Julius Bär Aktie

Ladies and gentlemen, welcome to the Julius Baer 2026 Half Year Results Presentation for Analysts and Investors. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it is my pleasure to hand over to Alexander van Leeuwen, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. Welcome to the Julius Baer Half Year Results Call. I am Alex van Leeuwen, Head of Investor Relations. We are joined today by our CEO, Stefan Bollinger; and CFO, Evie Kostakis.

Before starting, I would like to flag the important information provided on Slide 2 of the presentation. It is now my pleasure to hand over to Stefan for his introductory remarks.

Thank you, Alex. Good morning, everyone, and thank you for dialing in today. Let me start by giving you my take on our half year results. It has been an intense but highly productive first half for Julius Baer. Overall, we delivered a very strong operating performance, which was driven by exceptional client activity, especially in the first quarter. The results also reflect the depth and breadth of our capabilities and the ability of our team to help clients navigate complex markets and capture opportunities.

Now let's have a look at the figures. Asset under management reached CHF 547 billion, up 5% year-to-date, the highest level in our history. Net new money amounted to a solid CHF 5.7 billion, which we achieved despite the ongoing implementation of our revised risk and compliance framework. We generated a record half year net profit of CHF 673 million, a like-for-like increase of 32% year-on-year.

Our gross margin expanded to 87 basis points, and our cost/income ratio improved to 62.6% as we delivered further positive operating leverage. Capital generation remained strong with the CET1 ratio increasing to 18.5%, underscoring our solid capital position and financial resilience. Regarding capital distribution, I would like to reaffirm that any further share buybacks remain subject to approval by FINMA. We continue to have an active and constructive dialogue with FINMA, but the time line is ultimately theirs. In short, we have no further update at this point.

As you know, the first half also marks the start of our new 2026-2028 strategic cycle. We continued to progress steadily on our strategic priorities and are in execution mode on all 5 pillars: growth, efficiency, risk and compliance, technology and last but not least, our people agenda. First, we launched our growth program in February, and we are pushing to unlock organic growth. Front to back, everyone is involved. At the same time, we continue to progress on the implementation of our revised risk and compliance framework.

On the operational side, our focus is on simplifying end-to-end processes, taking a risk-based approach and leveraging technology, including AI. One example of how we apply a risk-based approach is the work we did on streamlining the client onboarding process in Switzerland.

Among many use cases, an example of how we leverage AI is the work we did on materially improving name and media screening. And on the fifth pillar, we progressed on the culture transformation agenda with emphasis on performance and ownership. Overall, I'm proud of what the team achieved and where we stand. Of course, there's still a lot of work ahead, and it's crucial we all remain focused on executing with discipline.

With that, I hand over to Evie to walk you through the financials.

Thank you, Stefan, and good morning, everyone. As usual, before turning to the results, I'd like to begin on Page 7 with an overview of the key market developments during the first half of the year as these will help frame the context for our performance.

Despite the shock in March, global stock market indices were up meaningfully, albeit with quite a wide dispersion of returns. For example, while the NASDAQ was up 20%, the SMI was up just 7% and Hong Kong and India were actually down more than 10%. Bond markets were little changed. And while the Swiss franc strengthened slightly versus the euro, the franc saw some modest weakening versus the dollar. The prices for precious metals show significant swings, especially at the end of January when both gold and silver following record peaks experienced their sharpest 1-day sell-offs and most extreme intraday swings in decades.

In terms of Central Bank interest rates, we saw the ECB hike by 25 basis points in June, the first time they raised rates since September 2023, whereas the U.S. Federal Reserve kept rates unchanged for now after 3 consecutive 25 basis point cuts in quick succession in the second half of 2025. The Swiss National Bank kept rates at 0. The third set of graphs on the bottom left of the page shows that the shape of the key yield curves continued to normalize. Finally, stock market volatility, as measured by the VIX increased in the first quarter with a spike in March before normalizing in the second quarter.

Moving on to Slide 8, which shows assets under management up 5% to an all-time high CHF 547 billion on the back of positive market performance, continued net new money and the stronger dollar. Monthly average AUM, important for the margin calculations, grew by 7% year-on-year to CHF 526 billion. And with assets under custody up 10%, this brings total client assets to just shy of CHF 650 billion.

Proceeding to net new money on Slide 9. A bit similar to what happened in H2. We started the period slowly, but picked up some momentum in the last 2 months, ending with net new money of CHF 5.7 billion, and that's a 2.2% annualized run rate. Growth continues to be weighed down by the ongoing rollout of our revised risk and compliance framework. That said, every region added inflows with Western Europe, including Switzerland, delivering particularly strong results.

Most of the inflows came from RMs still delivering on their agreed business cases, typically over a 3- to 4-year horizon. And on average, they're performing right in line with our expectations. And on the topic of client leverage, after pausing in the first 4 months, we saw clients starting to take on some leverage again in May and June.

So now let's go to revenues on Slide 10. Compared to the underlying result a year ago, thanks to the record high AUM and the exceptionally strong client activity in the first quarter, operating income grew by 12% to CHF 2.276 billion. Net commission and fee income grew 12% year-on-year to CHF 1.279 billion, largely driven by the 7% year-on-year increase in average AUM and a rise in brokerage commissions. Net interest income rose 80% to CHF 130 million, driven largely by lower deposit rates, resulting in total interest expense dropping 21% to CHF 714 million.

Despite higher average loan volumes, interest income from lending fell 16% to CHF 529 million, impacted by lower rates. In contrast, income from the treasury portfolio edged up 2% to CHF 270 million, supported by slightly higher balances. Net income from financial instruments at fair value through profit and loss grew 9% to CHF 876 million. The boost came mainly from strong performance in FX and metals trading as well as structured products, especially in the first quarter before moderating in Q2 as conditions settled. On treasury swaps, income dipped slightly despite higher average volumes as the yield spread between U.S. and Swiss rates compressed compared to last year.

On Slide 11, we regroup the IFRS revenue lines in an alternative way with the aim to better reflect the 3 key business drivers, i.e. recurring income, interest-driven income and activity-driven income. For the definitions and how we derive this alternative split from the IFRS view, please refer to the appendix.

And I note that the treasury swap income figures we are -- we use are based on management accounts. What this alternative view shows clearly is how the 12% year-on-year revenue increase was driven mainly by higher activity-driven income, which grew by 30% to CHF 710 million and by recurring income, which rose by 10% to CHF 984 million, while the jump in accounting net interest income was tempered by lower treasury swap income, thereby limiting the growth in interest-driven income to 2% or CHF 593 million.

On Slide 12, we show the same in gross margin terms. The year-on-year increase in gross margin from just over 83 basis points to almost 87 basis points is essentially the result of a 5 basis point increase in the activity-driven gross margin to 27 basis points and a 1 basis point decrease in the interest-driven gross margin to 23 basis points, with the recurring gross margin holding stable at 37 basis points.

The exit gross margin in the last 2 months, i.e., May and June was 80 basis points, of which somewhat more than 37 basis points from recurring income, well over 21 basis points from interest-driven income and slightly less than 23 basis points from activity-driven income. By the way, in the appendix, you can find an overview of the gross margin development on the basis of the IFRS revenue split.

