UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Date: March 21, 2019
UBS Group AG
Commission File Number: 1-36764
UBS AG
Commission File Number: 1-15060
(Registrants'
Names)
Bahnhofstrasse 45, Zurich, Switzerland and
Aeschenvorstadt 1, Basel, Switzerland
(Address of principal executive offices)
Indicate by check mark whether the registrant files or
will file annual reports under cover of Form 20‑F or Form 40-F.
Form 20-F
x
Form
40-F
o
This
Form 6-K consists of the presentation and speech given by Sergio Ermotti at Morgan
Stanley European Financials Conference on March 20, 2019, which appear
immediately following this page.
Morgan
Stanley European
Financials Conference
20 March
2019
Speech
by
Sergio
P.
Ermotti
Numbers for slides
refer to the 2019 Morgan Stanley European Financials Conference presentation.
Materials and a webcast replay are available at www.ubs.com/investors
Sergio
P.
Ermotti
Slide 1 – Cautionary
statement regarding forward-looking statements
Thank you Magdalena.
Before I start, I would
like to draw your attention to our cautionary statement. You can also find this
presentation and my remarks on our investor relations webpage.
Slide 2 – Uniquely
positioned with leading franchise
As you know, our
franchise is well diversified, and we have a strong presence in the biggest and
the fastest growing markets. With over half of earnings generated by asset
gathering businesses, we are well positioned to take advantage of the secular
trends of economic growth and wealth creation.
While the current
geopolitical and macroeconomic picture is quite adverse, such events are
nothing new. In recent years they have been a constant factor and we
demonstrated the resilience of our model and ability to generate excess capital
even in the most challenging of times.
Slide 3 – Strong
FY18 results
We have delivered 19
billion dollars in net profits over the last five years, and 2018 was
particularly strong.
Amid changing market
conditions, we delivered positive operating leverage and increased net profit
by 16% to 4.5 billion. This translates into 13.1% return on CET1 capital,
clearly above most European banks and in line with our American peers.
Slide 4 – FY18
capital generation of 4bn
Capital generation and
efficiency are at the heart of our business model, and last year was no
different in this regard. We accrued for a higher dividend, exceeded our share
buyback target and further increased our CET1 capital base.
Many of you have asked how recent developments may affect capital
returns. We are quite transparent on our provisions, as well as on why and how
we have to determine them. In particular in respect to the French matter, which
I am sure will come up in the Q&A.
Now, regarding our capital policy, nothing has fundamentally
changed. Our intentions on cash dividends are clear, and the only open question
relates to the size and pace of future share buybacks.
We will assess parameters regularly and, as I already said in
February, we will provide you with an update with our first quarter results in
April.
Slide 5 – Balancing revenue, cost and capital efficiency
As you all know, this slide is critical to understand our
approach to balancing revenue growth, cost management and capital consumption.
Our goal is always to optimize costs in a sustainable way,
but bringing down the cost / income ratio without regard for capital efficiency
and returns is not a winning strategy.
Slide 6 – Market beta factor development
Even before this quarter started we knew comparatives would
be tough, given the drop in the recurring fee asset base from last quarter and
the exceptionally strong start we had in Q1 on the back for euphoric outlook
for 2018
We also saw a risk that market conditions would remain tough
going into the first quarter, which turned out to be true.
Volatility and volumes are muted and it is clear investors
have not yet regained confidence, which took a serious hit in the fourth
quarter. Persistent uncertainty, political risks reinforce a "wait and
see" approach among our clients.
While this backdrop has had an impact on our revenues, it
will be partly offset by lower costs and a limited drag from Corporate Center.
Also, even with the additional provisions we just took and
other potential changes, we expect our capital ratios at the end of Q1 to be in
line with our guidance.
Slide 7 – Market beta factor development
Looking across our businesses, behavior of our wealth
management and institutional clients is highly Looking across our businesses,
behavior of our wealth management and institutional clients is highly
correlated this time around.
GWM transaction-based income remains under pressure. This is
especially visible in Asia, where our most recent client survey shows a rather
somber view on this year's outlook amid political tensions, trade tariff
disputes, and concerns about slowing growth in the region.
Our US clients remain
on the sidelines as well, generally content with their planned asset
allocations and financial plans.
At the moment we see GWM revenues down about 9% from a year
ago, with the gap narrowing over the course of the quarter. Transaction-based
income could be down by roughly 25%, mainly driven by APAC.
We should be able to partly offset this through a reduction
in costs of close to 5%.
For Q1 we also expect GWM net new money to be positive and
within our target range.
For the IB, over the last six years we have shown that our
strategy works and our franchise is resilient. We have scale where it matters
and our IB model is fundamentally attractive. It is the right one for UBS and
our clients.
But conditions this quarter have been among the toughest in
years, especially outside of the US, and we face demanding comparatives.
Volatility and volumes are muted with limited activity from
institutional and global wealth management clients. Fee pools have declined
across the board with very little M&A and IPO activity outside of the US
and low ECM activity levels.
We've seen some improvement lately but it remains patchy, and
not enough to offset the challenging start to the year.
