Bloomberg Audio Studios, podcasts, radio news. After a good set of quarterly results, what are you most proud of?
Well, first of all, I'm proud that we made very good progress in the integration, and so we significantly now reduce the risk of the integration itself. And we did that while les staying close to clients deliver very good financial results, which makes me comfortable.
That we are on a good way to deliver on our twenty twenty six financial targets.
Of course, it's going to take a lot of time to restore the profitability because the amount of task to be done is huge, but I'm confident that we are on a good way to deliver.
There's always this overhang about the capital requirements that regulators are talking about. You've been very vocal about it. How do you see it playing out?
Well, OK, we started technical discussions with all interested parties. We will see how it comes out. I think that we are all for making the system more resilient, more safe.
On the other end, we have to recognize that the current system has served us well, so so much that we were able to step in and rescue Credit Swiss, so we need to look at the lessons learned from this crisis, but also on the other end, we need to ensure that the outcome is proportionate and is also one that allows us to continue to be a driver of growth and well being for the Swiss economy.
So your biggest concern, I mean, at any point, could it touch dividend or shareholder buybacks?
I don't think this will happen.
I think that in any case, it's premature to speculate on the outcome.
I know that there's a number of ways, of course, of dealing with this if something big were to happen in the space. One of them is probably a sort deals our regulators have they given you agree light on them.
Well, look, you know, I don't think this is srt R something that can be used in a focus and selective way to manage economic risk and not to manage a regulatory capital issues per se.
So in that sense, I don't think it's a solution.
What is there a solution that you're looking at to kind of minimize the impact on UBS.
I think it's premature to speculate because we don't know really the outcome of the discussions. We will find out probably late this year, early part of twenty twenty five the direction of travel and then we can make an assessment.
Serger, talk to me a little bit about wealth management. So there's been a number of high profile people. Iball, for example, is moving to Asia. What's your biggest hope for wealth and in what region?
Well, Iqbal has moved to Asia with his family. So I think we continue.
To see Asia, China and the US as a big driver of growth. They are very important elements of our strategy, together with our position in Switzerland as a leading universal bank. And we you so also in the second quarter results.
But overall that.
Asia continues to be a pretty good secular driver of growth for our business.
What about the US?
The US we are I'm glad we are making good progress with some initiatives to make the A, B and wealth management working closer together. This has helped our transaction activities in wealth management. We are also preparing the platform to institutionalize more of our client relationships. So and now with the new leadership team with Rob Kurowski, we are really preparing for the next phase.
Of our plans.
And I'm confident and that we will improve our results in the US in the foreseeable.
Future quite quickly.
How aggrossive do you want to be in the US internmal, I think we have a plan and we set our plan that we believe we need to get to meet teams protect profit margins in the next two or three years, and then from their own words, we will look at ways.
To improve further. But it takes time to do that, you know. Of course, the environment is not really favorable.
We need to do things with sustainability in mind, and not just to him to do quick wins.
I mean, are you looking at potential acquisitions or will most of everything will be so organic?
Now?
We have to we have to do our own work and fix the issues we need to fix and.
And leverage better the capabilities we have.
Right now, and they are enough driver of growth and for us in the foreseeable future.
Do you see any M and A on the cards you ready to acquire even something small?
You're quite busy with MNA right now, so it's difficult for us to think about M and A.
So I think that we have enough on our plate.
Yeah, that's fair, Serge. When you look at the week that was, it was pretty volatile or actually pretty extraordinary for markets. I don't know whether we still understand fully the underlying reasons, But has it changed the way that you see the markets in the next six months.
Not dramatically, but I think, I guess for the markets and for many investors, what happened early on this month has been a a wake up called right, So, I mean, you look at the magnitude of the movements should make people think carefully about having a proper diversification and being very thoughtful about the way you invest money. So in that sense, the fact that we have basically made back everything in one week or two cannot be taken as
a you know, temporary issues. In my point of view, one has to really think that probably is a sign of some elements of fragility in the system.
Does it get easier as maybe we get a FED cut, or does it get more complicated as we go to the US election?
But look, you know.
When central bank cuts, it depends how they cut and why they cut. So if you know, of course there is now capacity probably to accommodate cuts based on lower inflation, but it's also you know, we need to watch exactly also what are the underlying economic drivers and to the extent that the FED is forced to cut more aggressively because of economic downturns. That would not really be good for the market. So we need to really watch why rates would come down and how quickly they come down.
In general, we do expect and we see room for a potential raid cuts in the foreseable future. But I wouldn't really be in the camp of predicting that the FED will go as far as the market.
Wants the FED to go. Why is that well, because.
I think that probably the market is used to see central banks stepping in every time and being very accommodative in the previous cycles, and I think right now is quite clear that central banks are focused also on inflation, and therefore they don't have so much capacity to go as far as the market may want to see.
Is the US election during the game in town? I mean, it could change depending on who's in the White House, regulation for banks, it could change even central bank independence, tear of trade wars.
Yeah, look, yes, but if US election would be the only game in town, we would be in a pretty good place in the world.
So I think that.
Administration changes every four years or so, and that we are used to do that to see that. So I think that unfortunately we have many other problems, particularly geopolitically humanitarian issues we have across the ward. So I think that, of course you have to expect a little bit of volatility around the upcoming election in the US, but it's you know, it's not gonna it's not going to resolve all the issues that we have on the plate right now.
But I'm confident that you know we are for us.
I mean, we have a business model that has been able to be to show resilience and actually success even in a moment of stress.
And that's the most important issue for us.
So you're telling me what the world is changing because of these poly crises? Is that fair? And what does it mean for a bank like UBS, Well, it.
Means that the necessity for us to stay close to clients and continue to advise and as I mentioned before, they've helped them to diversify and manage the risk. It's crucial and that's the reason I believe that in those moments we are seen as a safe event, as a place to go for advice, and I'm glad that our people are doing that while also absorbing a huge task of integrating credit suite. So and I believe we are ready for that kind of environment.
Do you think it's also changing client behavior? There's been a lot of focus on private markets. How does that interplay actually change and what does it mean for ubs now?
The big change in client behaviors we saw in the last twenty four months was clearly more diversification towards fixed income and so on and so forth. When the rates comes down, of course, maybe part of it will go to search for higher yield and maybe in private credit, but not only. But we do believe that as rates come comes down, you will see also potentially people moving back to more alternative assets.
And also, which is important to.
Understand the ed winds we face in the industry, but also at ups in NII in margins on interest rates will be also upset by clients taking more leverage potentially. So it depends how it plays out.
It depends what are the underlying economic dynamics.
Do you worry that there could be a systemic risk for semi systemic risks?
I don't think so. No, I don't think systems. I don't see systemic risk.
But volatility high volatilelyy doesn't mean that you have systemic risks.
But what does it mean high volatility means.
You need to have higher volatility. I mean to be honest, I think if you look at high volatility can be an absolute or a relative concept. So because we have seen solo volatility in the last few quarters, you know, I do believe we see higher volatility. If this is very high and permanently, it's another matter. But I do believe we're going to see more volatility.
So it can be quarterally results. If I don't ask you about hiring or actually job losses, can you give us an update on what the next six and then twelve months will bring.
Well? You saw that, you know, the restructuring and fixing the elements of problems in the integration are unfortunately driving job losses. We are we took down around three thousand counties quarters, so I think that we will continue to do that in order to restore the profitability UBS had before the appeisition.