Now let's move on to operating expenses on Slide 13. Costs reached CHF 1.462 billion, an increase of CHF 36 million or 2%, well below the 12% growth rate in revenues, i.e., delivering healthy operating jaws. The increase was driven by personnel costs, which were up CHF 37 million or 4% to CHF 974 million, driven by a 1% year-on-year rise in average headcount and higher incentive and performance-related compensation.

The rise in headcount was largely driven by further internalizations as part of our cost improvement focus as well as a one-off technical FTE true-up in H1 related to the treatment of long-term absentees. General expenses held steady at CHF 371 million. This included provisions and losses of CHF 37 million, up by CHF 1 million or 3% year-on-year.

When excluding provisions and losses in both periods, we saw a 1% year-on-year decrease to CHF 333 million. This reflects a balance between higher spending on technology investments, which rose as part of our platform modernization initiative in Switzerland and significant cost savings achieved through efficiency measures and internalizations.

The sum total of depreciation and amortization was unchanged at CHF 117 million. The costs in H1 included CHF 7 million cost to achieve related to the new efficiency improvement program with fiscal year savings of CHF 11 million already benefiting the P&L in the first half of the year. Gross run rate savings of CHF 60 million have already been implemented by the end of June. As a result, the expense margin improved by 3 basis points year-on-year to 54 basis points.

And thanks to the cost management and of course, the elevated gross margin, the cost-to-income ratio came down by almost 6 percentage points to 62.6%. However, it is important to note that this outcome benefited from an exceptionally favorable revenue environment, one that we do not expect to repeat regularly in our planning. Additionally, we are continuing to roll out significant investments over the next few years. For these reasons, I would caution against extrapolating the year-to-date strong cost-to-income performance into the near future.

Slide 14 summarizes the profit development. Thanks to the all-time high in AUM, the pronounced client activity and the improved operating leverage, net profit reached a record high half yearly level of CHF 673 million. In terms of IFRS net profit, that meant profits more than doubled year-on-year. But considering the large items impacting the results a year ago, the like-for-like increase was 32%.

The pretax margin improved by 6 basis points to 31 basis points, while the return on CET1 capital increased from 28% to 32% despite a very significant buildup in capital, as we will see in a few slides. Our forward tax guidance for the current strategic cycle is unchanged at between 18% and 20% and takes into account the currently expected impact of the implementation of the OECD minimum tax rate in different jurisdictions.

On to the balance sheet on Slide 15. Our balance sheet remains highly liquid with a loan-to-deposit ratio of 61% and one of the highest liquidity coverage ratios in Europe at 344%. Year-to-date, the balance sheet grew 8% to nearly CHF 117 billion. The main driver was client deposits, up 8% to CHF 72 billion. On the asset side, loans rose 5% to CHF 44 billion with Lombard lending up 7% to CHF 36 billion, while mortgages edged slightly down 2% to CHF 8 billion.

The treasury book also expanded up 15% to CHF 18 billion, supported by growth in both fair value through OCI assets, up 13% to CHF 10 billion and bonds at amortized cost, which rose 17% to CHF 8 billion. As there was relatively little change in the Swiss franc exchange rate versus the key currencies, the FX-neutral changes were not meaningfully different.

Turning to the capital development on Slide 16. Julius Baer finished the first half of 2026 with a significantly stronger capital base. CET1 capital rose by CHF 0.4 billion to CHF 4.3 billion, a 9% increase since year-end. During the same period, risk-weighted assets grew to CHF 23.3 billion, an increase of 3%, driven by increases in credit risk positions and market risk positions.

Overall, this translated into a CET1 capital ratio of 18.5%, a 1.1 percentage point increase over the past 6 months, reflecting the highly capital-generative nature of our business model. The risk density was 20% at the end of June, and we've slightly reduced our guidance for the cycle to 21% to 23%.

Finally, on Slide 17, a quick review of the development in the Tier 1 leverage ratio. As a result of the CET1 capital development and the impact of the USD 350 million A Tier 1 redemption in April, Tier 1 capital increased by 2% to CHF 5.6 billion. The leverage exposure increased by 7% to CHF 120 billion, basically in line with the growth of the balance sheet. As a result, the Tier 1 leverage ratio declined somewhat to 4.7%, but clearly remains very comfortably above the regulatory floor of 3%.

With that, it is my pleasure to hand back to Stefan.

Thank you, Evie. Our financial performance in the first half of 2026 reflects good progress against our midterm targets, which we reconfirmed today. There's still work to be done, and we remain fully focused on delivery.

Now let me summarize the key takeaways. We achieved a strong operating performance in the first half of 2026, which confirms the strength of our business model and momentum in the execution of our strategy. The implementation of our revised risk and compliance framework continues. We are making steady progress on all our strategic priorities with a particular focus on reigniting organic growth and on driving culture change.

Before we go into Q&A, I would like to take a moment to thank Evie, given today marks our last results call together. Evie, you have been instrumental in repositioning Julius Baer for long-term success. And on a personal note, I'm deeply grateful for your support since I joined the bank. This isn't quite goodbye given the upcoming handover to Pete, but I want to sincerely thank you and to wish you every success in the next chapter of your career.

With that, let's transition to Q&A.

Our first question comes from Anke Reingen from RBC Capital.

[Operator Instructions] Our first question comes from Anke Reingen from RBC Capital.

The first one is just on the IM target. I think for the IMS state, you told us that the number you expect it to be higher by year-end. Can you just give us an update on where you think the relationship manager could add at the end of the year and if you still target the 150 hires?

And then just on the guidance on net new money, continued -- or the commentary about net new headwinds to 2027 flows. Do you sort of -- I mean, given you already can give us that comment now, is there like a target AUM base? Do you think that's at risk from your review to get a sense of how much of a headwind we still should expect in 2027? And do you still expect net new money to be higher '27 and '26? Or is that too early to say?

Thank you very much for the questions. Let me take the first one. So we ended the first half of the year with 1,247 RMs. On a gross basis, we have onboarded 47 RMs with further 14 hires already signed and expected to start in 2026 and advanced recruitment discussions ongoing with more than 50 candidates. So we're very pleased about the pipeline. I wouldn't focus too much on the slight net decrease at June end because if you include the 14 RMs who've already signed, the development would have been flat at June end.

RM levers are mainly driven by our continued disciplined exercise of stringent performance management. And I would also say that in terms of gross hiring, given the challenging environment we have, particularly in the Middle East, we would now expect to hire around 120 or so RMs in 2026. That said, we still expect to see a slight net increase in the total population of RMs by year-end.

On your question about the 2027 net new money guidance, in order to frame this, let me take you back to our strategy update in June last year. We are very focused on repositioning our business for the future, focus on quality core wealth management, which can yield predictable, repeatable and sustainable performance for our shareholders.

On the back of the new strategy that we announced in June, the Board approved a new risk and compliance framework last October. And since we have been working on implementing it. As it stands, we indeed anticipate that the impact from the implementation of the revised risk and compliance framework will carry over into 2027.

