WEBVTT - UBS CEO Sergio Ermotti Talks Swiss Banking Reforms, Asian Markets

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Since the twenty sixth annual GCC here in Shanghai, we've

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<v Speaker 2>been covering a lot of them and we are very

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<v Speaker 2>pleased to bring in the guest of honor, not the guest,

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<v Speaker 2>he's the host. I'm the guest here at the GCC

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<v Speaker 2>and Edi Sergio Almari ubs GRIP CEO, thanks so much

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<v Speaker 2>for having us here this again. What is your message

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<v Speaker 2>to the thirty six hundred or thereabout participants here at

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<v Speaker 2>the GCC this year and what's your general outlook for

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<v Speaker 2>business in China for your bank?

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<v Speaker 1>Well, actually, it's also great for me to be back here.

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<v Speaker 1>You know, last year was a quite you know, important

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<v Speaker 1>year for China. I think that we saw a huge

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<v Speaker 1>interest coming back on the Chinese market.

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<v Speaker 3>You know, stock performance.

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<v Speaker 1>Was great and we see today, I mean we have

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<v Speaker 1>almost three thousand and six UNDERD participants. You go through

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<v Speaker 1>across the board from corporates, institutional clients, family offices, and

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<v Speaker 1>you're not coming from also all over the world. We

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<v Speaker 1>sealed some more interest from overseas, which is indicating.

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<v Speaker 3>The momentum of the Chinese market.

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<v Speaker 1>So I think that you know, we believe this is

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<v Speaker 1>going to continue the secular trend support in China in

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<v Speaker 1>terms of growth in innovation, in technology, in biotech is

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<v Speaker 1>easier to stay and investors are realizing that.

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<v Speaker 2>So what kind of deal flow though, are you starting

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<v Speaker 2>to see? Is as we are starting to see China

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<v Speaker 2>get some more ventum. You talked about the stock market

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<v Speaker 2>the cs I three hundred of about seventeen percent last year,

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<v Speaker 2>so it is it's gaining some steam. But also outbound

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<v Speaker 2>deal flow seems to be growing quite a bit, whether

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<v Speaker 2>it's investing in factories in Europe or in the Global South.

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<v Speaker 2>It seems like capital is not only coming into China.

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<v Speaker 2>We're foreign interest is obviously looking at that rebound, but

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<v Speaker 2>also the capital is moving abroad.

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<v Speaker 1>Yeah, I mean, look, you know it's a good mix

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<v Speaker 1>of businesses, but you know, when you look at, for example,

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<v Speaker 1>the underweight of international investors to China almost half from

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<v Speaker 1>around two and a half percent in twenty twenty four

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<v Speaker 1>to one point three percent or so in twenty twenty five.

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<v Speaker 1>So this is a significant change on a year on

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<v Speaker 1>year basis, and this is the is the main driver.

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<v Speaker 1>We continue to see a lot of activity around IPUs,

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<v Speaker 1>particularly the record IPO issues last year. In Hong Kong,

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<v Speaker 1>which are probably going to stay with us. Also in

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<v Speaker 1>twenty twenty six, we.

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<v Speaker 3>See a lot of activity across Asia.

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<v Speaker 1>Inbound and outbound M and A in Japan is a

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<v Speaker 1>three folds. So in general, I would say that you

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<v Speaker 1>will continue to see momentum of you know, a Chinese

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<v Speaker 1>investors investing abroad, but also you know capital coming into

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<v Speaker 1>the country.

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<v Speaker 3>What's going to be your priority on shore?

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<v Speaker 2>For twenty twenty six, last year you got the full

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<v Speaker 2>one hundred percent securities license.

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<v Speaker 3>What's going to be the perer A. We are working

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<v Speaker 3>on all of this.

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<v Speaker 1>We also last year we also made a capital incluse

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<v Speaker 1>in our local entities and I think this year we

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<v Speaker 1>are now planning to launch a Panda bond, and so

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<v Speaker 1>I think that we want to continue to foster, you know,

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<v Speaker 1>our presence in China. We have been in China for

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<v Speaker 1>mainland China for thirty five years.

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<v Speaker 3>We have been in On Kong for sixty years.

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<v Speaker 1>So this is really part of our core business. I mean,

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<v Speaker 1>if if you think about we are managing in the

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<v Speaker 1>region more than a trillion of assets, eight hundred plus

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<v Speaker 1>in wealth management and two hundred and fifteen in asset management.

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<v Speaker 1>So we want to continue to reinforce that position, but

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<v Speaker 1>at the same time our leading position in the investment bank.

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<v Speaker 3>Across the board and where we are a leader.

