UBS CEO Sergio Ermotti Talks Earnings, Volatility, Credit Suisse
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Bloomberg Audio Studios. Podcasts, radio, news. Sergio, thank you very much for your time. A beat, of course, when it comes to profits in terms of revenue and the global markets team performing very well, the best quarter ever.

on record for them. If we were looking for soft spots, maybe in terms of the estimates, a bit of a miss when it comes to asset management and wealth, but the flows are still there. Earnings per share is a beat as well. Do those trends, particularly when it comes to the volatility that you've seen and the upside gains for the global markets team in the first quarter, do you expect those trends to continue in the quarters ahead?

Well, first of all, I have to say that I'm particularly happy to see our results because they underline the real value of our global diversified franchise. And also when you look at wealth management, asset management and investment bank both delivered

double-digit pre-tax profit expansion. Our core businesses had a combined 15% expansion. So I think that, of course, we saw a little bit of seasonality, positive seasonality, particularly in the first few weeks of January. I think it's fair to say that afterwards the seasonality factors were out and a high level of uncertainty and volatility did come in. But, you

The most important issue is that if you go back in history, you can see how we can really perform in a variety of market conditions. Wealth management, clearly the biggest profit driver, as it has been for a long time for UBS. How are your clients within wealth adjusting to the market turmoil, the political uncertainty? Are they staying on the sidelines? Are they looking for different products, different asset classes? Well, you look at...

So far we haven't really seen a major shift in asset allocation by clients and when you look at first quarter and the first couple of weeks in April, you know, they took more advantage of market volatility to reposition their exposures within the already set asset allocation. When you look at

the last couple of weeks is fair to say that probably there is a little bit of fatigue coming in from news, coming from the trade tariffs situation.

For the time being, I have to say that despite the real significant spike in volatility and huge volumes, we saw peaks in volume that exceeded 30% of the COVID times in the first couple of weeks of the second quarter. So despite all of this, clients are quite calm and focus on managing within their asset allocation. Is that volatility, that peak in volatility behind us now, do you think?

I don't think so. I think that's, as I said, probably now there is a little bit of settling down. I think markets have found probably a new...

a new dimension in terms of where to reconsider things from and now it's going to be depending on the developments on the tariff front. I think that uncertainty is there. It's very positive to see that there are ongoing discussions in terms of finding agreements

Having said that, if this goes on for too long, uncertainty has also a cost and therefore probably investors and corporates will slow down their investment plans. How are your private banking clients being impacted?

tariffs? No, for the clients themselves directly in their asset allocation just as a function of markets movements. You know of course we have a lot of clients who are also entrepreneur business owners and there it depends very much where they are so I think the tariff issue won't be a game in which everybody loses or everybody gains. Some people will be winners, some people will be losers. Is UBS benefiting from that

safe haven status that Switzerland has as investors diversify out of the US? I think that there is not necessarily a geographic or booking center issue. We are not seeing that kind of developments. I think that's

Well, it's fair to say that we are a global franchise. We have very important activities and booking centers in the U.S., but also when you look at Europe and Switzerland, you look at Asia, Hong Kong, Singapore, Australia, Japan. So our investors have been playing the diversification cards for many, many years, and so it's nothing really new. Expanding wealth management in the U.S.

It's a key priority for you and the team. There's still a bit of catch up with the likes of Morgan Stanley. What's holding the business back there and what does it look like by the end of 2025? Well, we have a plan on how to bring our pre-tax profit margins in the US to mid-teens numbers. We always say our goal in the US is to narrow the gap to our peers because of who we are and the size of our operation and the scope of our operation in the US is not realistic yet.

to think that we're going to close the gap with our main competitors. But within that, we believe that the ongoing efforts to work across many dimensions to improve profitability are going well. You look at the first quarter results, we had a 12% PBT margins. It's still short of the 15% we want to achieve in the next

couple of years but it shows that we are moving in the right direction. Okay, and you're confident in getting to that 15% within that time frame in the US? Yes, I think we are confident that we will do that. On the capital requirements debate that's unfolding, it seems like the SMB, the regulators, the government, not backing down in Switzerland in terms of imposing those higher capital requirements. Would you and the team be prepared to make structural changes, changes to the strategy to try to come to a compromise on this?

Well look, I think it's not appropriate to speculate what we will or we will not do in respect of any changes until we know exactly what they are. When we know what it is, we're going to analyse it and make considerations that are focusing on protecting the interests of our shareholders. Are they listening to your concerns? Are you able to shape the debate?

I think that one, I don't know. I think that the only thing I know that we are definitely making efforts in contributing to a fact-based discussion around this very important topic. So I think it's very important that whatever decision is taken, it's taken based on facts.

not about myth or about any other ideological issues. And so we want to make sure that all stakeholders are fully aware of all the consideration that should be analyzed before making such decisions. But it's a potential risk to the buyback and the dividend plan as you look out to that 2026 goal. Yeah, it's definitely... I think that our capital returns plans are...

are subject to us delivering on our financial targets, us keeping the already very strong capital position we have, and also no material and immediate change in the regulatory framework. But I think that it would be nice if any changes would be only limited to the short-term capital return plans. I think that the consequences of the changes are much more profound.

for the competitiveness not only of UBS but the Swiss Financial Center. The integration with Credit Suisse UBS seems to be going quite well. This quarter you're doing the migration of Swiss clients onto a single platform. Is there a risk to flows during that process?

Well, you never know of course when you come to the place where clients are moving physically or digitally, not physically, but digitally their accounts, they may make a choice to do something else. But if you look at the big chunk of clients and the most important, I don't see it as being a real factor. I do see also an opportunity for us really.

under the same IT operation, the same service and product offerings to expand our business and to create a win-win also for our clients who will benefit also from a more expanded and comprehensive offering.

We've reported, Bloomberg's reported that you're in talks with General Atlantic. They are, of course, the alternative asset management firm, potentially around a strategic partnership focused on private credit. Are you able to confirm that talks are taking place, that talks are taking place, Sajid?

Well, look, the area of private credit and how to enhance our toolkit and how to help our clients with the best products and capabilities are always a consideration, but it's not appropriate for me to comment on even Bloomberg speculations.

Okay, but pushing into private credit is a key strategy, a key priority, and you'll be working on that? I think, as I said, it's one of the toolkits we need to give our clients access to financing and so on, but it's as strategic as many other things we do.

On FX, before we let you go, the Swiss is strength up about 10% versus the US dollar year to date. A lot of your revenue is coming through from the US dollar, particularly when it comes to the global wealth management business. A lot of the cost is in Swiss francs. Some investors questioning the fundamentals of the US dollar. How are you thinking about those dynamics going forward?

Well, look, you know, if you look at the dollar and in general, I would say more the other way around, Swiss francs has been strengthening against many currencies, main currencies for decades now. So from our standpoint of view, if you look at our mix of effects exposure between revenue and cost, they're quite balanced. I mean, maybe a little bit of balance.

on the Swiss side versus, sorry, on the wealth management side and on the IB side where we have a little bit more cost in pounds for the IB. Generally speaking, I think FX is not a major factor for us. Switch to Verizon Business and get more from your internet without paying more for your internet. Get LTE Business Internet starting at $39 a month when paired with select business mobile plans. That's unlimited data.

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