As you know, we are in the wealth management business and derisking takes time, especially if you think about clients that have a complex setup, illiquid investments and other circumstances that mean that it takes time to exit that. And ultimately, of course, we want to do these exits in an appropriate manner for the impacted clients. Therefore, we should expect some continued headwind into 2027. At the same time, the situation will normalize in 2028. This exercise obviously doesn't help flows in the short term, but it will lead to an improvement of the quality and long-term sustainability of our book.

So my view is short-term pain for long-term gain. I'd also mention that at the same time, we are ramping up our growth initiatives. And while this takes some time, we expect some positive impact in '27 already. So all in all, derisking will be normalizing on one hand and our growth initiative will bearing some fruit on the other hand, which is why we're very confident about our 2028 target.

And in terms of how to quantify this, at this point, we reiterate the guidance we have given in May that net new money for 2026 will be below 2025. And we told you this morning, we expect this to spill over into '27, but it's too early to quantify the impact. It's impacting predominantly existing clients, but of course, also prospects.

The next question comes from Ben Caven-Roberts from Goldman Sachs.

Two from me, please. First, just on personnel expenses and the cost income dynamic. So if we look at the adjusted operating income, I think that was up 12% year-on-year and then personnel expenses were up 4% year-on-year. So would you see that as the right balance? If we think net relationship managers are down slightly, as mentioned, I know that's largely a function of ongoing performance management measures. But if you're looking at the pay-for-performance culture and how it currently stands and within that personnel expense line, if there's more moving beneath the surface and between different cohorts of the business?

And then secondly, just on net new money, is there any other color you'd give on the regional split, particularly interested in how you see dynamics in Asia following some recent policy measures in Hong Kong and Mainland China?

Ben, thanks a lot for the questions. So on the personnel expenses side, obviously, we had a fantastic development on our top line in the first half, which we are super pleased about. And in that respect, we've also reflected that in performance incentive accruals.

In terms of the cost-to-income ratio dynamics, of course, the 62.6% print is a very good print. And I note that in May and June, we had an exit cost-to-income ratio of 63%. However, if you were to ask me about the outlook for the year, as I mentioned in my opening remarks, I would not extrapolate that performance into the second half of the year. The reason is because we do expect to see some cost buildup in the second half of the year.

So from today's perspective, assuming an 80 basis points gross margin input factor, and this is not a forecast, just an input factor, happens to coincide with the exit margin we had in May and June. For the second half of the year, I would expect the cost-to-income ratio to be below 67%. I foresee an increase in costs in the second half, largely driven by 3 factors.

Number one, we have front-loaded investments, particularly in relation to the ongoing renewal of our Swiss Corp banking platform, along with increased amortization from prior year investments. These costs are expected to weigh in, in the second half with obviously longer-term benefits materializing on a back-ended basis.

Number two, we see an increase in cost to achieve in terms of our efficiency program. We just had CHF 7 million for the first half of the year and we see that number picking up in the second half of the year as we tackle more structural elements of the cost base.

And third, of course, we're going to be stepping up our spending related to the hiring of new RMs as part of our targeted growth strategy. So these investments, coupled with our ongoing focus on cost discipline are expected to drive long-term operating leverage and support the achievement of our target of a cost-to-income ratio sustainably below 67% by 2028. But as I've always said, it's not going to be a straight line.

The next question comes from Benjamin Goy from Deutsche Bank.

Two questions, please. First, coming back on the question on the regional split. And it's not only this half year, but consistently over the last years that Europe, Western Europe is very strong, which should be seen as a more mature market. On the other hand, Asia is solid, but not the outstanding performer. So maybe you can comment on those 2 regions, what is Europe doing particularly well and where Asia could accelerate?

And then secondly, CHF 23 million of credit losses. Obviously, grand scheme of things is a small number in particular as compared to the last 2, 3 years, but still it's above the, call it, run rate we had previously. So just wondering with less risk taking on the lending side, whether you can comment whether there are -- this is a new normal or whether there are still some smaller cases a part of the cleanup pushing up that number?

Thanks a lot, Ben. I will also answer Ben's question from before on net new money development by region. So as we outlined in the opening remarks, all regions contribute to net flows with particularly quite strong contributions from Western European markets, including obviously our home market, Switzerland.

If I look ahead, we continue to expect strong contributions from all key regions. In the Middle East, we saw some impact from the effects of the war, but we did see some normalization of flows, particularly in May and June. The RM hiring environment there remains challenging. With respect to Asia, I would say that in May and June, in particular, when we saw a restart of releveraging after it had paused or ground to a halt in the first 4 months of the year, we saw a very strong contribution coming from clients from our Asian franchise. They accounted for about 60% of that releveraging. So that's the commentary on the net new money regional developments.

We are very, very bullish in Asia in the longer run, the pace of wealth creation there is just astounding, and we're -- our franchise is very strong, and we're there to capture the opportunities. Now in terms of the credit losses, we had CHF 23 million worth of credit losses in the first half of the year. These are primarily associated with the income-producing real estate portfolio that we earmarked for managing down as we announced in the November IMS last year. I wouldn't say that there's any unusual development there. In fact, exposure has come down by 20%, which is a pleasing development.

And then the other thing I'd note is the market has stress tested our Lombard book twice this year, once in January with the extreme volatility in the precious metals space and then once again in March when the war broke out, and it has passed with flying colors. So we're quite happy with the performance there.

Maybe just to add to Ben's question on the Chinese regulatory developments. I was in Asia last week and obviously, something I discussed with the local colleagues. And the team on the ground sees this repatriation regulations mainly as a formalization of the process on capital flows in and out of China.

As you know, all the official regulated channels, Wealth Management Connect, Stock Connect to Hong Kong all remain fully open. And our team on the ground doesn't see any reason for concerns. In fact, as Evie just highlighted, we're very bullish on the long-term prospect of the regions. The region, we celebrate 20 years on the ground, and we're doubling down on investments there.

The next question comes Nicholas Herman from Citi.

Yes. Just coming back to the derisking, please. Could you just -- sorry if I missed this, could you quantify the impact of the derisking in the first half from the revised risk and compliance framework? And I think you said it's too early to quantify. But I guess just broadly, do you expect that rate to increase from here?

And then just sorry, a final related question. I guess does that impact of derisking in '27 mean that the progress on net new money will be more hockey stick now? Or are you still expecting a consistent path to the 4% to 5%?

And then on the recurring margin, just curious if there were any performance-related elements in your recurring margin in this period, which has expanded quite nicely. And I guess on a related note, have you -- you're already in the 37 to 39 basis points range. Does this make you more confident that you can get to the upper end of that range? Or I'm just kind of curious if you -- how you're thinking now about the recurring margin from here?

Thank you, Nicholas. Let me start with the net new money question. You're absolutely right. We should think more of a hockey stick type of development. given by 2028, we'll have the higher derisking because of the implementation of the risk and compliance framework behind us. And of course, at the same time, also, we'll see the benefit of all the investments we make on the growth side. In terms of the specific impact, it's hard to quantify given it affects both existing clients, but also prospects.

Nick, Evie here. On the recurring margin, Yes, we did a little bit above 37 basis points. We're happy about that. We've always said this is going to be a slow grind to get to the 39 basis points. The levers are well known. We talked about them extensively in the strategy update last year. What I would say is that we've had -- we've made -- we had quite some success in terms of our discretionary mandate flows.