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<v Speaker 1>In the region and in China mainland China particularly, and

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<v Speaker 1>also in asset management through our very successful joint venture

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<v Speaker 1>with ICBC.

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<v Speaker 2>What can you tell us about the ranging of that pandamond,

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<v Speaker 2>the size and timing and the likes.

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<v Speaker 1>This is still to be determined, but the decision has

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<v Speaker 1>been taken to issue pandamond.

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<v Speaker 2>So on shore versus Hong Kong or Greater China, what's

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<v Speaker 2>going to be the emphasis on shore as far as hiring.

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<v Speaker 2>I mean, you're very strong in wealth management obviously asset management.

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<v Speaker 3>What's going to be the priority?

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<v Speaker 1>Well, look, this year I think that our goal is

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<v Speaker 1>to continue to working with local universities hiring young talents.

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<v Speaker 1>We employ around one thy three hundred people in China

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<v Speaker 1>is behalf of them are in Shanghai and the rest

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<v Speaker 1>is in Beijing and the rest of in Shenzhen. We

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<v Speaker 1>we're probably going to had around one hundred people this

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<v Speaker 1>year in China and so but we are you know,

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<v Speaker 1>as I said, we are also investing not only in

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<v Speaker 1>seasoned professionals, but.

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<v Speaker 3>Also in the young generation of people for the franchise.

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<v Speaker 2>So obviously you still have some personnel issues on the

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<v Speaker 2>cost reductions from the integration with credit suites. That's separate

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<v Speaker 2>from what you're going to plan to hire across Asia

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<v Speaker 2>and in China.

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<v Speaker 1>Yeah, Look, when I look at Asia in general, the

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<v Speaker 1>integration is over, is done. So I think that we

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<v Speaker 1>completed the integration in twenty actually in twenty twenty four,

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<v Speaker 1>mainly in Asia across the board, the investment bank has

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<v Speaker 1>been closed and asset management the same. So as I

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<v Speaker 1>just mentioned, we are hiring both in China, but broadly

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<v Speaker 1>speaking also in Asia. In Japan, for example, we've been

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<v Speaker 1>expanding our capabilities and leveraging really the complementarity of credits

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<v Speaker 1>and ubs together, where we not only have a broader

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<v Speaker 1>footprint in terms of capabilities, but also of geographic footprint.

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<v Speaker 2>How would you assess how your businesses in Asia are

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<v Speaker 2>doing versus other regions, whether it's Europe or well.

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<v Speaker 3>Look, Asia has been growing.

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<v Speaker 1>Very fast in the last It is probably the biggest

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<v Speaker 1>engine of growth in nominal terms, is accounting for around

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<v Speaker 1>a quarter to thirty percent on average in the last

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<v Speaker 1>five years of our profits. So, as I mentioned, we

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<v Speaker 1>manage more than a trillion of assets out of the

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<v Speaker 1>seven trillion we manage globally.

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<v Speaker 3>So it's a.

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<v Speaker 1>Growing, steady, growing business, which when you look at the

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<v Speaker 1>engine of growth is well GDP growth is definitely going

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<v Speaker 1>to help four and a half percent in China is

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<v Speaker 1>quite important, but is a driver for growth in the

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<v Speaker 1>entire region.

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<v Speaker 3>We are selectively gaining some market.

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<v Speaker 1>Shares in areas where we want to compete and last

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<v Speaker 1>but not least, this monetization, this IPO calendar is very

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<v Speaker 1>important to our wealth management business because it's really helping

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<v Speaker 1>us to drive menu money and manu assets into our

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<v Speaker 1>wealth management frontis well.

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<v Speaker 2>Speaking of that IPO pipeline in Hong Kong, it's been

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<v Speaker 2>quite strong a lot of the new economy companies, but

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<v Speaker 2>there are also concerns of the new economy companies, whether

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<v Speaker 2>it's minimags or others, that profitability, just like the AI

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<v Speaker 2>companies in the United States and Western markets, that sustainability

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<v Speaker 2>is not necessarily it doesn't have a lot of visibility.

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<v Speaker 2>But what's your views on whether we're in a bubble

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<v Speaker 2>and how long that potentially could still last.

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<v Speaker 3>I don't know if we're in a bubble or not.

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<v Speaker 1>But of course when you see this kind of multiples

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<v Speaker 1>and performances, you have to ask yourself, is this a

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<v Speaker 1>repeat of what we saw maybe in other time two

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<v Speaker 1>thousand and one exactly the TMT bubble, and so on

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<v Speaker 1>and so forth. I would say that in general, you know,

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<v Speaker 1>first of all, our advice is very clear diversification, no

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<v Speaker 1>concentration of risk around the sector the technology and is

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<v Speaker 1>here to stay.

