UBS CEO Sergio Ermotti Talks Swiss Banking Reforms, Asian Markets

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Since the twenty sixth annual GCC here in Shanghai, we've been covering a lot of them and we are very pleased to bring in the guest of honor, not the guest, he's the host. I'm the guest here at the GCC and Edi Sergio Almari ubs GRIP CEO, thanks so much for having us here this again. What is your message to the thirty six hundred or thereabout participants here at the GCC this year and what's your general outlook for business in China for your bank?

Well, actually, it's also great for me to be back here. You know, last year was a quite you know, important year for China. I think that we saw a huge interest coming back on the Chinese market.

You know, stock performance.

Was great and we see today, I mean we have almost three thousand and six UNDERD participants. You go through across the board from corporates, institutional clients, family offices, and you're not coming from also all over the world. We sealed some more interest from overseas, which is indicating.

The momentum of the Chinese market.

So I think that you know, we believe this is going to continue the secular trend support in China in terms of growth in innovation, in technology, in biotech is easier to stay and investors are realizing that.

So what kind of deal flow though, are you starting to see? Is as we are starting to see China get some more ventum. You talked about the stock market the cs I three hundred of about seventeen percent last year, so it is it's gaining some steam. But also outbound deal flow seems to be growing quite a bit, whether it's investing in factories in Europe or in the Global South. It seems like capital is not only coming into China.

Yeah, I mean, look, you know it's a good mix of businesses, but you know, when you look at, for example, the underweight of international investors to China almost half from around two and a half percent in twenty twenty four to one point three percent or so in twenty twenty five. So this is a significant change on a year on year basis, and this is the is the main driver. We continue to see a lot of activity around IPUs, particularly the record IPO issues last year. In Hong Kong,

See a lot of activity across Asia.

Inbound and outbound M and A in Japan is a three folds. So in general, I would say that you will continue to see momentum of you know, a Chinese investors investing abroad, but also you know capital coming into the country.

What's going to be your priority on shore?

For twenty twenty six, last year you got the full one hundred percent securities license.

What's going to be the perer A. We are working on all of this.

We also last year we also made a capital incluse in our local entities and I think this year we are now planning to launch a Panda bond, and so I think that we want to continue to foster, you know, our presence in China. We have been in China for mainland China for thirty five years.

We have been in On Kong for sixty years.

So this is really part of our core business. I mean, if if you think about we are managing in the region more than a trillion of assets, eight hundred plus in wealth management and two hundred and fifteen in asset management. So we want to continue to reinforce that position, but at the same time our leading position in the investment bank.

Across the board and where we are a leader.

In the region and in China mainland China particularly, and also in asset management through our very successful joint venture with ICBC.

What can you tell us about the ranging of that pandamond, the size and timing and the likes.

This is still to be determined, but the decision has been taken to issue pandamond.

So on shore versus Hong Kong or Greater China, what's going to be the emphasis on shore as far as hiring. I mean, you're very strong in wealth management obviously asset management.

What's going to be the priority?

Well, look, this year I think that our goal is to continue to working with local universities hiring young talents. We employ around one thy three hundred people in China is behalf of them are in Shanghai and the rest is in Beijing and the rest of in Shenzhen. We we're probably going to had around one hundred people this year in China and so but we are you know, as I said, we are also investing not only in seasoned professionals, but.

Also in the young generation of people for the franchise.

So obviously you still have some personnel issues on the cost reductions from the integration with credit suites. That's separate from what you're going to plan to hire across Asia and in China.

Yeah, Look, when I look at Asia in general, the integration is over, is done. So I think that we completed the integration in twenty actually in twenty twenty four, mainly in Asia across the board, the investment bank has been closed and asset management the same. So as I just mentioned, we are hiring both in China, but broadly

How would you assess how your businesses in Asia are doing versus other regions, whether it's Europe or well.

Look, Asia has been growing.

Very fast in the last It is probably the biggest engine of growth in nominal terms, is accounting for around a quarter to thirty percent on average in the last five years of our profits. So, as I mentioned, we manage more than a trillion of assets out of the seven trillion we manage globally.

So it's a.

Growing, steady, growing business, which when you look at the engine of growth is well GDP growth is definitely going to help four and a half percent in China is quite important, but is a driver for growth in the entire region.

We are selectively gaining some market.

Shares in areas where we want to compete and last but not least, this monetization, this IPO calendar is very important to our wealth management business because it's really helping us to drive menu money and manu assets into our wealth management frontis well.

Speaking of that IPO pipeline in Hong Kong, it's been quite strong a lot of the new economy companies, but there are also concerns of the new economy companies, whether it's minimags or others, that profitability, just like the AI companies in the United States and Western markets, that sustainability is not necessarily it doesn't have a lot of visibility. But what's your views on whether we're in a bubble and how long that potentially could still last.

I don't know if we're in a bubble or not.

But of course when you see this kind of multiples and performances, you have to ask yourself, is this a repeat of what we saw maybe in other time two thousand and one exactly the TMT bubble, and so on and so forth. I would say that in general, you know, first of all, our advice is very clear diversification, no concentration of risk around the sector the technology and is here to stay.

But we should not really mix the two issues.

From an investors standpoint of view, it's very important to diversify, not to get into a trap of trying to pick up the right the winner or the loser.

And but you know, the true of the matter.

Is that the first wave was probably around the technology sector. Now we're going to see how embracing and implementing AI can help other parts of the economy become more vibrant and more efficient, and that's probably.

Going to be also the next side of the story.

