what Martin said. I think what you see is as we sort of roll down the biggest parts of the rollout of the wealth management platform, we were able to say, "All right, what can we do with the chunk of investment that we've been using?" That's where we decided to roll that into the U.S. platform. It's a CHF 600 million cumulative spend. Over the course of three years, you could say we had the choice just to let it roll off. Our view was we'd reinvest in modernizing the U.S. platform.
Thank you. On your 10%-15% pre-tax profit growth, can you please talk a bit more in terms of your assumptions for gross margins? Your initiatives taken on lending and mandates, do you think you'll be able to keep the gross margin stable, obviously ignoring the transaction part? Also, do you assume anything for markets and FX effects in your PBT growth? Maybe just secondly, how in practice does it work if two people manage such large divisions? How does it work in practice? Do you have metrics? Thank you.
First, we always have to align. Tom, do you want to take the first question?
I will take it. I will gladly take the first question. If you think about what we're doing on the profit growth and think about assumptions on gross margins, it's a relatively modest assumption of an uptick in gross margin, which makes some sense.
Sorry.
Makes some sense if you think about, in the U.S., we have new product introductions in the lending business around the same invested asset base. We're seeing an uplift there. We do think the transactional activity that we're seeing in the current quarter, the third quarter, for example, is not the transactional activity we've seen in a more normalized environment. That's the second piece. Very specifically, if you look at, for example, Advice Advantage, that we have upstairs, which is the affluent digital advice offering, that's priced at a couple basis point premium to our average ROA currently. Anything that we move into that is going to be ROA accretive. I think as we look at it, again, I don't think we were overly optimistic on gross margin expansion. It was really quite mechanical in terms of looking at the profits.
Maybe Martin will also do the market assumption one since it ties into that one. It's the same as what Kirt said on page four. We don't have different assumptions for Global Wealth Management than we do for the rest of the group. It's the same assumptions on implied forwards and interest rates and the MSCI World at 7% per annum.
You go back into our presentation to page eight, you see that we are saying that roughly 50% of the operating income growth is based in the assumptions on market factors. Page eight. How does it work if two people manage such a large business? As we rightly assumed, we have basically designed who does what more or less alone and what do we do together. On a global scale, we have Tom is taking care more of the Americas, i.e., the U.S. and Latin America. I'm focusing more on Europe and Asia. That gives us a little couple of hours of sleep each night, so you don't have to go 24/7. We have a couple of businesses or units that we manage jointly. For example, the ultra business, because there we have to constantly see with these global clients who does what.
We have a lot of clients across the regions. Additionally then, the three things that Tom explained, our Chief Investment Office, our Client Strategy Office, and our Investments Platform Solutions we are taking care of together to design the content and the delivery and the products jointly, and the same is true for the COO in our business. Actually, good coordination. Works fine.
I could add on what Martin said, maybe I'll tell a little story about after Sergio had said to Martin and me, "Look, here's what we're thinking about. What do you guys think?" We discussed it. We got together. We were both on holiday. Martin was, I think, in Austria skiing. I was in Vermont skiing. We talked at the beginning of the day, and we said, "You know what? We should think about what should we do. How should we define what we do separately? How should we define what we both are needed to do? How should we define for our people what neither of us is needed to do?" Martin was going out to ski. I think he was on his lunch break. I scratched it down on a little PDF, shot it over to him.
By the time I came back, he had a couple marks on it. I cleaned it up, then we sent it over to Sergio. By the next morning, by the time I was having breakfast before I was going out to ski, we had all agreed this is the way we were going to run Global Wealth Management. One sheet of paper, one day. I think we were very pragmatic in terms of how we thought about it, then we've been very pragmatic in terms of how we've run it.
Thank you, Caroline. As much as I would love to put 10%-15% profit growth in my estimate, in the past, it's been tough. We haven't gotten there. I'm trying to actually find a way of how I can really be sure this time you're going to make it. Intuitively, the best protection is actually the geographic mix, where you have two-thirds almost of your assets in Asia and the U.S., that should really solve it. Would you agree with that?
Zachary, maybe I'll just give a quick comment on it. I think, one of the reasons why we tried to give so much detail on the different levers that we're pulling, I think it helps you to have a more contemporaneous view of how we're doing in the course of executing it, other than just looking at the resulting factor, right? It's a lot about how we think we're going to do that. I certainly would say that we agree with you that geographic diversification of our business, we believe is a huge advantage.
I think the other thing you have to remember, we touched on it in our presentation, is that we saw some significant headwinds over the last period, which we won't see, or which have reduced, especially our early adoption of cross-border managing I think Tom managed the CHF 70 billion outflows we saw so on. This stuff is done, therefore, I think we are in a better environment.
Jernej from Goldman Sachs. I have a question. I think you presented a very compelling case for why global wealth management is a fully scalable type of business, right? The question that I have is, if indeed it is fully scalable, as I think intuitively, I would say it should be, why is the cost-income ratio of UBS higher in your wealth management operation compared to entities which are a 10th of your size?
It's the high percentage of the U.S. portion of the business. If you look at where we targeted the cost-income ratio in the U.S. business, it's roughly in line with the larger firms. They probably have about double the asset base that we have. I think that model automatically is giving you a higher cost-income ratio as part of that. It's that 51% U.S. mix that'll probably grow to mid to high 50s as time goes on.
I thought that a part of your answer would be that the portion of allocated costs to wealth management from the group level is quite high. If I'm not mistaken, I think you said previously it's around a third of the total.
No, look, I do think that, Sabine covered this in her presentation. She talked about all the work that we did. One of the benefits, to Jochen Reich's question of the diversification, the other side of that is you're operating in multiple jurisdictions. There are certain things from a legal entity standpoint that result in some extra costs in terms of complying with different regulatory regimes or different legal entity structures that you need to set up. I do think though that what we've done, in terms of the move that we've made to push out more of the equity and more of the corporate center costs directly out to the divisions, certainly heightens the focus of management on how can we, from a front-to-back basis, look to try to optimize on some of those costs.
I wouldn't say that I think there's an excess of set of costs. I think we're allocated the cost that we incur, and it's up to us to figure out how we can run our businesses better.
Thank you. Slide 47, I just want to go back to the two platforms. It would seem to me that it would be logical to have just one global platform, and that could lead to some increased cost savings. I'm wondering why have you decided to go for different platforms in different places, and given that this is the case, do you have a centralized view of your customers, so that we won't have any problems when it comes to money laundering and these type of things that we hear from some of your competitors? That would be my first question. Secondly, the stats that you quote on China are, of course, very compelling. I would be inclined to think that China onshore should be a much bigger opportunity, maybe three, five years down the line.
It seemed to me like you were downplaying it. Why is that? Thank you.
I'll take the first one. On the one versus two platforms, we evaluated it. One of the things we have to remember, we are running an integrated group. Part of what you're thinking is, in running our business of global wealth management, do we get more synergies geographically in global wealth management, or can we find more synergies in the cost structure by looking at the investment bank and asset management on a regional or country basis? Our clearance and settlement systems in the U.S. are highly integrated. It's not like you have wealth management clearing and settlement, and IB clearing and settlement. We have one clearing and settlement system. Some of your largest costs are already put together as a group.
As we evaluated this, what we found was, let's use the industry utility because we think that one of the biggest costs that we have in the U.S. is regulatory. You saw on Sabine's slide earlier this morning, 76% increase over the past few years in risk and regulatory costs. For us, finding a way to mutualize those costs in the U.S. was a very good way to look at evaluating this project. The other thing that we also thought about quite heavily, and I think you'll see it if you walk through the tech expo upstairs. The teams, if you look, we've got the two advisor workstations, two guys standing next to each other. That's not the first time they've talked. Right.
They've been talking about how do we take that new app that you just put in there, how do we get that from that platform over to this platform so we can knock one off? That app, and I mentioned that in my remarks, that app optimization is the place where we're going to be going from two to one. There'll be only one of certain types of things. If you look at the core operating platform, which gets more into the back office, we found that there were better synergies in the U.S. with the IB, quite frankly.