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<v Speaker 3>But we should not really mix the two issues.

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<v Speaker 1>From an investors standpoint of view, it's very important to diversify,

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<v Speaker 1>not to get into a trap of trying to pick

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<v Speaker 1>up the right the winner or the loser.

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<v Speaker 3>And but you know, the true of the matter.

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<v Speaker 1>Is that the first wave was probably around the technology sector.

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<v Speaker 1>Now we're going to see how embracing and implementing AI

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<v Speaker 1>can help other parts of the economy become more vibrant

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<v Speaker 1>and more efficient, and that's probably.

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<v Speaker 3>Going to be also the next side of the story.

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<v Speaker 2>You also have to you can't discount the fact that

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<v Speaker 2>most of the deal flows right now are in China.

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<v Speaker 2>The interest is in these new economy companies, So kind

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<v Speaker 2>of quantify the type of deal flows, whether it's underwriting

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<v Speaker 2>or other types of businesses or services from the near

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<v Speaker 2>bank that are tied directly to what has been a

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<v Speaker 2>priority of central government policymakers.

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<v Speaker 3>Here. Look, you know, but this is something that is

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<v Speaker 3>not really new.

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<v Speaker 1>I mean, the priorities for the central government around innovation

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<v Speaker 1>being in technology or or or pharma, biotech and so

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<v Speaker 1>on has been there for a while. So from our

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<v Speaker 1>standpoint of view, what we are helping is in you know,

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<v Speaker 1>local clients but also foreign clients to really select the winners.

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<v Speaker 3>I think is quite impressive how.

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<v Speaker 1>The Chinese companies are able not only to be a

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<v Speaker 1>fast followers, but in some cases setting new standards for

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<v Speaker 1>incumbents in in the US. So from my stand point

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<v Speaker 1>of view, this is a big story to stay with us.

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<v Speaker 3>We're we're going.

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<v Speaker 1>To see probably Chinese companies, you know, creating new frontiers

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<v Speaker 1>of innovation rather than being a follower.

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<v Speaker 2>You've mentioned Japan twice already in the last six or

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<v Speaker 2>seven minutes. What do you like about the Japanese story

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<v Speaker 2>right now? Obviously that the market's doing really well, there

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<v Speaker 2>are some pro growth policies from taki Ichisa on the

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<v Speaker 2>new Prime minister. What in particular do you like about

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<v Speaker 2>Japan Well, I.

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<v Speaker 1>Have to say before Urend I was in Japan and

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<v Speaker 1>after thirty years of you know, I fell for the

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<v Speaker 1>first time a renewed sense of optimism across the board

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<v Speaker 1>and you know, corporate, institutional investor, governments, regulatory bodies looking

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<v Speaker 1>in a much more positive ways about the future. So

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<v Speaker 1>I think Japan is the third largest wealth management market

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<v Speaker 1>in the world in terms of savings.

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<v Speaker 3>And it's quite clear to me.

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<v Speaker 1>That now that rates are coming up and you know,

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<v Speaker 1>there is a new paradigm that is there to stay

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<v Speaker 1>with us, and I do believe that also there you

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<v Speaker 1>will see Japanese corporates probably looking to deploy more.

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<v Speaker 3>Assets outside Japan.

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<v Speaker 1>But also a renewed interest from foreign investors into Japan.

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<v Speaker 2>Where specifically would you like to grow in Japan and

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<v Speaker 2>what kind of hiring you were talking about maybe one

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<v Speaker 2>hundred new physicians here in China, what about Japan.

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<v Speaker 1>Well, across the board in our core businesses, I mean

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<v Speaker 1>outside outside Switzerland, I mean the fact of the three

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<v Speaker 1>core activities the you know, in weals management, we have

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<v Speaker 1>a very successful joint venture with Sulutoo and suit Trust Bank,

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<v Speaker 1>and that is growing and we want to foster more

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<v Speaker 1>in the investment bank of course, in the investment banking

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<v Speaker 1>in E C, M and M and A uh, you know,

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<v Speaker 1>reinforcing our presence iniquities and in research where we are

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<v Speaker 1>a leader in generally in Asia and GLASTPO not list

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<v Speaker 1>in the asset managementalysis.

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<v Speaker 2>Let's talk about the overall integration with Credit Sweez. You

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<v Speaker 2>mentioned that in this part of the world and in

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<v Speaker 2>China that integration pretty much was completed last year, and

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<v Speaker 2>you've also said to us, I think in September that

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<v Speaker 2>the overall integration will be completed by the end of

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<v Speaker 2>this current calendar first quarter.