So discretionary mandate penetration has gone up to 17% from 16% where it had dropped post the deconsolidation of the JB family office in Brazil. So yes, we like the development in the recurring margin, and we are full throttle trying to do our best to get it up there. But as we've always said, it's going to be a slow grind.

On that, have you seen any impact on demand for private assets on the back of all the negative news flow? And I guess if penetration of private assets were to remain unchanged from here, would there be a lack of uplift in your recurring margin versus kind of the path that you set out in your strategic plan? And I guess, would you be able to roughly quantify that lack of uplift if private assets penetration were to be unchanged?

Look, there's a lot of moving parts. What I would say is that where we are in terms of private markets penetration, we have a lot of upside ahead of us, Nick. So I'm optimistic that we'll be able to get that gross margin associated with recurring up in the next couple of years. And I think, Stefan, maybe you have a couple of comments to add.

Look, quite generally, I would say that in private markets, given there's a lot of money leaving the space that maybe you could argue should never have been there in the first place. This opens up opportunities for sophisticated high net worth clients like ours. And so we see lots of opportunities to take advantage of that. You can think of private credit, can think of some of the opportunities in buyout, but of course, also in venture.

The next question comes from Hubert Lam from Bank of America.

I've got 3 questions. Firstly, on RM hires, can you talk about which regions are you hiring them from? Is there a focus in particular countries or regions? That's the first question.

Second question is about releveraging. It's good to see a boost in May and June. Is this the start of where you think releveraging to come and do you think this can be maintained?

And lastly, just a clarification, Evie, I think you mentioned the exit margin in May, June. Did you say that NI interest driven margin was 21 basis points. I just wanted to check if that was correct.

Thanks, Hubert, and thanks a lot for the question. So on the -- I'll start from the third one. On the gross margin for the exit rate for interest driven, it was well above 21 basis points. In terms of the releveraging that we saw in May and June, I think if you take into account the lately quite hawkish narrative that's coming from central banks across Europe and the United States and what the market is pricing in now in terms of potential rate hikes, I would be cautious to extrapolate the releveraging trend for the rest of the year. We don't do so in our budgeting. And as you'll recall from the strategy updates, that we did last year in London.

We are -- we've put out those midterm planning targets, assuming a stable lending penetration at current levels. Then finally, the first question on RM hires. We are hiring across the board in all our key regions with a particular focus in our key markets.

The next question comes from Amit Ranjan from JPMorgan.

I have one, please. Can you please talk about the split in contributions coming from seasoned advisers versus those on a business case that you have talked about in the past?

Amit, thanks a lot for the question. So the split between seasoned RMs and RMs on business case has held steady from where it was last year. So it's about 2/3 -- 1/3. I would also say that we're very pleased with the performance of our relationship managers that are on business case. Business case achievement rate is around 69%. As you know, the average business case is around CHF 200 million. And I would also call out the fact that today, we have about 31% of our relationship manager population on business case, which is the highest proportion in the last 7.5 half year periods.

Maybe just to add, Amit, obviously, this also implies that there is a lot of upside in terms of the productivity of our seasoned RMs, and it's a big focus item as part of our growth strategy.

The next question comes from Stefan Stalmann from Autonomous.

I have two questions, please. It looks like you actually wrote off a good chunk of your impaired loans, about CHF 600 million during the first half. Is that related to the infamous property group that caused problems in late 2023? And is the fact that you're writing off this exposure also implying that the chance of recoveries here is now very low?

And the second question I wanted to ask is about the risk and compliance framework on the exercise to introduce this new risk and compliance framework. Is it fair to say that the completion of this project will be a condition for FINMA to sign off on the enforcement action? Or are those 2 things totally unrelated?

Stefan, thank you for the question. Indeed, if you look at Note 9 in our half year report, which I assume you've already done, you'll see that we have written off the largest exposure associated with the private debt exposure in 2023. I will note that last year, we had quite substantial recoveries from that position. And going forward, we, of course, are trying to recover some more. But I think from now on, the recovery potential is more limited.

And Stefan, on your second question, first and foremost, this exercise is about bringing our business in line with our core wealth management lane and the strategy that we outlined last June. And we're very focused on having a book that has the right parameters going forward.

The next question comes from Giulia Aurora Miotto from Morgan Stanley.

Evie, all the best for the next adventure. In terms of questions, so costs, second half, some investments you were flagging. Could you quantify perhaps how much do you expect costs to increase in the second half or -- and how much cost to achieve do you expect?

And then, Stefan, on your comment about the hockey stick on new money in 2028, does this mean that you probably expect '26 and '27 to be roughly stable around this level, like 2.5%, 3% and then the step-up towards 4% to 5% in 2028. I'm wondering because consensus is currently expecting 3.5% in '27. And yes, I'm wondering if that's realistic or probably it will be lower.

Giulia, thanks a lot for your kind words and for the questions. So let me start with the costs. I think I tried to give some indication. If you take the exit margin of May and June in terms of gross margin of 80 basis points and you take that as an input factor, I would expect the cost-to-income ratio for the second half of the year to be less than 67%.

I don't want to give you a specific number on cost growth. But what I can tell you with respect to the cost to achieve, we did CHF 7 million in the first half of the year. I expect that number to more than double in the second half.

And Giulia, on your question around the hockey stick. So as we said before, we don't have enough visibility yet. It's too early to quantify the impact for 2027. What we are saying is that there is a gradual positive impact coming from all our growth initiatives. And as always, our strategy is not to kick the can down the road. And so we are trying to get the book in line with our risk and compliance framework as soon as possible. All we can tell for now is that it is likely spilling over into '27.

And sorry, can I just go back to the comment on cost income below 67% in the second half. So essentially, you're already at the 2028 target in the second half. Does it -- do you expect it to stay there to improve in '27 or '27 will be more investments and therefore, you can maybe be above 67%.

Why don't we give you an update on that in the November IMS when we are more progressed with our planning cycle for '27, Giulia, if that's okay. It will be Pete giving you the update, not me, but we speak with one voice.

The next question comes from Jeremy Sigee from BNP Paribas.

Just one follow-up, please. On the adviser numbers, you're still seeing quite heavy adviser exits. And I just wondered in rough terms, what proportion of those are recent hires from the last 3 years not working out versus longer tenure seasoned RMs rotating off? What's the rough split of the exits that you're seeing at the minute?

Jeremy, thanks a lot for the question. I would say that the vast majority is RMs on business case that we were not able to perform according to our expectations rather than seasoned RMs. By definition, seasoned RMs are RMs that have made it.

[Operator Instructions] Our next question comes from Nicolas Payen from Kepler Cheuvreux.

I have two, please. The first one is coming back on the derisking side. I just wanted to know if there is any region which is more impacted than the others from this exercise. And the second one would be on the interest-driven income outlook going into H2 and 2027. We have rate cuts. We have deposits which are repricing. We have a bit of Lombard growth.

So how should we think about the interest-driven income going forward? Because I think you mentioned that the interest-driven income was well above 21 basis points on the exit margins. And as a side question, could we have the size of the treasury swap book as well, please?