Giulia, yes, as we said, the onshore China is a big market. It is mainly a market that is heavily dominated by the domestic players. It is heavily regulated also for non-domestic players. As we said, we have the most comprehensive set of licenses. We just, a couple of weeks ago, got an important license for our Beijing branch, and now we need to expand the offering there, because you just can't take an international offering that you have and sell it onshore China due to capital controls and things like. You basically have to set up a lot of infrastructure up front, and that needs to be tested with the regulator, with the authorities. It takes a long while to get there.
While we believe this is a huge opportunity in the long term, we also wanted to be cautious and say, "Listen, this needs a lot of upfront investment to get there," and that's why we phrased it that way.
Thanks. I see the logic if you go becoming more and more integrated, but the world is becoming more and more fragmented. In particular, as the U.S. dollar gets used more and more as an instrument of foreign policy. With your 2 big markets being China and the U.S., do you think at some stage, even in your 3-year plan, you might have to make a choice between being in the U.S. dollar system and being in China? How do you think about that risk in general?
I would say-
Paralyzing.
That's not our base case, and not the base case of the firm in terms of evaluating the trade conflict, at this point in time. I would say, I think there is, as much as it may seem like things are fragmenting, I think it's just highlighting the frictions of a highly integrated system. Over time, if you look at our business and you talk to clients, whether Martin's visiting clients in the U.S. or I'm visiting clients in Asia or Europe, they have the same desires for their families, the same desires, in terms of improving society that they'd like to do. I think there are a lot more commonalities, and that's a base case assumption. If our base case was wrong, we have a different choice.
Our APAC business is not only China, not only onshore China. We have a business in Japan, we have a business in Taiwan. We have also domestic business in Hong Kong. We have a domestic business in Singapore. We have offshore businesses from Thailand, from Malaysia, from Indonesia, from the Philippines. A lot of money in Asia is coming from different sources. Yes, of course, we also have a significant offshore Chinese business, and we hope to grow a domestic one. But a lot of that business also, that offshore business in the different locations coming from the different markets, is also based on U.S. dollar. Right? I'm also not seeing that as a conflict in the current situation.
Just trying to find a friendly face.
They look all friendly. Come on.
Nick. What?
Thanks very much.
Take mine. Five years older.
I have two questions. The first one, it's quite a large ambition you've set out for the U.S. ultra-high-net-worth segment, looking to grow potentially up to CHF 70 billion over three years. Given the nature of client relationships and the client-adviser relationship in the U.S., will that entail selective hiring to try and drive that? Or is it something where you can think the strength of the UBS brand and product set, you can just drop into that client base? That's the first question. The second one is around the Broadridge deal. Given that the track record of large-scale IT changes in the U.S. are challenging, could you talk about, 1, the timeframe for that, and given you're going to have to tell 7,000 client advisers they've got a new system coming, how you actually manage that process? Thank you.
Okay. On the second one, we obviously communicated with our financial advisers or are communicating right now about that. I would say, our advisers have obviously been giving us a lot of feedback about some of the improvements they'd like to see in the system, and the way we approach things. I think they'll find a lot of the things that we'll discuss as we roll out the Broadridge deal to them. They'll see in what we've designed with Broadridge. I think they'll find it worth the wait. It's something that is, though, a multi-year process with some staged deployments, it's really about three years for us to fully get that out. If you think about, similar to what we had with the wealth management platform outside the U.S., in terms of scope and size of work to do that.
It will be something that'll make lives of our advisers, lives of our client service associates much simpler. It'll improve productivity. It'll make it easier for them to serve their clients. I think they'll be quite pleased with it. Going back to your point on the ultra segment, will there be some selective hiring? I think that when we announced Global Wealth Management, the segment in which we had the highest uptick in inbound calls from advisers who wanted to start talking about joining our firm was from the ultra segment. Because they know it's an offering that they can't get any place in the U.S. where they would work at a competitor. I think, some of the things that we've talked about today, I'm sure our managers will be out talking to some of the people that they're talking to about what our plans are.
I think they'll find that attractive. Some of the places where we have, I mentioned before, Nick, the additional hiring is also in the support teams to help advisors deliver. For example, on the GFO team, on the family office solutions group. Something like Asset Wizard, which I think you might have had a chance to see upstairs. That's something that based on our advisor feedback, we're rolling out to them at the beginning of this year. Sorry, beginning of 2019, which is something that helps you aggregate a lot more, attract a lot more assets to the firm. Selective hiring is the right word, not a binge.
I can see the Swiss members of our GEB tapping their watches because we're running slightly over time. I realize that your questions on Wealth Management are very important, I think we should probably continue them with Tom and Martin over coffee from any friendly face and come back at 4:00 P.M. Thank you very much. Bye.
Good afternoon to everyone, and welcome to our partnership collaboration short session. We hope to give you more evidence and facts as to the areas, how and why we collaborate so much more now between our two divisions. I'll introduce myself briefly since we're spending more time together a bit later on. I'm Piero Novelli, Co-President of the Investment Bank of UBS. Our two divisions, Global Wealth Management and the Investment Bank, work together very closely on some of our best client relationships globally, that we carefully select when we can detect and see that they are indeed significant cross-divisional business opportunities that we would not be able to capture on our own. This is a good source for us of incremental revenue and incremental business, that we have nurtured over time, and it's a joint venture that is growing quite fast.
Specifically, we'd like to discuss with you the Global Family Office, which is this joint venture that is growing fast, and it's highly successful. I have experienced this myself directly in my previous job. I was running global M&A, and for five years, I banked two important GFO clients, generating with them a very significant M&A and equity capital markets fees that, very frankly, the Investment Bank would have never seen without this joint venture with our Wealth Management colleagues. I've seen directly the value of this joint venture, and how you can unlock significant revenues through this partnership. The GFO, Global Family Office, we use too many acronyms, I'm told, and we do indeed, was set up in 2011 to serve a very selected group of important clients that have certain specific characteristics that can give rise and trigger additional incremental business for UBS.
We decided to provide a multi-touch point, cross-divisional coverage on a consistent basis to enhance the strategic dialogue by both divisions with this selected group of clients. Since inception, the GFO has experienced quite a nice smooth growth of the revenues and market share. As you can see with some of the data on the chart. Year to date, the GFO is 22% up in terms of revenues relative to year to date 2017. Also, you can see statistics that show that the clients that were onboarded into the GFO in 2014, over a four-year period, have approximately doubled their revenues. Two-thirds of these revenues are coming indeed from the Investment Bank. Again, this is incremental business for UBS that neither division could successfully capture on our own. It's a broad-ranging stream of revenues and products with which we can serve these clients.
These clients have certain characteristics. As mentioned before, they tend to be highly active in trading. They tend to control companies, often publicly traded, that we can assist with M&A advisory, underwriting, financing services, and all sorts of other products that the IB can serve and assist with. Again, we see this as a tremendous opportunity for our respective divisions, and it's become a great source of collaboration. Martin and I, more and more so, are pitching to each other clients important business opportunities. As I see that happening more often between the two of us and with our colleagues in our teams, I know that this partnership is now working really well, because I see cross-divisional pitching to important clients on important opportunities.
With that, I would pass it on to Martin to share with you guys a few stories so that you can get a more tangible feeling of the opportunity that we can capture together.
Thank you, Piero. Thanks a lot. As Piero said, a lot of our clients in this Global Family Office, we acquire them in Wealth Management, but when they are larger, we often see that they have more institutional-like needs and that we in UBS have the capability in the whole group, especially in the Investment Bank, but also partly in Asset Management. To help them even more than we only could do in Global Wealth Management. Let me give you a couple of examples. For example, we have one Eastern European billionaire. I think he is, since 2016 with us. He became a client of our GFO joint venture. With the dedicated team, they introduced him to the IB. He got onboarded on a couple of platforms, for example, FX, equity, APAC financing, and he did a lot of new deals with us.
Within three years, his revenues tripled. A great success story for us. Second example, we have a family office which basically in Luxembourg runs their own algo trading fund. We also introduced them through our GFO offering to the IB, onboarded them on different IB platforms so that today their whole FX and equity flow all goes to UBS. In the five years they are now in this GFO covering, their revenues went up by six times. By just combining this. We also have examples in the U.S., and as you heard Tom and myself talking earlier about it, we want to introduce more of this GFO offering also in the U.S. We are already there, but we are not as penetrated with GFO offerings in the U.S. as we are, for example, in CEMEA.