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<v Speaker 3>What are the biggest hurdles to overcome right now?

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<v Speaker 2>AI, You know it integration is going to be a

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<v Speaker 2>big one, but also there's going to be some personnel

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<v Speaker 2>issues that you have to resolve as you go through

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<v Speaker 2>that costco.

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<v Speaker 1>So what we're going to do around by the end

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<v Speaker 1>of this first quarter, we're going to migrate the balance

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<v Speaker 1>of around fifteen percent of the clients in Switzerland into

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<v Speaker 1>the UBS platform. At that point in time, all clients

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<v Speaker 1>globally will be on our UBS system, right on our

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<v Speaker 1>UBS platform. Then we're going to start to shut down

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<v Speaker 1>IT centers, data centers, and you know the Act.

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<v Speaker 3>In Switzerland, we are still you know, we are still

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<v Speaker 3>maintaining and running two separate IT.

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<v Speaker 1>Systems, so shutting down that one will create the synergies,

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<v Speaker 1>real estate footprint and to some.

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<v Speaker 3>Extent, unfortunately, also some personnel reduction that.

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<v Speaker 1>Will continue to stay within what we announced in terms

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<v Speaker 1>of product if redundancy.

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<v Speaker 3>We believe we're going to manage that below.

0:13:29.600 --> 0:13:35.680
<v Speaker 1>Three thousand redundancies between now and the early part of

0:13:35.679 --> 0:13:36.600
<v Speaker 1>twenty twenty seven.

0:13:36.960 --> 0:13:37.720
<v Speaker 3>And where do we stand.

0:13:37.720 --> 0:13:39.520
<v Speaker 2>Do you have any kind of update right now what

0:13:39.640 --> 0:13:42.559
<v Speaker 2>the Bank's perspective is on of course the two big

0:13:42.600 --> 0:13:45.960
<v Speaker 2>defail regulation and some of the proposals from the Swiss

0:13:45.960 --> 0:13:49.000
<v Speaker 2>government as far as capital requirements.

0:13:48.520 --> 0:13:53.120
<v Speaker 1>Well, this is really unimportant steps together with finishing the integration.

0:13:53.240 --> 0:13:55.960
<v Speaker 3>I think that I just mentioned, you know.

0:13:56.080 --> 0:14:00.800
<v Speaker 1>The process of completing the integration and finalizing this very

0:14:00.800 --> 0:14:05.120
<v Speaker 1>big work because of course that is also painful because

0:14:05.240 --> 0:14:09.760
<v Speaker 1>as I mentioned, we need to take also go through redundancies.

0:14:09.800 --> 0:14:12.240
<v Speaker 1>But what we want to set is the scene for growth,

0:14:12.760 --> 0:14:13.880
<v Speaker 1>to be able to you.

0:14:13.840 --> 0:14:17.839
<v Speaker 3>Know, to hire again and growth. And in that sense, in.

0:14:17.880 --> 0:14:20.080
<v Speaker 1>Order to be able to growth, we have we need

0:14:20.080 --> 0:14:25.520
<v Speaker 1>a competitive regulatory framework and what we we fully understand

0:14:25.640 --> 0:14:29.200
<v Speaker 1>the necessity of taking the lessons learned from what happened

0:14:29.200 --> 0:14:32.400
<v Speaker 1>at Credit Suis. But we believe that the current proposals

0:14:32.480 --> 0:14:34.960
<v Speaker 1>are not really reflecting.

0:14:34.440 --> 0:14:37.440
<v Speaker 3>What happened at Crety Suis and are going too far.

0:14:38.000 --> 0:14:41.960
<v Speaker 1>And therefore we are contributing in the debate with our

0:14:42.040 --> 0:14:42.920
<v Speaker 1>views on the matter.

0:14:43.440 --> 0:14:45.480
<v Speaker 3>And but this is now a political process.

0:14:45.760 --> 0:14:48.600
<v Speaker 1>We hope we're going to get more clarity in the

0:14:48.640 --> 0:14:50.040
<v Speaker 1>second by the second half of the.

0:14:50.080 --> 0:14:52.400
<v Speaker 2>Year, second half of the year, other compromises that you

0:14:52.440 --> 0:14:58.000
<v Speaker 2>would potentially accept, and that conditions of doing business, is

0:14:58.440 --> 0:15:01.960
<v Speaker 2>it a hindrance obviously to be is still domiciled in Switzerland.

0:15:02.320 --> 0:15:04.840
<v Speaker 1>Look, you know, first of all, there is a compromise

0:15:04.960 --> 0:15:11.280
<v Speaker 1>is usually between two people, you know, negotiating something.