Nicolas, thanks for the question. So on the size of the swap book, I'll start from the last one, the FX swap book, it's around CHF 27.5 billion as of H1. In terms of the interest-driven income, the component of gross margin, I did mention it was a little bit above 21 basis points in terms of exit margin. Part of that was due to an increase in time and call deposits towards the end of the period, which impacted a little bit the number.

However, in our forecast for the second half of the year, we're looking at a contribution from IDI of around 22 to 23 basis points. And with respect to '27, I think we'll be able to give you a better picture once we further progress with our planning for next year.

And on your first question on derisking, we do not disclose the detailed description of our risk and compliance framework, but you can think of different client types in high-risk countries or certain sensitive industries that no longer fit our risk profile.

We have a follow-up question from Anke Reingen from RBC Capital.

Yes. Sorry, but just 2 follow-up questions. The first one, you say you expect the RM number to be higher by year-end. Is that relative to end of June? And then I just have a question about your dividend accrual at 120 basis points versus 300 basis points capital generation. Just to confirm your dividend payout ratio guidance for this year is 50%.

Thanks for the follow-up questions, Anke. Yes, the dividend policy remains unchanged. And with respect to the net increase in RMs, I referred to year-on-year.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Bollinger for any closing remarks.

Thank you all very much for your engagement and your questions. We'll be back with our next update at the IMS in November. As usual, the Investor Relations team is available offline in case of further questions. Thank you all, and have a good day.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines.

Ladies and gentlemen, welcome to the Julius Bar Analyst Q&A on Interim Management Statement for the first 4 months of 2026. I am Mathilde, the Chorus Call operator. [Operator Instructions]

The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Alexander van Leeuwen, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining today's Q&A session with CEO, Stefan Bollinger; and CFO, Evie Kostakis. The reference documents for this call is the Interim Management Statement or IMS, covering the first 4 months of 2026 issued earlier this morning as a media release.

As noted in the release, the IMS is prepared on the basis of unaudited management accounts and present financial information using non-IFRS alternative performance measures or APMs. In that context, we also refer you to the APM section at the end of the release.

The customary cautionary statement is also included there and applies equally to the remarks made during this call. We aim to conclude the session by 9:00 Swiss time. With that in mind, we kindly ask participants to limit themselves to a maximum of 2 questions each.

With that, it is my pleasure to hand over to Stefan.

Thank you, Alex, and good morning, everyone. Today, we reported the best start of the year -- to the year in Julius Bar's history with record operating income driven by all-time high assets under management and exceptional client activity. This overall strong performance is a testament to the strength of our franchise and the quality of our people.

It is precisely in challenging times like this that Julius Bar demonstrates its ability to navigate complexity, seize opportunities and delivers value, both for our clients and shareholders. I want to take a moment to say that I'm particularly proud of our teams, who have been directly affected by the war in the Middle East.

They have demonstrated extraordinary resilience in dealing with multiple challenges, all while delivering the highest level of service to our clients. Looking at our top line performance, we reported that assets under management reached a record CHF 528 billion, driven by strong equity market performance and net new money inflows of CHF 3 billion.

The annualized net new money pace of 1.7% reflects a slower start to the year due to 3 factors: First, the continued implementation of our revised risk and compliance framework; second, the heightened uncertainty linked to the ongoing conflict in the Middle East; and third, a pause in client releveraging. We also announced the appointment of Thomas Frauenlob and Rajesh Manwani to our Executive Board. Thomas is Co-Head, Region Western Markets in Switzerland, based in Zurich; and Rajesh Manwani, Co-Head, Global Products & Solutions, is based in Singapore.

This change further strengthens our EXP, balancing group functions with region and product representation and reflects the group's pivot to growth. In terms of outlook, the strong performance in the opening months supported by the absence of significant one-off effects positions us to deliver an IFRS net profit for the first half of 2026 that is substantially higher than in the first half of 2025.

Furthermore, we are making good progress on executing the strategic priorities we outlined to you last June in London with all our 5 programs up and running. As a result, we are on track to deliver on our midterm goals, including our net new money target of 4% to 5% by 2028.

Finally, to address it upfront, as of today, we don't have an update on the status of FINMA's enforcement action. However, we continue to have a transparent and constructive dialogue with our regulator. Let me now take this opportunity to personally thank Evie, our outgoing CFO, for her many contributions to Julius Bar. Evie's leadership has been crucial in repositioning Julius Bar for long-term success, and I personally greatly appreciate her support and guidance since I joined the bank. She will stay with us until the end of the year to ensure an orderly transition.

With that, over to you, Evie, for an update on our results.

Thank you, Stefan, for your kind words, and good morning, everyone. It's been an honor to work by your side and under your leadership. Julius Bar is an amazing company, and I fully intend to remain a proud shareholder and a loyal client. But first things first, I will ensure my successor can hit the ground running and get off to a flying start.

In the first 4 months of the year, it was pleasing to see assets under management reached a record high of CHF 528 billion despite a further 1.5% appreciation of the Swiss franc against the dollar in percentage terms. Operating jaws widened substantially with the cost-to-income ratio improving to 62% and the pretax margin to 32 basis points. And the strong capital-generative nature of this business is evidenced by the capital buildup in the first 4 months of the year with the CET1 capital ratio now at 18.1%.

Obviously, the results were helped by the very high activity in the first quarter when we experienced high levels of volatility. And while we have no crystal ball in our planning, we do not assume that such an exceptional activity environment will continue in the near term.

Indeed, in April, the exit gross margin normalized down to 81 basis points on the back of lower activity-driven income. Together with the fact that the Swiss franc shows no signs of weakening, this means that we need to remain laser-focused on cost discipline as indeed we did in the first 4 months of the year.

With that, let's now move on straight to Q&A.

[Operator Instructions] The first question comes from the line of Flora Bocahut from Barclays.

The first question is on the RM number. I don't think I saw it in the press release. I may have missed it, but you had the end-of-period number of RMs. And any comments you can give us on the performance of your relationship manager this quarter in terms of net new money with the usual breakdown, if you can, between new RMs and seasoned RMs?

And then I just wanted to ask you a broader question on the cost performance. Can you maybe tell us where you stand on the savings that you target? And also if you booked any restructuring costs this quarter -- these 4 months?

Thank you very much for the questions. Let me start with the first one. In terms of the number of relationship managers, we ended April with 1,257. As we said, we've made good progress in hiring RMs in the first 4 months of the year with more than 30 already starting with us and 50 in advanced discussions. So from where we stand today, we are quite reasonably confident that we'll get near the 150 number that we target for year-end.

In terms of the CHF 3 billion net new money print for the first quarter, the contribution came mostly from RMs on business case. These RMs are tracking well. We're very pleased with our performance. They constitute about 30% of the total RM population and the business case achievement rate is tracking at 68%.

In terms of our efficiency program and the CHF 130 million gross savings we target for this strategic cycle, we are well on track. You've seen our cost-to-income ratio for the first 4 months of the year. Of course, that was very much embedded by a very strong gross margin.

Nonetheless, we continue to be very disciplined with respect to our cost management. We haven't taken too many restructuring charges in the first 4 months of the year or made investments that offset our cost takeout. However, we expect more of that to come through in the remaining couple of quarters, and we'll give you a full-fledged update with the half year results.