There, for example, Tom introduced the GFO office to a Midwestern family, diverse family, that was thinking about consolidating their business. I think they were business doing with about 10 regional banks. They were looking for a bank that were able to offer them a consolidated service, but also help them to expand their business to Europe, and also talk about family and succession planning. We basically assembled a team, an international team, with the GFO investment banking clients. We offered them the solution. They basically were able to consolidate with us. This brought us about CHF 110 million net new money, significant revenues, and a lot of opportunity because we also introduced them to our European team so that they now can do what they wanted, i.e. invest more into Europe directly.
These three examples show you that if we bring together the know-how of our IB colleagues with the relationships we have in wealth management and expand from a purely wealth management into a more institutional type business, we really have a lot of opportunity in the bank to move forward. We see one of the biggest opportunities for that with our GFO clients in Asia. Nobody's better equipped to talk about how we can expand that in Asia than Kathryn Shih, our President for the APAC region. Cassie.
Thank you, Martin. Collaboration is at the core of what we do in Asia Pacific. We create a competitive advantage by working very closely together across different businesses and across geographies. Our Asian clients are quite unique because a lot of them control big businesses. You heard earlier from Martin in his presentation that every week, three new billionaires are being created in Asia Pacific, and two new billionaires are being created in China. With this, we actually bank about 60% of the billionaires in Asia Pacific. This is a very unique position for us, because these billionaires and these business owners, for them, the business that they have is very close to their heart. It's very important for a wealth manager to be able to address that need. We train our client advisors by the CCS department. We train them on each sector.
We train them on the tech sector, we train them on the other investment sectors, so that our client advisors are relevant to their entrepreneurial clients. This is quite important for us. The other tool that we do to get our two businesses working much more closely together, the Investment Bank and Wealth Management, is by looking at our top 100 clients, and this is actually even across to Asset Management. With our top 100 clients in Asia Pacific, we actually know how much they deal with each of our divisions, who in each of our divisions they deal with in APAC and globally. We focus a lot on these top clients so that we can increase our share of wallet.
Across the region, we do a lot working across divisions, and sometimes it's about helping the Chinese client find an acquisition in Europe, or it's about succession planning with the Wealth Management clients. It might be to help a Chinese new technology IPO, and this one Piero is going to talk about. Just to sum up, in APAC, we do a lot to collaborate and to bring our clients across different divisions and different geographies.
Cassie, you have been 30 years in the region. You have built Wealth Management in Asia to great success. Would this have been possible without the IB to support it?
In fact, having the top Wealth Manager, it's actually very important to have a leading Investment Bank. It's not just nice to have. A lot of the wealth is created from IPOs, so it is actually very synergistic. I think Piero is going to tell us about an IPO situation.
Thank you, Martin. APAC is indeed for us the gold standard of how you partner and how you collaborate among the Investment Bank and the Wealth Management division, partly because of the structure of the economy and the secular trends you have heard earlier today. As a result, there are so many examples of successful partnership between Wealth and Investment Bank that have resulted in great outcomes for our clients. I'll mention two specifically, two examples. One, a consumer healthcare company, family owned and family controlled, whereby the family had decided that because of generational changes and changes in succession plan, they would like to monetize from their strategic holdings in their company and eventually plan for the succession and hedging and portfolio management of the proceeds from the sale. This was indeed a cross-referral from Wealth Management to the IB. We did not know this client at all.
As a result of this collaboration and partnership, we did secure the sole advisory mandate for the exclusive sale of the company. We executed that successfully, forming a consortium of investors that ultimately bought the business, advising the clients throughout on the M&A process. As a result of that, our colleagues in Wealth Management got to manage the proceeds, continue their advisory on portfolio management, as well as providing hedging on the sale proceeds. So overall, it was a great success for us, and again, another example of business that we would have never transacted in the IB had there not been for the partnership with Wealth Management. The second and last example I'll mention, and both of them have happened actually in the last six months, so they're very recent.
Was the second largest internet IPO from China into the U.S. which was again, a relationship from Wealth Management, whereby we all collaborated really well between CCS, ICS, the public side, the private side, and Wealth in trying to secure the joint global coordinator and joint book runner for this IPO. It was a very successful collaboration that enhanced also the prospects for distribution. It was CCS sales syndicate, as well as Wealth helping on the distribution, that rendered this transaction generally very successful for all of us. We hope that these few examples you've heard from all of us substantiate and give you further evidence for the reasons why we feel so bullish about this joint venture, which again, those results you've seen belong primarily to the EMEA region, which is the majority of the clients on board there right now.
But clearly, as you heard today, there are clear plans to expand this and roll that out to the U.S. and APAC. That's why we feel so confident that this will provide a good engine for growth for us going forward. Good. Again, ladies and gentlemen, it's the same guy as before. It's cost efficiencies. Thank you very much for your time this afternoon, and we hope that the day has been very informative and interesting for you so far. Welcome to the final presentation, which is the presentation of the Investment Bank of UBS. I'm very pleased to have the opportunity to take you through the strategy of the Investment Bank today, alongside my colleague, Rob. As we have just taken on these new roles, both of us, Rob and I, will introduce ourselves briefly.
I rejoined UBS in January 2013, to look after the global M&A business, after having managed M&A businesses for more than a decade. We've had a very good year so far in M&A, as I'm sure you've seen from the Q3 results. I am very excited and proud to leverage this success from the privileged position, working with Rob to co-run the Investment Bank of UBS.
Thank you, Piero. To echo your words, it's truly an honor and a privilege to be here today, and I'd like to thank you all for your time and attention. I realize it's been a long day. I've been running the equities business since 2014, and I've been driving optimization and innovation as we transitioned into a MiFID II world. I'm quite confident that the equities business is in great shape and in the hands of an excellent and experienced team. We're going to take you through what the Investment Bank has achieved. We're going to talk about our strategy and our growth plans, building on the progress made to date. We'd like to leave you with three key messages today. One, our model is truly unique. It works for us, it works for our clients, and it works for our shareholders.
We are committed to our existing strategy, our mandate is quite clear. Two, our Investment Bank focuses on areas of excellence where we can win, enabling us to deliver best-in-class services for our institutional and corporate clients, as well as across Group. To truly add value to Global Wealth Management clients, P&C, and Asset Management clients, the Investment Bank needs to be highly competitive. Therefore, we are unwavering in our focus to continue on our path of playing in the areas where we can succeed. Third, we'd like to underline our commitment to controlling and optimizing resources. Our growth plan is driven by our capital-light, advisory, and execution businesses, which only require limited incremental balance sheet to grow.
We can deliver disciplined growth while accelerating on our path to becoming a digital investment bank, which is a key part of our offering, and we're going to tell you a little bit more about that later on.
Let's start with the shape of our Investment Bank. This slide shows clearly how our capital-light model makes us different to peers, in terms of both business and geographic mix. Firstly, as you can see, we are overweight equities, where we have scale in each one of our products. Within the foreign exchange rates and credit business, we are clearly overweight Forex, as you know well. Secondly, our model in FRC means lower volatility in revenues and returns. When credit spreads tighten, our fixed income-heavy peers have the potential for larger revenue upside. In more adverse market conditions, our liquid and capital-light FRC model should outperform in terms of returns. Thirdly, within IBD, as you can clearly see from the slide, we have a lower weighting than our peers in leveraged finance revenues. This is as a result of two factors.
One, a lower risk appetite at this point in time in the cycle than our peers, and importantly, a very disciplined focus on businesses with risk-adjusted returns above our target rate. Geographically, as you can see, our mix is very well balanced. With an exposure that is relatively higher to APAC and lower to the Americas compared to peers. This gives us a unique, balanced, and truly global footprint from which to operate successfully. We are more resilient to external market shocks given our lower inventory and relatively high balance sheet velocity. What matters the most is that our Investment Bank is the right size for our clients, our shareholders, and for UBS Group. This slide shows the positioning across our businesses by return on attributed equity and by revenue ranking among the top nine investment banks.