At the moment we see IB revenues down about a third compared
with the very strong 1Q18. We expect to deliver positive adjusted returns on
attributed equity at around mid-single digits for the first quarter. Remember
the IB now carries nearly 30% more capital than just a few months ago.
While clearly not in line with our long-term aspirations, I
find it to be an acceptable outcome if it is a one-off in one of the worst
first quarter environments in recent history.
Meanwhile, our P&C
and Asset Management businesses continue to deliver combined profits of about
half a billion per quarter, consistent with our expectations.
Slide 8 – Incremental measures to lower cost and improve
capital efficiency in 2019
I'm very pleased with our progress on our strategic
initiatives aimed at cost reductions and optimizing financial resources.
Tougher conditions make people and organizations more focused
and determined. In this environment we are redoubling our efforts and executing
on both strategic and tactical measures.
Our short-term cost initiatives will support profitability
without mortgaging UBS's future. We have slowed hiring and some IT projects, but
we will not halt our investments into growth-oriented initiatives to improve
short-term P&L.
Overall, we expect our tactical cost actions to generate at
least 300 million in cost saves incremental to our strategic actions, with most
benefits coming through in the second half of the year.
On the capital front,
we are exploring ways to accelerate LRD optimization.
Thanks to our technology investments, we identified new
opportunities to optimize liquidity management. For example, better balance between
assets and liabilities at the legal entity level would also help us free up
some trapped LRD.
These initiatives will reduce LRD consumption by around 20
billion.
We are starting to execute on these actions and expect
benefits to materialize in the second half of the year. This is incremental to
any reduction in balance sheet usage we may see due to lower client activity.
Of course, we will at
all times maintain ample capacity to grow our Global Wealth Management
franchise, especially its lending book, in a capital-efficient manner.
Slide 9 – Executing on our alpha plans
Last, but not least, we are executing on the longer term
alpha plans we laid out at our Investor Update to deliver on our 2021 ambitions
across our businesses. In addition, we continue to optimize our headcount and
global footprint in Corporate Center.
Slide 10 – Key messages
So, to summarize. In 2018 we delivered strong results,
confirming UBS has the right business model.
The first quarter has been very challenging so far, but we
remain uniquely positioned to take advantage of secular trends of economic
growth and wealth creation.
We are taking actions which will partly offset the impact of
the difficult market environment so far this year, supporting capital
generation. At this point I still believe we can achieve returns at least in
line with last year's.
With that, I'd like to
hand back over to Magdalena to start with Q&A. Thank you.
Cautionary statement regarding forward-looking statements:
This
document contains statements that constitute “forward-looking statements,”
including but not limited to management’s outlook for UBS’s financial
performance and statements relating to the anticipated effect of transactions and
strategic initiatives on UBS’s business and future development. While these
forward-looking statements represent UBS’s judgments and expectations
concerning the matters described, a number of risks, uncertainties and other
important factors could cause actual developments and results to differ
materially from UBS’s expectations. These factors include, but are not limited
to: (i) the degree to which UBS is successful in the ongoing execution of its
strategic plans, including its cost reduction and efficiency initiatives and
its ability to manage its levels of risk-weighted assets (RWA) and leverage
ratio denominator (LRD), including to counteract regulatory-driven increases,
liquidity coverage ratio and other financial resources, and the degree to which
UBS is successful in implementing changes to its businesses to meet changing
market, regulatory and other conditions; (ii) the continuing low or negative
interest rate environment in Switzerland and other jurisdictions, developments
in the macroeconomic climate and in the markets in which UBS operates or to
which it is exposed, including movements in securities prices or liquidity,
credit spreads, and currency exchange rates, and the effects of economic
conditions, market developments, and geopolitical tensions on the financial
position or creditworthiness of UBS’s clients and counterparties as well as on
client sentiment and levels of activity; (iii) changes in the availability of
capital and funding, including any changes in UBS’s credit spreads and ratings,
as well as availability and cost of funding to meet requirements for debt
eligible for total loss-absorbing capacity (TLAC); (iv) changes in or the
implementation of financial legislation and regulation in Switzerland, the US,
the UK, the European Union and other financial centers that have imposed, or
resulted in, or may do so in the future, more stringent or entity-specific
capital, TLAC, leverage ratio, liquidity and funding requirements, incremental
tax requirements, additional levies, limitations on permitted activities,
constraints on remuneration, constraints on transfers of capital and liquidity
and sharing of operational costs across the Group or other measures, and the
effect these will or would have on UBS’s business activities; (v) the degree to
which UBS is successful in implementing further changes to its legal structure
to improve its resolvability and meet related regulatory requirements and the
potential need to make further changes to the legal structure or booking model
of UBS Group in response to legal and regulatory requirements, proposals in
Switzerland and other jurisdictions for mandatory structural reform of banks or
systemically important institutions or to other external developments, and the
extent to which such changes will have the intended effects; (vi) UBS’s ability
to maintain and improve its systems and controls for the detection and
prevention of money laundering and compliance with sanctions to meet evolving