The next question comes from the line of Amit Ranjan from JPMorgan.

Thanks, Evie, for all the engagement over the years. The first one is on net new money flows. How should we think about the impact of the risk and compliance framework going forward? Is it expected to continue through the year?

And if you can tell us also what the impact was in the first 4 months from this? And how should we think about the slightly above 3% expectation on net new money for 2026 now? And the second one is on gross margins. So if you can please talk through the drivers of the change in mix between NII and treasury swap income. Was it related to the size of the portfolio or something else, please?

Thank you, Amit, for the question. And so on the first question around net new money, maybe just I outlined what has happened so far this year, and then we can talk about what we expect going forward.

As we said in our statement, the 3 reasons are the derisking, the Middle East crisis and the modest releveraging. I mean maybe on the last point, just to clarify, this added 0.6% to net new money in H2, and it came to a halt for now.

On the derisking, as we said before, derisking is an ongoing exercise. In the current year, the application of our revised risk and compliance framework is leading to more derisking than in a normal year, including on compliance and reputation risk. What I would say is sort of from a quality point of view, while this obviously does not help our flows in the short term, the key benefit is that it does lead to an improvement in the quality and long-term sustainability of the client book.

I would also reiterate that we're relentlessly focused on introducing organic growth, and we can outline what the initiatives are that we're working on. And I would also like to reiterate that we're highly confident that we can reach our net new money target of 4% to 5% by 2028.

And Amit, thank you. It's also been a big pleasure to working with you throughout the years. So thank you for your comments. Let me try and address the outlook question. Look, where -- given where the slower start to the year in terms of net new money, from today's perspective, we assume that net inflows will improve for the rest of the year, but the 2026 net new money will be somewhat below the 2025 annualized growth rate.

Nonetheless, as Stefan said, we are highly confident that we can reach our net new money target range of 4% to 5% by 2028. Now with respect to the second question and the dynamics around treasury swap income and net interest income, you will have seen that the treasury swap income came down to 18 basis points versus the 22 basis point print in the second half of the year.

It's important to note that treasury swap income decline was largely offset by 3 basis points higher net interest income. As you know, the Federal Reserve cut rates 3x in the second half of 2025, and now that's fully reflected in the first 4 months of this year. Lower U.S. rates, ceteris paribus are good for NII, given that we have more U.S. dollar deposits than assets and negative for treasury swap income as the difference between the U.S. and Swiss rates is reduced.

And of course, in case the Federal Reserve were somehow to increase rates, then obviously, the reverse would be true. This is why it is so important to look at the total interest-driven income rather than just the individual components.

We now have a question from the line of Anke Reingen from RBC.

Firstly, just on your releveraging. I thought it was somewhat surprising. Is that because of your derisking? And is this largely like an April trend you were seeing so that it's 0 for the first 4 months? And then I was wondering, can you give us an indication about your exit margin in April, please?

Anke, thanks for the couple of questions. So on the first one, there's been a pause in client releveraging in the first 4 months of the year. And with the reduced optimism around the possibility of Central Bank interest rates coming down meaningfully in the U.S., I've even heard some chatter about potential hikes and the potential rate hike in Europe being floated by ECB officials in combination with the sense of geopolitical and macroeconomic uncertainty, in our current thinking, we are not assuming any meaningful acceleration of client releveraging in the near term.

You will recall that in the second half of last year, we had a 0.6 percentage points contribution of releveraging to the net new money, which we didn't see in the first 4 months of the year, but this had nothing to do with derisking. And Anke, please remind me what the second question was?

Exit margin.

Yes, the exit margin was 81 basis points in April and the delta between the 90s for the most part in activity driven.

The next question comes from the line of Ben Caven-Roberts Goldman Sachs International.

So just two, please. So on the cost-income. So in February, I think you've given guidance that assuming similar inputs to last year's strategy update, you'd expect a slightly higher cost-income in 2026 versus the 68% that you did in 2025. How do you think about that guidance now given the 4 months of the year that are now behind you?

And obviously, revenue margins trending pretty solidly? And then a follow-up on net new money, please. Is there any color you'd give by geography just in terms of if there was much of a different picture in Europe versus the Middle East, versus Asia and then how clients are navigating that backdrop now?

Thanks for the questions. So on the cost-to-income ratio, the low cost-to-income ratio we achieved in the first 4 months of the year is primarily driven by the exceptionally high activity-driven income, which led to the gross margin print of 90 basis points, which is obviously well above the 80 basis points input factor that we applied in setting our medium-term cost-income ratio target.

However, I referenced the exit margin in April. And for now, I think that the guidance I gave in February still makes sense, i.e., with an input factor of 80 basis points, a dollar- Swiss exchange rate at 0.8 and a reasonably normal AUM development, we would expect to get to a cost-income ratio this year that is around the levels of last year.

And in terms of net new money and color on geographies, for the first 4 months of the year, we had a stronger contribution from Western Europe and Switzerland. Looking ahead, we expect more broad-based contribution from all the regions.

We now have a question from the line of Herman Nicholas from Citi.

Two for me, please. Firstly, on relationship managers. So you mentioned the 1,257 at the end of April, 30 joiners. Could you just discuss departure trends and reaction to the revised contract model now that we've had a few months of that being implemented? And then the second question I had was on the capital build, which was quite strong in the first 4 months. So just wondering if there was anything that you've done in terms of optimizing your risk-weighted assets to support that capital build or if that was just pure you can reference, please.

Nick, thanks for the questions. Let me start with the second one on the capital buildup. So we were at 17.4% at year-end. We had about a 200 basis point contribution from IFRS net profits. The treasury bond portfolio, for the most part, has pulled to par, so there was no movement there. Then you take away 80 basis points for the dividend accrual and actually RWAs increased slightly. So that gets you to the 18.1%.

That's kind of a detail of the capital walk. So primarily driven by strong profits. With the respect to the second question on RMs, we don't -- as we said, we've hired quite well. We have 33 that we've signed on and 50 in advanced discussions. We've had some leavers. As you know, we're very diligent about low performer management.

So we continue to do that at pace across the board. And I would not say that any leavers have anything to do with the RM comp model, which has been extremely well received by our relationship managers, but I'll let Stefan add some comments on that.

Thanks, Evie. Yes, Nick, the feedback from RMs on the new compensation framework has been positive. I mean, just to reiterate what we did, the purpose of the new RM framework is to align RM's incentive with the interest of the bank and hence, our shareholders. Give them an incentive to stay in our core wealth management lane, manage tail risk and at the same time, pay for performance.

And just to maybe make it clear what I mean with pay for performance. What we did is we changed the way we define performance in a way that aligns with you, our shareholders. So, so far, there has been no negative reaction and has not been a driver of departure.

We now have a question from the line of Nicolas Payen from Kepler Cheuvreux.

I have two, please. The first one would be on RMs. If you could give us a bit of color regarding where you are hiring the most, notably the breakdown between EMEA and Asia, please? And the second one would be on investments because if I remember well, you mentioned that 2026 was an investment year. And I just wanted to see what kind of pace should we expect for 2026 throughout the year? Should we expect some lumpiness in the investments after the first 4 months?