We only seek scale where we truly require it in order to be best in class, and that is not in every business. We have scale, which we define as being in the top five of the same rankings, in around 70% of the businesses in which we operate. For some businesses, such as advisory, that you nicely see up there in terms of ROEs, scale is not relevant. Successful performance is driven a lot more by hiring and retaining the appropriate talent to the firm and not by the balance sheet. This discipline is what enables us to consistently deliver strong returns to our shareholders whilst providing truly competitive services that are best in class to our clients internally and externally. Over 90% of our businesses by revenue deliver returns above our target. This obviously begs the question of what about the remaining 10%?
Which is what we have labeled at the bottom left of the page with a small dot as the rest of FRC. This includes rates and credit as well as solutions, which is our lightly structured offering for our clients. There are several above target return businesses in this grouping that we call other FRC. As technology continues to revolutionize these markets and yield curves normalize, our strength in electronic trading as well as structured products should lead to improved profitability in this group of businesses as well. These businesses also provide services and capabilities that are generally important for all of UBS, supporting our debt capital markets and leverage finance origination platform, as well as our clients and colleagues in Global Wealth Management.
We have made progress in optimizing resource usage by focusing on our key strengths in all of our products, which are high velocity, technology-driven products as well as macro volatility products. With the coming rise in attributed equity and corporate center allocations that Kirt has explained earlier today, the vast majority of our businesses at around 80%, as opposed to the 90% I just mentioned, would have returns still above target. Our strategy has been and remains a strategy of earn to play, where the main input to success is intellectual capital and client relationships, rather than relying on deploying our balance sheet to win business. Finally, in spite of our discipline-focused, almost obsession on overall returns from our businesses, the Investment Bank's businesses have defended, and in some cases, such as M&A and equities, recently and over the recent years, gained market share from our competitors.
The Investment Bank has a very good track record of managing resources, as Piero alluded to. This is reflected in our strong operating leverage over time, which is a critical tool for us to deliver on our returns-focused strategy. In periods of falling revenues, as we've experienced in the industry over the last several years, we have reduced costs by approximately CHF 300 million from 2014 to 2017. Year-to-date operating leverage is also apparent, with revenue growth of 10% with only a four percentage increase in costs, including investments in our people and technology. However, cost efficiency cannot be viewed alone. We also need to look at capital efficiency. It's critical that we get this balance right. Looking at revenue and RWAs as a measure of the success of our capital-light strategy, returns have been robust. Excluding RWAs from methodology, models, policy, and FX, our returns have actually risen.
These two charts show our strong track record, again, of controlling resources. The first chart shows the evolution of RWAs since 2014. RWAs have increased due to regulatory and policy changes as well as model updates. Risk levels, excluding these factors, have actually decreased. Similarly, leverage exposure, excluding high quality liquid assets or HQLA, has been broadly constant. Progress on netting and optimization has been offset by inflation markets and changes to FX. Over and above that, since HQLA has been allocated to the Investment Bank, we've been very successful optimizing our activities to reduce the HQLA that we attract. Managing operating leverage remains a key focus for the Investment Bank, and we plan to build on the progress that we've made over the last 12 months to reduce the cost income ratio further.
In 2019, our target for the cost income ratio is around 78%, which we aim to reduce to around 75% in 2021. You can see the breakdown of the strategic growth levers on the slide. We intend to gain profitable market share, again, through investments in technology and our people. As Kirt has taken you through this morning, additional equity and costs are being allocated to the divisions, including the Investment Bank. With around six percentage points impact on our return on attributed equity. We are absorbing this change, and we are adjusting our return on attributed equity target from greater than 15% to around 15%. The increased allocation will obviously create some variance around this new performance target.
We have a strong and proven track record of optimizing resources, and remain confident in our ability to successfully manage cost and capital efficiency while gaining market share to allow us to exceed the cost of equity through the cycle. We are committed to delivering this. Going forward, the Investment Bank will see increases of CHF 7 billion in RWAs and CHF 28 billion in LRD from incremental allocations consistent with Kirt's presentation earlier this morning. Pure business-related growth in RWAs and LRD at the Investment Bank is expected to be controlled, with the increases being well below that of group. This should enable the Investment Bank's consumption of resources to remain around one-third of the group level.
We would now like to take you through what we see as the three dimensions to our growth. Products, regions, and partnership. From a product perspective, we aim to drive advisory and execution businesses, delivering value-added differentiated content, in ICS and research, and push forward our digital initiatives throughout the Investment Bank. Geographically, we expect growth to be driven primarily by the Americas and Asia Pacific. We're working in partnership within the Investment Bank as well as across the group, in particular, as you heard before, with Global Wealth Management. This is an area where we see tremendous growth potential, as shown in the success we have already achieved with our global family office joint venture. Our partnership culture across the group is crucial in order to maximize value for our businesses. We wanted to spend some time on advisory and execution compared to financing and structured derivatives.
Our capital light advisory and execution businesses consume around a third of our equity. To grow these businesses, talent and technology are the key input as opposed to balance sheet. We have an ambition to increase the weight of these businesses in profit terms over time to 40% from the current roughly 34% as an average from 2014 to mid this year. Our financing and structured derivatives businesses remain very important to us. Since 2012, these great businesses have had limited variability in returns, which have been consistently above our target. Our ambition is to continue to grow these businesses, we just want to grow advisory and execution by more. We do not need to deploy significant incremental resources in order to grow advisory and execution faster. As we mentioned, the key inputs there are technology and talent.
Its relative share of attributed equity is not expected to change.
Each product has a defined ambition and a plan for how to achieve this. In CCS, our ambition is to continue growing the advisory top line as we've been doing the last several quarters. The strategy is to build upon the success that we've experienced in verticals, like industrials and technology, and broaden that excellence to other industry groups and regions. Ultimately, we seek to leverage best practices, reputation, deep content, and experience globally. At the same time, CCS will continue to focus on increasing intensity and importantly, developing talent. A key part of our ICS strategy is to be an important provider of liquidity and to offer our clients best execution. Investments in electronic execution should drive revenue growth. We prepared thoroughly for MiFID II, and we're already seeing the benefits, with industry surveys suggesting we rank top two in terms of European execution market share.
Differentiated content remains core to our offering and our strategy. Our top-ranked global equities research team is obviously a big differentiator, and we continue to develop Evidence Lab and its data-driven research to add value for all of our clients. Our sales force and content specialists distribute market intelligence through Knowledge Network, through One Source, and our derivative strategy brands. Client service is paramount, and we are carefully investing to provide efficient and innovative client coverage. We remain ambitious for all of our businesses, and each in their own way. The next section gets me excited. It's a pleasure to speak about our digital development. After driving many of these initiatives in the equities business over the last four years. The investment bank has a strong track record of innovation in a wide range of products.
Electronic execution, UBS Research, and UBS Neo. Electronic execution is at the heart of our offering. UBS was an early entrant and market leader, developing our first algorithm in 1997, and I was very much in the business. Our equities electronic turnover has significantly outpaced the market. UBS was recently awarded the number 1 sell side electronic execution department. Equally, electronic FX is top 3 globally according to Euromoney. Our volumes are also ahead of the market following recent investments. UBS Neo is our award-winning multi-channel platform for clients across the IB and group. With over 1.5 million users from 100 countries, Neo delivers cross-asset class solutions from over 63 applications. Today at lunch and in the breaks, you've had a chance to look at three investment bank tech demos to give you a feel for the wide-ranging technologies that we're applying.
The differentiation that Evidence Lab brings to research is significant, leading to, amongst other things, the number 1 ranking in global equities institutional investor. In the case of ORCA, our new FX and rates algorithm, we are very excited about its unique ability to synchronize order placement and decision making. This is powered by machine learning, offering an ideal solution for our client trades looking to be filled more quickly. We've also showcased our Neo actively managed certificates platform, which allows portfolio managers to outsource the operational burden of running an investment portfolio strategy to UBS, and instead focus their attention on the investment decision-making process and transferring this to an efficient and a highly flexible package. Our digital strategy is being executed in the business divisions and overseen centrally. Each business is using technology to differentiate itself in the market and to add value to our clients.