regulatory requirements and expectations, in particular in the US; (vii) the
uncertainty arising from the timing and nature of the UK exit from the EU;
(viii) changes in UBS’s competitive position, including whether differences in
regulatory capital and other requirements among the major financial centers
will adversely affect UBS’s ability to compete in certain lines of business;
(ix) changes in the standards of conduct applicable to our businesses that may
result from new regulation or new enforcement of existing standards, including
recently enacted and proposed measures to impose new and enhanced duties when
interacting with customers and in the execution and handling of customer
transactions; (x) the liability to which UBS may be exposed, or possible
constraints or sanctions that regulatory authorities might impose on UBS, due
to litigation, contractual claims and regulatory investigations, including the
potential for disqualification from certain businesses, potentially large fines
or monetary penalties, or the loss of licenses or privileges as a result of
regulatory or other governmental sanctions, as well as the effect that
litigation, regulatory and similar matters have on the operational risk
component of our RWA as well as the amount of capital available for return to
shareholders; (xi) the effects on UBS’s cross-border banking business of tax or
regulatory developments and of possible changes in UBS’s policies and practices
relating to this business; (xii) UBS’s ability to retain and attract the
employees necessary to generate revenues and to manage, support and control its
businesses, which may be affected by competitive factors; (xiii) changes in
accounting or tax standards or policies, and determinations or interpretations
affecting the recognition of gain or loss, the valuation of goodwill, the
recognition of deferred tax assets and other matters; (xiv) UBS’s ability to
implement new technologies and business methods, including digital services and
technologies and ability to successfully compete with both existing and new
financial service providers, some of which may not be regulated to the same
extent; (xv) limitations on the effectiveness of UBS’s internal processes for
risk management, risk control, measurement and modeling, and of financial
models generally; (xvi) the occurrence of operational failures, such as fraud,
misconduct, unauthorized trading, financial crime, cyberattacks, and systems
failures; (xvii) restrictions on the ability of UBS Group AG to make payments
or distributions, including due to restrictions on the ability of its
subsidiaries to make loans or distributions, directly or indirectly, or, in the
case of financial difficulties, due to the exercise by FINMA or the regulators
of UBS’s operations in other countries of their broad statutory powers in
relation to protective measures, restructuring and liquidation proceedings;
(xviii) the degree to which changes in regulation, capital or legal structure,
financial results or other factors may affect UBS’s ability to maintain its
stated capital return objective; and (xix) the effect that these or other
factors or unanticipated events may have on our reputation and the additional
consequences that this may have on our business and performance. The sequence
in which the factors above are presented is not indicative of their likelihood
of occurrence or the potential magnitude of their consequences. Our business
and financial performance could be affected by other factors identified in our
past and future filings and reports, including those filed with the SEC. More
detailed information about those factors is set forth in documents furnished by
UBS and filings made by UBS with the SEC, including UBS’s Annual Report on Form
20-F for the year ended 31 December 2018. UBS is not under any obligation to
(and expressly disclaims any obligation to) update or alter its forward-looking
statements, whether as a result of new information, future events, or
otherwise.
Disclaimer:
This
presentation and the information contained herein are provided solely for
information purposes, and are not to be construed as a solicitation of an offer
to buy or sell any securities or other financial instruments in Switzerland,
the United States or any other jurisdiction. No investment decision relating to
securities of or relating to UBS Group AG, UBS AG or their affiliates should be
made on the basis of this document. No representation or warranty is made or
implied concerning, and UBS assumes no responsibility for, the accuracy,
completeness, reliability or comparability of the information contained herein
relating to third parties, which is based solely on publicly available
information. UBS undertakes no obligation to update the information contained
herein.
Non-GAAP
Financial Measures
:
In addition to reporting results in accordance with International Financial
Reporting Standards (IFRS), UBS reports adjusted results that exclude items
that management believes are not representative of the underlying performance
of its businesses. Such adjusted results are non-GAAP financial measures as
defined by US Securities and Exchange Commission (SEC) regulations and may be
Alternative Performance Measures as defined under the guidelines published the
European Securities Market Authority (ESMA). Please refer to pages 11-13 of
UBS's Quarterly Report for the fourth quarter of 2018 and to its most recent
Annual Report for a reconciliation of adjusted performance measures to reported
results under IFRS and for a definitions of adjusted performance measures and
other alternative performance measures.
© UBS 2019. The key symbol and UBS are among the registered and
unregistered trademarks of UBS. All rights reserved.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants
have duly caused this report to be signed on their behalf by the undersigned,
thereunto duly authorized.
UBS
Group AG
By:
_/s/ Kelsang Tsün____________
Name: Kelsang Tsün
Title: Executive Director
By:
_/s/ Ella Campi ________________
Name: Ella Campi
Title: Executive Director
UBS
AG
By:
_/s/ Kelsang Tsün______________
Name: Kelsang Tsün
Title: Executive Director
By:
_/s/ Ella
Campi ________________
Name: Ella Campi
Title: Executive Director
Date: March 21, 2019
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