Thanks for the question. We are hiring across the board. And I would say the obvious one where we haven't hired that much is the Middle East as clearly RMs are focusing on other things for now. Otherwise, we have been successful hiring across the board. And I would highlight, in particular, our focus on beefing up our RM population in Switzerland. And we see some great talent there in the market.

And on the investment side, Nicolas, I wouldn't talk about any lumpiness in our investment cycle. You know that we are investing in our core infrastructure in Switzerland. That's a multiyear program. And of course, we continue to invest in other areas of technology to augment our relationship managers as well as investments in...

Ladies and gentlemen, please hold the line. The connection with the speakers has been lost. Mr. Payen, your line is open. You may go ahead with your questions.

I think it was. just answered.

[Operator Instructions] The next question comes from the line of Giulia Miotto from Morgan Stanley.

I have two. So first of all, I'm going to go back on the net new money. How long do you envisage the revised risk and compliance framework to continue to be a headwind? Because I would think by now, basically, I would guess user should have reviewed all the client book and this should come to an end. I hear that you said net new money in '26 is perhaps slightly below '25, so below 2.9%.

But I was wondering if we can basically see the end of this by midyear or if you think it continues until the end of the year. And then on cost-income. So I was surprised that you basically reiterated the same guidance as you gave in February because the first 4 months has been incredibly strong. And so unless -- and the exit rate on gross margin is 81 bps. So unless we see an increase in costs, and meaningful increase in cost, cost-income should be better. What am I missing?

Giulia, let me start with the second question. So indeed, on the cost-to-income ratio, we haven't seen too much of cost to achieve in the first 4 months of the year in terms of the CHF 130 million efficiency program. So we expect some cost increase in the second half of the year, and that also informs our guidance at 80 basis points -- sorry, at an 80 basis points gross margin input.

The other point also to take note of is we did assume that this guidance was with a spot CHF 0.8 dollar exchange rate, and we've been slightly stronger than in terms of the Swiss franc versus the dollar for the first 4 months of the year, and we don't expect that the Swiss franc is going to weaken in the next few months.

And Giulia, on your questions on the derisking and how long it takes, I mean, just to reiterate, this is an ongoing exercise. And as you pointed out, in the current year, it's somewhat more than what we expected.

As we mentioned before, you should expect a gradual uptick in net new money over time. But being now some months into 2026, it's too early to give you further guidance. I just want to reiterate again that we are highly confident that we can reach our net new money target of 4% to 5% by 2028.

And we are very focused on generating sustainable, high-quality growth in net new money and of course, also in revenues. And as you know, we are laser-focused on improving organic growth. We launched this initiative at the beginning of the year, and we are very focused on increasing our product and service capabilities, have a sharper client targeting and really enable the front line to deliver with initiatives such as ease of doing business.

And of course Sorry, Giulia, just another component, of course, is also that we really want to empower our seasoned RMs to be an additional growth engine, complementing the hiring of experienced RMs, and we start to see some progress on that.

We now have a question from the line of Jeremy Sigee from BNP.

I wanted to carry on the same discussion actually about adviser hires and net new money. So apologies for being repetitive. But the -- on the advisers, I think at the full year in February or January, February, you were telling us that you did expect the attrition that you've seen, but net-net, a small positive increase in advisers over the full year. Here, you've obviously seen a slight decrease in net terms. But is the expectation for a small positive increase in advisers over the full year? Is that still intact?

And then secondly, just again, circling back on the net new money, now expecting slightly less than 2025. I think at full year, you were expecting a slight improvement versus 2025. I just wondered how you'd characterize what's turning out differently or what's proving a bit more difficult than you were hoping?

Jeremy, so thanks for the questions. On the adviser hires, we still expect a small net positive increase for the end of the year. That remains unchanged. The only thing that sort of changed is the situation in the Middle East. So certain discussions, advanced discussions we had with RMs in that region have for obvious reasons, stalled. But nonetheless, we're still quite confident that we'll see a small net increase for -- by the end of the year.

And with respect to what's changed, well, what's changed was the slow start in the first 4 months of the year in terms of net new money, which makes us adjust slightly our guidance.

And actually, just since you mentioned Middle East, I mean, how do you view the net impact of that in net new money terms? I mean, obviously, it's a massive disruption, but do you get a kind of flight to safety benefit as well from that going on?

Yes. Look, just to remind everyone, our AUM exposure in the Middle East is about 11%. It's unchanged from the end of 2025. And what I would say is that the client segment that we are operating in, which is the wealthiest family, they have booked their assets offshore since a long time, Singapore and Switzerland being the most popular booking centers.

So we actually don't see this shift from onshore to offshore. I mean also to remind you, we actually don't have a booking center in the Middle East. And so I think what has been talked about in the press, it might be more something in the lower segments.

We did see some flows, but maybe not as much as you would have expected because, of course, these families also were focusing on their personal situations, the operating business and other things. I would say midterm, however, this has really highlighted the value of a stable offshore booking center. So I think this was a period where people reflected again on the value of having their money in places like Switzerland with safety and stability.

The next question comes from the line of Stefan Stalmann from Autonomous Research.

My first question is going back to net new assets and -- sorry, net new money and the derisking effect. Are you actively exiting existing clients or existing client groups? Or are you merely tightening the onboarding criteria for new clients?

And the second question I wanted to ask also on net new money. You suggested Evie, that most of the net new money is still coming from RMs on business plans. So effectively very little net new money from the seasoned RMs. And I find it a little surprising given that the new compensation system is now in place and well supported from what you say. Why is it that there's no movement on the organic growth of the seasoned portfolios?

Stefan, let me start with the second question. So I said most of the net new money came from RMs and business case, and we're very pleased with the developments on that front with the business case achievement rate of 68%. The split was around 70-30. So 70% from RMs -- 70% from our RMs on business case and 30% from existing RMs. So I didn't mean to underplay the contribution of existing RMs. That being said, over the long term, we want to increase that percentage, and Stefan has talked extensively about all the initiatives underway in order to get our seasoned RMs to a place where they're very systematic contributors to our growth.

And to your question around the clients, of course, we apply our group risk and compliance framework to both existing and new clients. So both are affected.

We now have a question from the line of Lam Hubert from Bank of America.

It's Hubert Lam from Bank of America. I've got 2 questions. Firstly -- well, firstly, I'd like to thank Evie for all our hard work over the last few years. Good luck in the future. Now on to the questions. Firstly, on flows, Evie, when you talked about the geographic mix and where the flows are mainly coming from, you mentioned Western Europe and Switzerland, but you did mention Asia.

Can you talk about what the flows you're seeing coming from Asia and the competition you're seeing there as a lot of the competitors have reported good inflows in the region. Second question is if you can give us an update on progress on the Swiss IT platform. How is that coming along and the timing for that in terms of progress?

Thank you, Hubert, for the question. Maybe I'll start with the first one. And of course, when we talk about Asia, most people talk about the IPO boom we have seen in Hong Kong last summer and I would just remind you of how the life cycle of IPO proceeds work.