In ICS, the smart coverage model means using artificial intelligence to provide clients with a much more targeted service. UBS Data Solutions, a centralized, robust data processing and distribution platform, has recently been set up as a standalone business to meet client demand for both financial and alternative data. In CCS, technology will be used to provide differentiated advice. We continue to build out Evidence Lab to be at the forefront of advanced research techniques. Using, for example, geospatial analysis and data science to provide unique insights for our clients. We've set up an innovation lab to speed up the pace of innovations, building proofs of concepts with the businesses. Probably most importantly, innovation in the front end of our business will only realize efficiencies if digitization is front to back and throughout the entire organization.
The alignment of corporate center to the divisions, as Sabine discussed earlier today, is critical for us to all understand and get full ownership of front to back, and in turn, it means that the functions are engaged and accountable, helping to fully create a digital investment bank.
Our balanced global reach also provides the investment bank attractive options for growth. Returns in the Americas and in APAC have remained consistently well above target. Our ambition is to drive growth in both regions while maintaining our leadership positions in Switzerland and in India. In Asia Pacific, we see opportunities from the expected growth in China, especially from market internationalization, which UBS is best placed to benefit from given the strength of our franchise. This was displayed specifically in equities during the two-day MSCI A Share inclusion. We achieved market share in Stock Connect of well over 20% in both instances. This is a clear testament to our strength in and a reflection of our long-term, unwavering commitment to China. We're planning to grow in China by strengthening also our CCS business, both onshore and offshore.
This should have benefits for clients across the other regions, as we are particularly well-placed to execute cross-regional, cross-continental M&A and IPOs, one example you've heard before, given our global reach and strong corporate relationships. FX should maintain a strong position in APAC, where we are currently number three, according to Euromoney. Growing CCS Americas remains one of our key objectives. With recent advances in M&A, having moved us up the rankings in Q3 to 10th versus 15th a year ago. We have the ambition to improve our ranking further in M&A. In equities in the Americas, we have seen consistent revenue growth over time, and we target this to continue. According to Coalition, we have moved from ninth in 2015 to sixth in H1 2018. Our first equal of the known U.S. players in H1 2018.
In FRC Americas, we expect credit flow to capitalize on recent investments in technology and people. Importantly, one growth driver for us is the benefit of global connectivity underpinned by our partnership culture. This is also something that very few peers have, and certainly not to the same extent as UBS. By delivering the global product to each region, we aim to gain wallet share with our existing clients. There are clear benefits from this, especially in the Americas, but also across our franchise. While this chart is complex, we hope that the web shows the multitude of interconnections and the many touch points that the IB has with the rest of the group. The partnership between Global Wealth Management and the Investment Bank is wide-ranging, from providing pure services and products to strategic dialogue with the clients of our Global Family Office joint venture.
The strategy for disciplined growth is based on openly sharing and strengthening our respective best client relationships across divisions, across the entire group. The Investment Bank touches other areas of the group in many ways. This applies across all divisions, providing best-in-class execution, services, structured products, M&A advice, underwriting services for clients of all of our divisions. Other parts of the group already use Investment Banking platforms such as UBS Neo and UBS Research. As you will have already heard from Axel, we do in fact run a universal bank in Switzerland, where all of our divisions cooperate really smoothly in order to seamlessly support our clients. In conclusion, our partnership spirit and global connectivity across divisions are the cultural pillars of our strategy through which we can extract maximum value from all of our businesses.
You'll recognize this slide by now, and we walked you through our targets and ambitions. I'd like to leave you with the fact that we're committed to our unique model and delivering cost- and capital-efficient growth. With that, we'll leave up on the slide our key messages. Thank you very much for your attention, and Piero and I would be happy to take questions.
Danny, do you want to go first? Yeah.
Thanks for taking my question. Daniel Regli first. One question on the cost-income ratio for 2019. I'm just noting that you're the only division picking up in cost-income ratio. Is this purely due to the reallocation of costs from this corporate center, or are there other drivers, investments, and so on, leading to a higher cost-income ratio than obviously year-to-date this year? The second question is regarding your rates and credits business. Obviously, this is the only spot on the bottom left on the chart. I don't remember which slide it was. What is your strategy there, and why do you stick to this business? Thanks.
I'm happy to answer both of those. First, the cost-income ratio being higher in 2019. I think it's really four reasons. One, our performance year-to-date has actually been quite strong. I'd say the second thing is we're also flattered by a deferred day one release from FRC in Q2 from enhanced observability. The third thing I would say is, if you look over the time into 2021, you can see that obviously the trend is moving in the right direction. Lastly, based on our track record, I think that we've proven that we can excel in controlling costs and optimizing resources and managing the cost-income ratio in the right direction. As it relates to your second question, I think that our FRC businesses are important to us, and they fit strategically. Over the years, we've been very focused on optimizing and allocating resources.
If we look at each of them separately, first of all, FX is a critical business for us. We're top three, and we've really been focusing and investing on the FX side. As stated earlier by Euromoney, top three. If you look at rates and take these individually, on the linear rate side, we're not competing with the big three. We're focused on markets where we believe we have a geographic competitive advantage, like Switzerland or Australia, for example. If you look at cleared swaps, which have gone to a centralized clearing mechanism requiring less capital, which is more advantageous for our model, and it's also relying more and more on technology, where we've been investing. Again, positioning ourselves strategically where we can win.
If you look at our solutions businesses or our lightly structured products or the non-linear space, which is an area that's been very profitable for us and where we've built joint ventures across the firm, particularly with equity, where we've been able to be very successful. The last thing I'd say is, these businesses have very important synergies for the rest of our businesses. I'll get to credit in a second. If you look at rates, critical for hedging capabilities across the organization. Last, credit, and I don't want to leave out credit. Credit, we've made some significant investments in the U.S. I think the credit business has gone through a massive change post the financial crisis. Inventory that you need to carry to run those businesses have reduced by close to 80%. It fits our velocity-type, market-making-type businesses.
We're also leveraging technology there as well, as we're able to provide electronic quotes in 9,000 underlyings globally. Again, we continue to leverage, and credit has important synergies as well for our LCM and DCM businesses. Net-net, the business is important to us. It's the right size. We continue to optimize. It fits strategically within the group. If you look at the businesses in 2015 and 2016, they generated a return above the cost of equity. We're going to continue to adjust accordingly.
Tom.
Couple of questions. First question, despite the fact that you said that you plan to grow cash equities and derivatives, you left out financing, even though it's been an area where actually you've been gaining market share for the past four quarters. Secondly, could you provide any indication in terms of percentage of how much of your revenues are coming from GWM?
GFS was on the financing and structured side, by no means are we minimizing the business or the importance of the business. It's been a great business. It's a profitable business for us. It's important driver for clients across the entirety of equities. We've run that business very efficiently. If you look at an efficiency ratio of balances over balance sheet, we're towards the top. We've been investing massively in technology in order to create that type of efficiency by creating much more visibility as it relates to collateral coming in through things like depot sweeps and collateral upgrades. We continue to invest and run that business as a very profitable business.
I think it's important to note also that we're not at a point where we have so much scale in that business where we can't deploy in a very disciplined way, more balance sheet, and generate marginal returns above our average returns. We'll look to do that selectively, albeit in a controlled and disciplined way. It's an important business, and will continue to be an important business for the investment bank. Wealth management is a very important client for us, and they're going to continue to be a very important client for us. Piero and Martin and Kathy talked about the important synergies, and we continue to be really excited about building the relationship with Global Wealth Management over time. Are you still looking for friendly faces?
She's decided she's gone down the list. She's onto the unfriendly faces. Sorry. I might as well ask unfriendly questions then, I guess.
That's right.
Yeah.
The bubbles on slide four.
Yeah.
Do they all move down together on the new capital allocation, or is there a differentiation? Do some move down more than others? Second question, on slide 15, where you've got the areas of collaboration wheel with all the crazier web lines. If I take all of the stuff on the right-hand side that's for the IB, what proportion of the IB balance sheet does that constitute, please?
Can you just repeat the latter question? I'm sorry.
Sure. I'm a friendly guy, so I'm happy to do that.
That's fair, went confused. I appreciate that. I hear you.
