Kian Abouhossein

Kian Abouhossein of JPMorgan Chase & Co. inquired about the previously guided revenue impact from tariffs and sought more detail on the drivers behind the deterioration in Stage 2 loans, specifically distinguishing between model adjustments and environmental factors.

Answer

Group CEO Georges Elhedery stated that despite tariff uncertainty, trade fee income grew 4% due to strength in fast-growing corridors and services trade. Group CFO Pam Kaur added that the low single-digit revenue impact from tariffs still holds. She explained that an ECL model update was a key driver for Stage 2 migration, increasing allowances in Hong Kong but causing a release in the UK.

Kian Abouhossein of JPMorgan Chase & Co. asked for an update on the previously guided low single-digit revenue impact from trade tariffs. He also requested more detail on the drivers behind Stage 1 and Stage 2 credit migrations, particularly the split between model adjustments and environmental factors in the corporate and commercial bank.

Answer

Group CEO Georges Elhedery stated that trade fees grew 4% in Q2, demonstrating resilience due to HSBC's strong position in fast-growing trade corridors and investments in services trade. Group CFO Pam Kaur confirmed the low single-digit revenue impact guidance from tariffs remains valid. She added that recent ECL model updates were primarily due to Probability of Default (PD) migration, which increased allowances in Hong Kong but resulted in a release in the UK.

Kian Abouhossein requested the specific interest rate and GDP assumptions underpinning the current guidance. He also asked for details on the tariff impact analysis, including assumptions about China, trade corridors, and the bank's cost flexibility.

Answer

Georges Elhedery, an executive, highlighted the resilience of NII from the deposit franchise and fee income from Wealth, noting much of the business is intra-Asia and less affected by tariffs. Manveen Kaur, an executive, confirmed the $42 billion banking NII guidance for 2025 is based on mid-April rate curves. She added that the tariff scenario was used to stress test the mid-teens RoTE target, and the bank's cost trajectory remains on track.

Kian Abouhossein inquired about the planned use of the UBS AG parent bank's $8 billion dividend accrual and the progress on improving profitability and managing financial advisor headcount in the Wealth Management Americas division.

Answer

CFO Todd Tuckner explained that the accrual is for upstreaming to the group, targeting an equity double leverage ratio below 105% by year-end. Regarding the Americas, he acknowledged seasonal advisor movement but highlighted strong same-store net new money growth and progress on the division's pretax margin improvement plan.

Kian Abouhossein asked for a holistic view of the strategic changes in U.S. Wealth Management, including advisor headcount and flow expectations. He also asked for UBS's current views on its regulatory positioning relative to other banks ahead of the Federal Council report.

Answer

Todd Tuckner, Group Chief Financial Officer, described the U.S. Wealth Management platform as stable with a robust recruiting pipeline, reiterating the 2-3 year goal of a mid-teen pretax margin. Sergio Ermotti, Group Chief Executive Officer, commented on regulation, stating that Switzerland's framework is already demanding and any changes must balance capital strength with the need for attractive, sustainable returns.

Kian Abouhossein of JPMorgan Chase & Co. sought clarification on the $13 billion capital repatriation, asking why it didn't fully benefit the parent bank, how much capital remains in subsidiaries like CS International, and the impact of double leverage.

Answer

CEO Sergio Ermotti reiterated there are no "low-hanging fruits" in capital management. CFO Todd Tuckner explained the repatriated capital was essential to address the distressed capital ratios and high equity double leverage inherited from Credit Suisse. He confirmed about $5 billion more could be repatriated from CS International, subject to rundown progress and regulatory approval.

Kian Abouhossein requested specific details on U.S. Wealth Management sweep deposits, including volumes and rates, asked about the drivers of the lending decline outside the U.S., and inquired about potential capital relief from legal entity simplification.

Answer

Executive Todd Tuckner disclosed that advisory accounts constitute about one-third of sweep deposits and that new pricing would be competitive. He attributed the ex-U.S. lending decline to both client deleveraging and active financial resource optimization. On legal entities, he confirmed simplification work is ongoing to unlock efficiencies but noted it was too early to quantify capital relief.

Kian Abouhossein of JPMorgan Chase & Co. asked about Deutsche Bank's market share performance in its Private Bank and Corporate Bank divisions. He also inquired about future areas for cost improvements, noting that the current €2.5 billion efficiency program is nearly exhausted.

Answer

CEO Christian Sewing stated that the bank is positioned to grow market share in both the Private Bank and Corporate Bank, citing the completion of major transformations and new opportunities from Germany's economic stimulus. On costs, he disagreed that programs are exhausted, explaining that the next phase of strategy involves further reengineering, front-to-back process optimization, and digitalization to unlock more savings beyond 2025.

Kian Abouhossein from JPMorgan asked for context on the FIC trading slowdown in April, questioning which subsegments were weaker and if it was a temporary issue. He also inquired about the potential impact on the 10% RoTE target if GDP forecasts for the U.S. and China were to be significantly lower.

Answer

CFO James von Moltke clarified that the FIC slowdown was limited to the first half of April and is not an ongoing concern, with performance having since returned to normal. He noted credit was weaker but markets have recovered. Regarding the macro outlook, von Moltke explained that the bank's Q1 provision overlays already incorporated a more pessimistic scenario, and the diversified business model provides offsetting benefits, underpinning their confidence in the RoTE target.

Kian Abouhossein of JPMorgan Chase & Co. asked for a real-world analysis of interest rate sensitivity, considering a steepening yield curve rather than a parallel shift. He also inquired about the RM hiring outlook for 2024, breakeven timelines for new hires, and whether Julius Baer was observing the same recent pickup in client activity reported by U.S. peers.

Answer

CFO Evie Kostakis explained that a steepening curve would lower short-term deposit costs and Lombard loan income, while the treasury portfolio would hold up better and loan growth could be stimulated. CEO Philipp Rickenbacher expects net hiring to continue in 2024, with RMs measured on a 3-4 year path to profitability. He stated that Julius Baer is not seeing the same broad activity pickup that some U.S. players have reported.

Kian Abouhossein asked for an update on Asia, including the status of client deleveraging, loan growth opportunities, and transaction margins. He also questioned why the firm's pretax margin target of 28-31 bps isn't higher, considering some U.S. peers report margins over 30%.

Answer

CFO Evie Kostakis reported that client deleveraging in Asia continued in H2 2022 but at half the pace of H1, and the region saw positive net flows. She noted transaction margins were low but have upside potential in more benign markets. Regarding the pretax margin target, she described it as ambitious but affirmed there is nothing precluding the firm from exceeding it.

Kian Abouhossein of JPMorgan Chase & Co. questioned the feasibility of the company's cost-to-income ratio target, asking about the underlying revenue assumptions and cost flexibility. He also inquired about the competitive landscape for hiring advisors and how moving assets from OCI to held-to-maturity would impact the treasury's gross margin contribution.

Answer

CFO Evie Kostakis expressed confidence in reaching the cost-to-income target, citing a recovery in client activity in July and future benefits from rate hikes. CEO Philipp Rickenbacher described the hiring market as quality-focused and affirmed the firm's competitive compensation model. Evie Kostakis clarified that reclassifying assets to amortized cost does not impact the swap-based NII gross margin contribution.