You also have to you can't discount the fact that most of the deal flows right now are in China. The interest is in these new economy companies, So kind of quantify the type of deal flows, whether it's underwriting or other types of businesses or services from the near bank that are tied directly to what has been a priority of central government policymakers.

Here. Look, you know, but this is something that is not really new.

I mean, the priorities for the central government around innovation being in technology or or or pharma, biotech and so on has been there for a while. So from our standpoint of view, what we are helping is in you know, local clients but also foreign clients to really select the winners.

I think is quite impressive how.

The Chinese companies are able not only to be a fast followers, but in some cases setting new standards for incumbents in in the US. So from my stand point of view, this is a big story to stay with us.

We're we're going.

To see probably Chinese companies, you know, creating new frontiers of innovation rather than being a follower.

You've mentioned Japan twice already in the last six or seven minutes. What do you like about the Japanese story right now? Obviously that the market's doing really well, there are some pro growth policies from taki Ichisa on the new Prime minister. What in particular do you like about Japan Well, I.

Have to say before Urend I was in Japan and after thirty years of you know, I fell for the first time a renewed sense of optimism across the board and you know, corporate, institutional investor, governments, regulatory bodies looking in a much more positive ways about the future. So I think Japan is the third largest wealth management market in the world in terms of savings.

And it's quite clear to me.

That now that rates are coming up and you know, there is a new paradigm that is there to stay with us, and I do believe that also there you will see Japanese corporates probably looking to deploy more.

Assets outside Japan.

But also a renewed interest from foreign investors into Japan.

Where specifically would you like to grow in Japan and what kind of hiring you were talking about maybe one hundred new physicians here in China, what about Japan.

Well, across the board in our core businesses, I mean outside outside Switzerland, I mean the fact of the three core activities the you know, in weals management, we have a very successful joint venture with Sulutoo and suit Trust Bank, and that is growing and we want to foster more in the investment bank of course, in the investment banking in E C, M and M and A uh, you know, reinforcing our presence iniquities and in research where we are a leader in generally in Asia and GLASTPO not list

Let's talk about the overall integration with Credit Sweez. You mentioned that in this part of the world and in China that integration pretty much was completed last year, and you've also said to us, I think in September that the overall integration will be completed by the end of this current calendar first quarter.

What are the biggest hurdles to overcome right now?

AI, You know it integration is going to be a big one, but also there's going to be some personnel issues that you have to resolve as you go through that costco.

So what we're going to do around by the end of this first quarter, we're going to migrate the balance of around fifteen percent of the clients in Switzerland into the UBS platform. At that point in time, all clients globally will be on our UBS system, right on our UBS platform. Then we're going to start to shut down IT centers, data centers, and you know the Act.

In Switzerland, we are still you know, we are still maintaining and running two separate IT.

Systems, so shutting down that one will create the synergies, real estate footprint and to some.

Extent, unfortunately, also some personnel reduction that.

Will continue to stay within what we announced in terms of product if redundancy.

We believe we're going to manage that below.

Three thousand redundancies between now and the early part of twenty twenty seven.

And where do we stand.

Do you have any kind of update right now what the Bank's perspective is on of course the two big defail regulation and some of the proposals from the Swiss government as far as capital requirements.

Well, this is really unimportant steps together with finishing the integration.

I think that I just mentioned, you know.

The process of completing the integration and finalizing this very big work because of course that is also painful because as I mentioned, we need to take also go through redundancies. But what we want to set is the scene for growth, to be able to you.

Know, to hire again and growth. And in that sense, in.

Order to be able to growth, we have we need a competitive regulatory framework and what we we fully understand the necessity of taking the lessons learned from what happened at Credit Suis. But we believe that the current proposals are not really reflecting.

What happened at Crety Suis and are going too far.

And therefore we are contributing in the debate with our views on the matter.

And but this is now a political process.

We hope we're going to get more clarity in the second by the second half of the.

Year, second half of the year, other compromises that you would potentially accept, and that conditions of doing business, is it a hindrance obviously to be is still domiciled in Switzerland.

Look, you know, first of all, there is a compromise is usually between two people, you know, negotiating something.

We are not in a negotiation.

Is a political process and therefore we need to see what's coming out. As I said, our role right now is to make sure on behalf of our shareholders, our employees, our clients and in general to the public that we contribute our views on the matter.

But you know, we want.

We are we are a Swiss bank. We are very proud to be a Swiss bank. Is a we believe that is a is a.

Is a differentiating factor.

We believe this is good for Switzerland and we want to continue to operate as a Swiss bank are going forward.

So it's not necessarily a compromise because as you said, that would be a negotiation, right, But are you confident that they will come up and there will be a resolution that will be acceptable.

I cannot be confident about that. I think that.

I'm pleased to see that there is a political interest to go deeper and fully understand the details of this.

It's very important to understand.

The details of what's going on, so such an important decision cannot be taken out of emotions.

Or by people trying to drive the agenda by fear.

How would you What are your opportunities do you see in the United States? Obviously your chairman has doctor Scott Beason and those massive market rumors that was possibly about discussing moving to the United States. But we also know that mister Kelliher wants to post a wealth management in the United States.

What are the opportunities there?

Well, First of all, I have to say we are in a regular dialogue with many key stakeholders around the world in governments, regulatory framework. Regularly is nothing exceptional when we speak with one or the other officials. But of course the US, together with this region and China are likely to continue to be two engines of growth. It's very important for us to continue to be competitive and present in the US like we want to continue to be strong in Asia and in our own country, Switzerland.

Sergio Ramali, thanks so much for your time and having us here at the GCC twenty twenty six.