On the last slide 15, where you've got your areas of collaboration. If I add up the balance sheet attributed to all of those collaborative activities, what proportion of the total IB balance sheet would that be, please?
I'm adding. I left my calculator.
I brought you a number. Yeah, that's true.
Happy for you.
It looks to be around a third, but we need to spend more time with it. Around a third is, yeah, seems to be fitting.
Okay. Friendly faces. Oh, you're not, no. Oh, one more friendly. Okay. Sorry. The bubbles. Oh, we forgot about the bubbles. Yeah, the bubbles. Do they all move down together with the new target?
When you look-- I don't know if you want to take that as well.
Yeah.
When you look at the adjustments that we just went through and that Kirt went through this morning, roughly, and Piero touched on this, it goes from around 90%-80%. That's before we've optimized. To really answer your question, historically, our ability and the pace at which we're able to optimize, I think that will definitely dictate how the different bubbles grow, how they shrink, and how they move. At this point in time, it's probably premature to give a precise answer, but I would say no, because the pace of optimization will probably be different. Yep.
You've got a choice of three. Oh, Kian.
Mike is Kian, it's actually a nice question. Your page four, I'm just wondering about your equity derivative business. Based on this, I'm a bit surprised that you rank yourself so highly. I want to try to understand why that is the case. You can explain to us why this is such a good business for you, because normally I would expect you to be quite strong in equity derivative flow, but less in the structuring side, relatively weak in the U.S. Does it include corporate derivatives or not? Can you just answer what your strengths is and maybe what you're lacking in that business? Because it looks much better than I would've expected.
Look, it does include corporate equity derivatives.
That explains it.
That has been consistently over the time period, actually, a very profitable business for us that has returned much above our targets. You are correct. It is included.
I'd like to take the opportunity to talk about the strength of our global equity derivatives business. We have a very strong equity derivatives business. We rank top three in flow in the Americas. We do a very strong import business there as well. We've been investing in our capabilities in both Europe and Asia. We do have a robust structuring business. Where we haven't been as strong, as you correctly point out, in the Americas, is where we're looking to make some strategic investments.
Back to you, Jernej.
I just have two questions. The first one is, UBS de-emphasized the number of investment banking businesses over the past years. That turned out to be the right thing to do, particularly in the securities part of the equation. If you could go back in time and choose to keep capacity in one of those de-emphasized businesses, which one would it be? That's a perfectly nice question from my standards. The second question relates to the following. I think we're all on board that there's a synergy between running a private bank and an investment bank, particularly securities business at the same time. Broadly, how much of UBS's securities revenue in some way or another do you think is tied to the private bank activity in %? Is it a quarter? Is it half? What do you think it is? Thanks a lot.
The second question.
I just.
Sorry?
Sorry, on the second question.
Sorry.
What portion of securities revenue is touched by private banking clients in one way or another, I guess is a better question.
The answer to the first question is, I think that we're quite happy and pleased with the decisions that we made. We don't have regrets. We've adjusted businesses that we've been in based on market structural changes and technological developments. I think that we're quite happy with the decisions and stand by them.
In relation to wealth management as a percentage of the IB, it is absolutely certain that it's our single biggest client. There's no doubt. We're not providing numbers regarding that, but it is different, the extent to which it is the larger in different divisions. I think you have seen today that, for example, the GFO, the Global Family Office joint venture, will probably grow those revenues on the private side, where previously were smaller than on the public side. It's varied across divisions, but it is the single biggest client.
I'll take Jacques-Henri's question as the last one, Sergio's going to come back for his concluding remarks.
Yes. Sorry, I really have to ask this. In investment banking in particular, dual leadership never works. You have Grübel, Mack. Didn't work. In this organization, Kengeter, Wilmot-Sitwell didn't work. Why is it going to work this time, considering that the previous great success of the investment bank has been with a single leadership?
Thank you for the question and we love each other. That's the simple answer. Other than that, I think it's 2 reasons will render this a lot easier as a job. First of all, our mandate is very clear. The strategy is set. It's UBS strategy. It's been the same for a while, so we know exactly what we need to do and how we need to do it, and that is very helpful to us. There is going to be no divergence there. Importantly, both of us were there running businesses and executing the UBS strategy for the investment bank. Secondly, importantly, Rob and I are very complementary in terms of skill set and geographies, and I think that's tremendously helpful to the 2 of us, because he's based in the U.S., I'm based in Europe. His background is very much the public side.
My background is very much the private side. I think there is a lot of osmosis in terms of knowledge and professional skills. Also, I think most importantly of all, it's for our people. It's for our colleagues. This provide the best possible continuity and the smoothest transition because we have been in the trenches with our colleagues day in and day out for the last 5 years. That's why we feel very confident, that beyond the fact that we actually get on really well as people, that the business framework is such that it should be quite straightforward for us to do this well together.
Thank you.
I know it's been a very long day, and you've been bombarded with a lot of information, and I hope you found them useful, in terms of understanding our story. As I say that this morning is not about talking about a strategic direction, it's about execution, it's about how we execute. I thought that you also had an opportunity to understand in more details our journey. I think that I don't want to go through spending a lot of time in repeating what I said this morning. For us, it's very clear that we want to continue to capture the real big opportunities that we see coming up in our segment, in the industry, in wealth management. Wealth creation is a theme that is staying with us despite short-term market volatility. I expect that we will be able to perform in line with our expectations.
In that sense, there is a track record of the last seven years that demonstrate that we have been able to navigate complex transformation project, but also very complex market environments. In our focus on disciplined growth, I think that I hope you took away that we are absolutely focused on managing our resources prudently, not only balance sheet, but also our cost resources. I hope that at least we could make some progress in taking away what I could call, with all due respect, the paranoia on the cost-income ratio around us. Our story is definitely not a story of cost-income ratio, and we cannot be compared to the average of the universal banks in Europe. We are measuring ourselves in a very disciplined way, versus the consumption of capital and the returns on capital.
We make choices, in some cases, to tell, for example, the Investment Bank, we don't want to be in certain businesses that would be very positive for cost-income ratio, but they will be totally capital destructive in terms of not only returns, but also our ability to fulfill your expectation in terms of capital returns. It's very clear that there is a trade-off here that is quite complex to manage, but we aim to be as transparent as possible. I think that I prefer now to leave open the time between us and the end for any other questions you have. As I said before, I really thank you for your contribution, directly or indirectly, to make what I hope you find a successful day in terms of communication, because we got a lot of feedback in the various interactions we have with shareholders.
We try to address everything that is possible to address, notwithstanding that we have always to make also trade-off between what we believe is in the interest of some elements of transparency and also, indeed, some element of what I would consider confidential information to protect our shareholders. Because going down too deep in planning, for example, in our businesses, is only good for our competitors, not for shareholders, for sure. We have to consider that kind of situation. In many cases, we do believe that we have a broader disclosure. We can always improve. Having said that, those trade-offs are very important. I like to know much more about my competitors than I currently can, and it's not always possible for good reason. We have to live with those trade-offs. But I think that we can continue to have a constructive journey in that sense.
I open up for questions or any observation you may have.
I just wanted to ask a couple of questions relating to your cost income target cost efficiency. I apologize.
Sure.
The first one is just getting an idea on, you talk about a stable fixed cost base between now and 2021, but when you do look at your targets, it looks like a lot of the investments are potentially front-loaded. The cost saves are potentially backloaded to some extent. If that's not the case, then please correct me. If it's a fixed cost base throughout, then please do clarify that. The broader question attached to this was your opening comment when you joined this morning was a joke about organizing Investor Day on the back of a record fall in the S&P. In the event that you can't see any revenue growth, let's pick a bear case scenario, would you still be confident that you could reduce the cost income ratio on the basis that you said both investments and performance-based compensation are linked to the revenue growth?
Yes. No, thanks. Well, yes, we do expect a smooth transition. It's not a hockey stick kind of policy, I think that you will see. As you are seeing right now, we are taking down costs and I would say that if it's completely linear, I don't know the numbers, but it's pretty much so. It's not a hockey stick strategy for sure. We do expect those savings to materialize as we go through the journey already in 2019. Actually, you see already 2019, our cost income ratio coming down. In respect of the revenues environment, maybe I like to clarify further, the beta and alpha story so that we don't confuse. The beta story, there is zero subjectivity from myself, the CFO, or the business divisions. This is all data we take from external independent providers and/or our economists.