0:15:11.360 --> 0:15:12.560
<v Speaker 3>We are not in a negotiation.

0:15:12.880 --> 0:15:15.880
<v Speaker 1>Is a political process and therefore we need to see

0:15:15.880 --> 0:15:18.840
<v Speaker 1>what's coming out. As I said, our role right now

0:15:18.920 --> 0:15:22.720
<v Speaker 1>is to make sure on behalf of our shareholders, our employees,

0:15:22.760 --> 0:15:25.960
<v Speaker 1>our clients and in general to the public that we

0:15:26.080 --> 0:15:28.320
<v Speaker 1>contribute our views on the matter.

0:15:28.720 --> 0:15:30.600
<v Speaker 3>But you know, we want.

0:15:30.600 --> 0:15:33.880
<v Speaker 1>We are we are a Swiss bank. We are very

0:15:33.880 --> 0:15:36.640
<v Speaker 1>proud to be a Swiss bank. Is a we believe

0:15:37.760 --> 0:15:40.400
<v Speaker 1>that is a is a.

0:15:41.680 --> 0:15:43.000
<v Speaker 3>Is a differentiating factor.

0:15:43.280 --> 0:15:45.640
<v Speaker 1>We believe this is good for Switzerland and we want

0:15:45.640 --> 0:15:48.040
<v Speaker 1>to continue to operate as a Swiss bank are going forward.

0:15:48.080 --> 0:15:50.320
<v Speaker 2>So it's not necessarily a compromise because as you said,

0:15:50.360 --> 0:15:52.960
<v Speaker 2>that would be a negotiation, right, But are you confident

0:15:53.320 --> 0:15:55.960
<v Speaker 2>that they will come up and there will be a

0:15:56.960 --> 0:15:59.480
<v Speaker 2>resolution that will be acceptable.

0:16:01.360 --> 0:16:04.720
<v Speaker 3>I cannot be confident about that. I think that.

0:16:04.640 --> 0:16:10.760
<v Speaker 4>I'm pleased to see that there is a political interest

0:16:10.880 --> 0:16:15.160
<v Speaker 4>to go deeper and fully understand the details of this.

0:16:15.280 --> 0:16:17.160
<v Speaker 3>It's very important to understand.

0:16:16.800 --> 0:16:20.640
<v Speaker 1>The details of what's going on, so such an important

0:16:20.720 --> 0:16:24.840
<v Speaker 1>decision cannot be taken out of emotions.

0:16:24.240 --> 0:16:28.440
<v Speaker 3>Or by people trying to drive the agenda by fear.

0:16:29.840 --> 0:16:32.360
<v Speaker 2>How would you What are your opportunities do you see

0:16:32.520 --> 0:16:35.920
<v Speaker 2>in the United States? Obviously your chairman has doctor Scott

0:16:36.000 --> 0:16:40.400
<v Speaker 2>Beason and those massive market rumors that was possibly about

0:16:40.400 --> 0:16:44.000
<v Speaker 2>discussing moving to the United States. But we also know

0:16:44.120 --> 0:16:47.200
<v Speaker 2>that mister Kelliher wants to post a wealth management in

0:16:47.200 --> 0:16:47.840
<v Speaker 2>the United States.

0:16:47.880 --> 0:16:49.160
<v Speaker 3>What are the opportunities there?

0:16:49.280 --> 0:16:51.040
<v Speaker 1>Well, First of all, I have to say we are

0:16:51.080 --> 0:16:55.560
<v Speaker 1>in a regular dialogue with many key stakeholders around the

0:16:55.600 --> 0:17:01.440
<v Speaker 1>world in governments, regulatory framework. Regularly is nothing exceptional when

0:17:01.440 --> 0:17:06.840
<v Speaker 1>we speak with one or the other officials. But of

0:17:06.840 --> 0:17:10.800
<v Speaker 1>course the US, together with this region and China are

0:17:11.520 --> 0:17:14.160
<v Speaker 1>likely to continue to be two engines of growth. It's

0:17:14.240 --> 0:17:17.439
<v Speaker 1>very important for us to continue to be competitive and

0:17:17.560 --> 0:17:20.479
<v Speaker 1>present in the US like we want to continue to

0:17:20.520 --> 0:17:24.400
<v Speaker 1>be strong in Asia and in our own country, Switzerland.

0:17:24.680 --> 0:17:27.080
<v Speaker 2>Sergio Ramali, thanks so much for your time and having

0:17:27.160 --> 0:17:29.720
<v Speaker 2>us here at the GCC twenty twenty six.