UBS CEO Sergio Ermotti Talks Earnings, Volatility, Credit Suisse

Bloomberg Audio Studios, podcasts, radio news. So Jo, 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 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

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 leriasify to franchise, and also when you look at Wealth Management, as to the management and the investment banking board are delivered double digit.

Pre tax profit expansion.

Our core businesses at combined fifteen percent expansion. So I think it's of course, so 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 know, we you know, the most important issues that if you go back in history, you can see how we can really perform in a variety of in a variety of market conditions.

Wealth management clearly the biggest profit driver as it has been for a long time for ups. How your clients within wealth adjusting to the market turmoil or 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 the first quarter and then the first couple of weeks in April, you know they took more at of market volatility to reposition their exposures within the radio 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 US, coming from you know, the trade tariff's situation.

So that.

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 thirty percent of the COVID times in the first week in the first couple of weeks of the second quarter. So despite all of these, clients are quite calm and focus on managing within their asset occasion.

Is that volatility peaking 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 say 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 by tariffs for the.

Clients themselves directly in their 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 depends very much where they are. So I think the Tarifficie won't be a game in which everybody loses or everybody gains.

Some people will be winners, some people will be losing.

And 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, well, it's fair to say that we are a global franchise. We have very important activities and booking centers in the US, but also when you look at Europe in Switzerland, you look at Asia, On Kong, Singapore, in Australia and 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 US is 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 twenty twenty five.

Well, we are we have a plan on how to bring our pre tax profit margins in the US to mid teens numbers.

This is we all.

We say that our goal in the US is still 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 the thing that we're going to close the gap with our main competitors.

But you know, within that, we believe that.

You know, the ongoing efforts to work across many dimensions to improve profitability are going well.

You look at the first quarter results we have.

We had a twelve percent PbD margins, is still short of the fifteen percent 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 fifteen percent within that time frame in.

The US, Yeah, I think we are confident that we will do.

The only capital requirements debate that's unfolding. It seems like the SMB, the regulators, is the government not backing down in Switzerland in terms of imposing those higher capital requirements. Would you in the team be prepared to make structural changes changes to the strategy to try to come to a compromise.

On this, Well, okay, think it's not appropriate to speculate what we will or we will not do in respect of any any changes until we.

Know exactly what they are.

When we know what it is, we're going to analyze it and and make considerations that are you know, focusing on protecting and the interest of our shoreolders.

I think 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 in in contributing to a fact based discussion around is very important topics. So I think it's very important that whatever decision is taken is taken based on facts, not about meath or about any other ideological issues. And so we want to make sure that, you know, also COLDS are.

Fully fully aware.

Of, uh, you know, 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 twenty twenty six goal.

Yeah, it's definitely, you know, 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 anything that it would be nice if any changes would be only limited to the short

The integration we create the Swiss ups 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 when the clients are moving physically or you know, digitally, not physically but digitally, there accounts me. 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 is 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 for our clients or will benefits also from a more expanded and comprehensive offering.

We've reported Bloomberg's reported that you're in 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 the talks are taking place, that talks are taking place.

Well, look the area of private credit and how to enhance our tool kit, you know, how to help our clients to to to to 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, key priority, and you'll be working on that.

I think.

Is why, as I said, is what is one of the toolkit we need to give our clients access to financing and so on. That is, you know, it is as strategic as and many other things we do on FX.

Before we let you go, the swissly strength up about ten percent versus the US dollar year today. A lot of your revenues coming through from the US dollar, particularly when it comes to 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 any in general, I would say more the other way around. So his friends has been strengthening against many current main currencies for decades now.

So from our standpoint.

Of view, if you look at our weeks of effects exposure between even costs, they are quite balanced. I mean, maybe a little bit of you know, on the Swiss side versus sorry on on the on the wealth management side, and on the A B side where we have a little bit more cost in in in in pounds for the A B. But generally speaking, I think effects it's not a major factor for us.