What I would say is we need broader market and industry consensus. There is no wishful thinking, blue sky scenario in the beta, so that we don't create any potential conflict and we can really isolate alpha levers. In respect of course, what's going on, I do hope that the fact that we have a balanced growth portfolio between beta and alpha should allow, and I believe will allow us to navigate any downfall. Of course, you're not going to eliminate everything. Our numbers are based on both levers more or less materializing over time. Of course, markets may not go up 70% linearly, right? Over the cycle, we expect that to happen. We expect the alpha generation to continue to go, lending, penetration of mandates, and the rolling out of technology in order to make us more efficient. All those levers should help.
Of course, it goes without saying, a big chunk of our variable compensation in the U.S. is driven by our compensation framework agreed. There's no discretion on both sides, let's put it that way. In terms of variable compensation, we have, of course, the IFRS accounting stickiness. You see also our IFRS numbers is basically moving toward compared to what we call the communicated compensation, right? It's more or less the same. There is a degree also of flexibility on variable compensation that is rightly so linked to the performance of the bank.
Of course, the real big issue, notwithstanding, if you are talking about Wealth Management, the ideas of management and so on is always to see in compensation topics, let's be frank, as long as you have people that still roll the dice and continue to play a game for the next round and hoping they can recover and pay for jobs that don't create any value, of course, there is a competitive tension in retaining talents that needs to be taken into consideration. We have been able to manage that process in the past. Please. Can you tell me your name, please?
Hello. Thank you. Daniel Regli, MainFirst. I'm trying to ask now a really nice question, not like JPMorgan nice or Goldman Sachs nice, but MainFirst nice. What is your vision for UBS for the next five years when we expect the next Investor Day in five years? What will be different by then? Not except from being larger and more efficient and more profitable and maybe within this context, can you share some thoughts about big data? Is there somehow a group-wide strategy to leverage this information you have?
Well, as you can see from our strategy, it's been very consistent, it's all about focus and not being big. Of course, we have to look at the dynamics in the Wealth Management industry. We are large amongst four or five people having mid-single digits market share, but it takes a lot of players to get to a significant market share. We're not going to play for that kind of game. We're going to focus on quality of our growth. In respect of how I mentioned this morning in my remarks, I do believe that technology across the board will change substantially the way we operate. Usage of data is already something that is going on as we speak, it's only going to improve.
Rob mentioned what we do in research with Evidence Lab and what we are already doing in P&C and in every business, also in wealth management. You heard Tom mentioning how we look at data and how our financial advisor behave when they are part of a social media network versus if they are not. We are starting to deploy those techniques. In respect of data usage of clients, one has to pay attention what you do with data of clients. We are quite convinced that the paradigm also about how freely one can use data, not only in banking but in general in our society and in business, is going to be somehow limited over time.
In that sense, I think that technology will help us, yes, through data, to find out how to better serve clients, how to avoid frictions or people that are likely to leave the bank or behaves in a way that may trigger retention issues, but it's going to be gradual. Fundamentally, I still believe that technology will change more profoundly banking the back end than it is the front. The front. It's already an ongoing story, and I'm sure you had an opportunity upstairs to have a feeling that how it's already part of the journey. It's not a big bank. I keep repeating this is you got to go back in five years' time, in 10 years' time, you realize how much has changed. It's the back end that you don't realize because we don't see it. We don't touch it.
That's where the costs are. I mean, two-third of the people in the bank are really not touching clients. It's clear that we need to find ways to be more rational in the way we use those resources. Technology, it's helping us a lot in respect of doing the business more efficiently, but also more effective. I mean, there's no way you can. This morning somebody raised an issue about anti-money laundering and know your clients. Of course, we are not a large retail bank with small payments, but of course, without artificial intelligence, as the price of any transactions goes down to almost zero. Anti-money laundering is not done with big tickets in wealth management. Anti-money laundering, the real issue is where the small tickets are, and there, without artificial intelligence, you won't be able to tackle those areas.
In any case, we are deploying all these tools in order to make us more precise. I believe that UBS in five years' time will continue to be the leader in wealth management. We continue to be a leader that is growing, in terms of sophistication and also efficiencies and ability to work across the various dimension of what clients want. In essence, maybe if I can summarize the answer, is to say, continue to be and even be more relevant to entrepreneurs, to our clients, where we get the most out of this relationship, and they get the most out of UBS, is when we sit together and we talk about their business issues and their wealth planning issues, their investment issue, the private and the corporate side comes together.
That's really the added value we bring to the table, and that's the reason why if you split out those things too quickly, you're going to find yourself confronted with a competitor talking about the wealth planning and monetization and the risk management of their stakes in their company and how they want to proceed. They're going to simply say, Okay. It happened to be that some of those banks have great ambitions in wealth management. Of course, we're not going to let those people sit around the table so easily. Andrew, because you were so nice today. Yeah.
Thanks. I haven't had that review from anyone else today, so thank you. There were multiple positive comments around good operational leverage, low marginal cost income ratios, and I suppose for normal industries we'd then maybe think about inorganic growth and M&A opportunities to leverage those scale benefits you've got, take out the cost. At what point do you start thinking about M&A more and maybe taking money away from buybacks? Are the buybacks the absolute priority, no matter what the M&A opportunities?
Look, I think that M&A, realistically speaking, for somebody of our size, if it's M&A like we did in wealth management, or we may do in a small part of any other businesses, it's part of our, I call it almost organic. It's a de facto organic story because it's not really changing any trajectory of our capital. When I talk about M&A, I'm talking about fundamental, call it transformational one. I wouldn't really think that any of this, if and when would be an element to be put together with capital returns. If anything, you would need to justify, first of all, what is the industrial logic, and how does it make that a better story? If you look at, we are quite unique, and we want to keep our uniqueness.
It's difficult in any business, to be honest, to rule out M&A and inorganic growth. One has to nowadays really think, what is the real added value for shareholders in doing that? In that sense, our options are quite limited.
Hi, it's Andrew Lim. As you grow your balance sheet, how important is securities-backed lending or Lombard lending within that, in attracting new clients in APAC, in EM? Do most of them require that as a product? Is it
The more broad IB product offering and what you offer in wealth management more broadly that attracts them to UBS. Secondly, just wanting to flip the question a bit more to the downside. We can't ignore the fact that EM APAC assets have fallen in value quite significantly lately. Can you talk us through how protected UBS is to falling collateral values? Could it be to the extent that you have to pull back Lombard lending as those LTV values go down?
Thanks. No, I think that offering Lombard capabilities is a big part of the equation, I think that Lombard is usually, we separate the two businesses between pretty straightforward in terms of size and concentration risk and liquidity of the underlying stocks, what I would call plain vanilla lending that is done within wealth management and what we would consider more structured or complex to manage in terms of size. Of course, this is a big element in how we can get the IB expertise in managing risks, working together with wealth management. If you have a basket of shares or high concentration risks, you need to have completely different risk management engines and a mentality, and most importantly, documentation around how you manage the risk, if it's recourse, non-recourse, it depends very much on the situation.
Of course, lending is a major tool to leverage relationships and is what clients are expecting you to offer. If it's an issue on attracting clients, not necessarily, it's in growing clients. We don't go out usually and advertise our capability based on lending. Lending is part of the offering, in any case, Lombard lending, I would say from a risk-reward standpoint of view, is probably one of the most profitable business that a bank can have. If you go back into history, probably Lombard lending is only really letting you down when you have frauds, not really when you have deterioration of value in the market because of market correction. Usually, you can manage through collateral calls or risk management tools around it. When you have frauds, then it's really more dangerous.
In that sense, I think I'm also responding to the second question, that we have a pretty sophisticated engine. You look at what happened already in 2016 in Asia. We have very focused standards on how we lend, where we lend, and to whom we lend. This is costing. In a bull market, it may cost you a little of growth. I think that going back to our sustainability issue, I think that we have the right balance between risk reward, and as I mentioned this morning, is risk awareness doesn't mean that we are risk averse. When it's necessary, we deploy capital to our private clients and corporate clients. Ladies first.
Thank you. Thinking about your 17% return on CET1 target, what do you think is the biggest risk to that? Is that market performance? Is that regulation, litigation, margin compression? I would be interested to hear your thoughts on that. My second question, if I may. You've been CEO since 2011. Do you expect to stay there for the foreseeable? No. Is there any succession planning? Thank you.
I can refer that one for the nomination committee to the board. No, on the risk, the risks are the one we discussed before. Of course, if you have a sudden deterioration of market conditions, you will probably see a slowdown in achieving those targets. Having said that, one has to say, okay, how much then you're going to have less capital deployed. If there is no real big activity and growth and business, you also going to deploy less capital. In terms of return on capital, which the factor that we have to take in consideration these issues, you saw the expected growth of our LRD and risk-weighted assets is correlated to our beta assumption on what's going on in the market. If you have a deterioration on the market, you also going to get less consumption. I think Rob mentioned before GFS.
GFS, some of the balance sheet absorption in LRDs due to the fact that financial markets and equity markets have been going up, you are absorbing more. If it goes down, you are absorbing less, therefore you retain more flexibility on capital returns on that side. The denominator factor or regulation, I don't really expect anything dramatic to change between now and 2021, 2022. We have, of course, an headwind in respect of return on CET1 coming from the fact that we're going to build up another CHF 5 billion of CET1 ratio, that's, I don't expect more on the regulation. On the litigation front, it's difficult, but litigation. Our portfolio has been shrinking. I think that we feel that we have the right approach on how to manage the legacy litigations.
If anything should happen, either through actual provisions or to one-off items, they would be isolated. I don't think that I guess the vast majority of you is looking litigation, in any case, outside underlying and performance issues. I think that we can isolate the two. I feel pretty confident that we should be able to manage this situation. In respect of my tenure, as I mentioned before, I think that it's clear that for a European CEO of a bank, yes, it's a longer one. If I look at any other reasonable industry or outside Europe, seven years is not very long. At the end of the day, I'm committed to what I'm doing. I enjoy what I do, and I think that I have also a strong team helping me and supporting me.
As long as I have the energy and the passion for what I do, and people believe that it's okay, I will do it.
Two questions. The first one is on U.S. In 2004, 2003
Gosh.
Peter Wuffli outlined how PaineWebber is going to be a driver for ultra-high net worth growth in the U.S. family offices. The message I heard today is a bit similar to then.
Really?
That was round one. We are now in round two.
Is it related to the question before on my tenure or
No. Very much related to what is different this time.
Oh.
Clearly it was very difficult to penetrate the U.S. client base. Really what I want to understand is what is different in round two, because it didn't work in round one. The second question is regarding Asia. I wasn't able to ask a question earlier about China. I'm very excited about your proposition in China, and I think you have a superb footprint in Asia, as we all know. Can you talk a little bit about when is the starting point? What will trigger the starting point? Are you fully capable to come in, client advisors, platforms? Are you ready to basically penetrate clients right away? And at what asset base, looking at margins and costs, et cetera, today, would you actually think that you could break even in China onshore?
Let me the first question on why is this time different than before. I would say that fundamentally during those days, Tom Naratil was there in this journey, so I can assure you that he knows exactly what has to be avoided and what should be done. In those days, it's fair to say that the franchise we had in the U.S. was very successful, but was very much a brokerage model. It was indeed, if I understand, going through history, of course, you always need to understand history. I definitely made my own work in thinking about what should we do in order to take out value of this integration of the two businesses versus, and not repeating the mistake, was really, at that time, was a view that we can change them.
Not only we can change the fact of the financial advisor and the brokers very rapidly, but the fact that you pretend to change how the industry works. In any case, I would say that from those points, if you think forward, the journey has been quite dramatic because today we are the fourth largest in the U.S. but we have the highest penetration in terms of assets for financial advisor, and we have the highest productivity. We have a business that has migrated from a brokerage business more into wealth management and also expanding into banking products, something that they didn't have in the past. You heard Tom before mentioning that five years ago, we were not doing certain banking products. This has changed completely and converged more towards the way we do businesses outside the U.S.
I think this is the time where we can see, we manage our wealth management businesses globally for everything that makes sense to be done globally. But if you really look down on a day-to-day basis, we run our business in Asia, the difference in Hong Kong and Singapore versus what we do in Zurich, versus what we do in Europe and the U.S. in a different way or in Latin America. There are regional specificities. What we try to put together is only the things that do matter. We don't try to change how clients want to be served locally, and we try only to identify the clients that have global needs and they need a global platform. In that sense, I'm pretty convinced that we may do new mistakes, but it's unlikely we're going to do the same one.
On Asia and China, the vision there is very simple. We are not going to be successful in China in trying to really penetrate how to manage Chinese assets. Wealth creation is there, is the big opportunity, but the real big opportunity is really helping those investors and clients to invest abroad, and to, first of all, embrace the concept of wealth management and wealth planning and diversification. We can do that both by using our B2C, basically tapping at clients that we already know or we think are going to grow the numbers of millionaires, and millionaires is expanding. Our brand will help us to tap this opportunity.
Most importantly, and I think was also touched by Axel in his presentation, replicating more also what we have been doing in Switzerland and in other parts of the world, being the bank for banks, being the bank for other financial institutions that wants to develop wealth management capabilities. Helping them in a white-labeling basis, through execution products, whatever. Helping those counterparts. In some cases, they are competitors, we are not really competitor in that sense because we are not really tapping the same segments of clients, helping them to develop their capabilities. The biggest opportunity is diversification outside China, in China. The process of getting all the licenses is long. The good news is that we are, I think that we are well-positioned from an historical standpoint of view in going through these processes.
I think it's fair to say, as Martin said, is one cannot go to China and thinking that things are going to happen overnight. You need to have commitment and be patient. That's the reason why, in a nutshell, I consider China something that will be fully capitalized in terms of return on investments, probably by the next generation of leaders of UBS. In the meantime, we're still going to grow in the greater China concept, in the greater Asian concept, but onshore China is going to take time to develop.
Sorry. At the start of your presentation, Sergio, you made a statement with which I agree. You basically said, look, UBS probably has structurally the best profitability profile, structurally, of any G-SIB institution. I think that's true. Half of UBS's pre-tax profits, as you show, come from asset gathering businesses, returns above 20% on equity, right? You know where this is going. That's the starting point. Structurally, it has the best profitability potential, but it's not even close to being the most profitable G-SIB institution. Can it become the most profitable G-SIB institution, and what needs to happen for that to take place?
How do you define profitability?
I think the same way as most of people in this room would define it, return on tangible equity.
Sorry?
Return on tangible equity.
Return on tangible equity, I think that Kirt did a pretty good job in explaining to you this morning that the difference between our return on CT1 ratio and the return on tangible is not so different for us. I think that, by the way, we have absolutely no ambition or belief that we should tell you how to measure us. Okay. The intent is never. We're going to give you our numbers, we're going to also put the numbers on return on tangible equity and adjust and not adjust it, so everybody can come up with their own conclusion on how they want to evaluate us.
What we are saying when we change our metrics is that we try to indicate to you the way we measure our resources internally, and CT1 ratio is quite clearly, for us, and for the rest of the industry, the binding constraints. I think that we measure having a constant double-digit mid-teens return on those metrics makes us a quite successful organization. I don't know how many others nowadays really achieve those targets. Correct me if I'm wrong, I don't know. It doesn't look to me that based on return on tangible. By the way, you look at our tangible part, the tangible equity, we are quite unique. Nobody has 17% of their tangible into deferred tax assets. This is a very good, and it's something that brings value to shareholders.
Contrary to U.S. banks, we are not paying a dividend quarterly, we are not releasing that part of the tangible part on a quarterly basis. That's the reason why, notwithstanding everything, we can always improve and we will improve, but I'm pretty happy with the returns profile and the expected returns going forward. Good. Again, many thanks. We look forward to see you around for the more informal parts of the sessions. Again, many thanks, and looking forward to catch up later.