Obviously, there's an IPO, then there's a lockup that has to expire, then there's a single stock risk management transaction. The clients get cash and then they do the deployment. And naturally, we are most interested in the fifth leg when clients actually put money to work and we can develop a wealth management relationship and maybe universal banks that are looking for cash to finance their other banking activities like commercial banking, they're going to be a little bit earlier in that game, but I think we are very well positioned to take advantage of that.

And I would say, right now, as you know, with markets at all-time high, to deploy cash into -- particularly into the equities market is obviously something that some clients are not keen to do. And therefore, maybe we don't see the deployment happen as fast as you would have expected otherwise.

And Hubert, this is Evie. Thanks a lot. It's also been a pleasure to work with you over the last few years. On the IT platform project, I think what we can say is that we're making decent progress, and we're on track. I'm sure we will be updating you in coming quarters.

[Operator Instructions] We have a follow-up question from the line of Ben Caven-Roberts from Goldman Sachs International.

Just a technical follow-up on the cost-income ratio guidance for 2026 that we were just talking about. Not to put too fine a point on it, but when you mentioned the 80 bps gross margin input assumed, do you now mean for the full year or for the remainder of the year at this point? Because even if you assume 80 bps for the rest of this year, mechanically, given the 4-month print, that would imply a full year run rate about 3 bps higher versus the 80, I think you mentioned a few months back, plus, of course, AUM is tracking a bit higher year-to-date. I recognize dollar-Franc, as you say, is a bit weaker now than the 0.8%. But outside of that, does that mean that costs are now tracking a bit higher than what you had expected previously? Or there's just a bit of conservatism in the way you're talking about this?

Thanks, Ben. Thanks for putting pressure on me. No, look, the 80 basis points is for full year. I think the implication from my comments is we do expect a little bit of cost pressure coming in the second half of the year.

We now have a question from the line of Daniel Regli from ZKB.

I must admit that I've missed you the technical reasons part of the Q&A. So if anything was already answered, just skip it. The first question is on net new money. And can you quantify the kind of risk and compliance impact on the net new money number in the first 4 months in '26?

And the second question is, do you have any comments on the ongoing FINMA enforcement and the time line? Is there any kind of change or update on this one?

We indeed actually already talked a bunch about net new money and what the impact was on the derisking. On the question around FINMA, as we said upfront, there's no update, but we feel that we have a very constructive and proactive relationship, and I'm very hopefully we're going to bring this to a conclusion. But the timing, of course, as you know, is the timing of the regulator. It's not up to us to determine when that's going to happen.

Okay. But you don't have any kind of indication that this will be in reasonable time?

No, we don't. We're not going to speculate what FINMA's time line is.

[Operator Instructions] We have a follow-up question from the line of Anke Reingen from RBC.

Apologies for following up. I just wanted to ask about the 80 basis points for the full year. Is that sort of like your guidance for the gross margin where you think you land? Or is that the input factor for your cost-income ratio guidance? And then just on the net new money, you reiterate your high confidence on the 4% to 5% in 2028. What is sort of like the key -- what does give you the confidence?

I'll take the first one, Anke. Thank you. It is indeed an input factor. It's not a guidance. We don't give guidance for gross margin, as you know, because we're reasonably confident about the trajectory of the recurring component of the margin.

We are also reasonably comfortable with the interest-driven component of the margin, but the wildcard also always is the activity-driven component. So it's indeed an input factor and not a guidance. Stefan?

Yes. And I'm happy to take your question why we're so confident on the 2028 4% to 5% net new money target. As we've talked to you before, we have many initiatives in place that we are well on track on. I mean, on the product and service capabilities, we are doubling down on strong capabilities such as discretionary mandates and structured products.

We're selectively expanding other activities, namely in alternatives on the sharper client targeting, we're strengthening our key geographies and dedicated client positions -- propositions. And in terms of front enablement, I would highlight that we spent a lot of time streamlining our processes [indiscernible] sales management to give RMs more time to serve clients, everything that we're doing under the ease of doing business umbrella.

There's, of course, also some benefits from AI coming in, for example, on the compliance side, determining source of wealth and other things. And I think all these initiatives are designed to accelerate our growth and really making our seasoned RMs to deliver organic growth.

And maybe just to mention an additional point on the RM compensation. One key change we made is that we're really incentivizing people to deliver growth and deliver share of wallet. And so I think we have put both the infrastructure in place for our RMs to have time to go out and find new business. At the same time, they have a financial incentive to do that.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Bollinger for any closing remarks.

Thank you all for your questions and for attending this morning. The strong performance we delivered in the first 4 months of the year is a further milestone in our ongoing strategic transformation.

I look ahead with confidence. We have the right business model and the right strategy. Independence at scale resonates strongly with our clients. And this, combined with the disciplined execution of our strategy with a clear focus on tight risk management and organic growth positions us well to achieve our midterm targets. We look forward to speaking to you again at our half year results on the 21st of July. Thank you. Have a great day, and have a nice weekend.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Julius Bär 2025 Full Year Results Presentation for media and analysts. I am Sandra, the Chorus Call operator.

[Operator Instructions] The conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Alexander van Leeuwen, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. Welcome to the Julius Bär Full Year Results Call. I am Alex van Leeuwen, Head of Investor Relations. We are joined today by our CEO, Stefan Bollinger and CFO, Evie Kostakis. Today, in addition to the financial results presented by Evie, Stefan will also provide an update on the execution of our strategy as promised back in June.

Before starting, I would like to flag the important information provided on Slide 2 of the presentation. It's now my pleasure to hand over to Stefan for his introductory remarks.

Thank you, Alex, and good morning, everyone. Thank you for dialing in for this full year results call and update on our strategy execution. Let me start by giving you my take on our 2025 results.

Overall, 2025 was a good year with a strong underlying financial performance. It was also an important transition year for us as we redefined our strategy and started our transformation journey. And with all our efforts so far, I'm pleased that we are back to solid foundations with a positive execution momentum to deliver our midterm targets.

First, a few comments on business performance. We're happy to report record high assets under management of more than CHF 520 billion, underpinned by solid net new money of CHF 14.4 billion, and that despite our ongoing derisking efforts. This further solidifies our position as the largest independent wealth manager internationally.

On an underlying basis, operating income was up 6%, while costs were up only 1%, resulting in a 17% increase in pretax profit. Our underlying cost income ratio improved by a full 3 percentage points to 67.6%. This resulted in positive operating leverage for the first time since 2021. We also further bolstered our capital position with a CET1 capital ratio of 17.4%.

Second, in 2025, we decisively addressed legacy issues and strengthened our foundations. We completed the credit review, upgraded our governance and renewed our leadership team. We also significantly simplified the organization, enhanced accountabilities and promoted disciplined entrepreneurship.

And third, we successfully launched our new strategy and created great momentum in executing it. We empowered the organization front to back to fully focus on profitable growth, and we continue to improve operational efficiencies and advance on our technology priorities. We achieved what we planned for the year, and we are ready for the transformation ahead.

I'll give you more color on the key milestones and the way forward a little later. And now I'd like to hand over to Evie for more details on the financials.

Thank you, Stefan, and good morning, everyone. As usual, before discussing the results, I'll start on Page 6 with an overview of some of the key market developments in 2025 that provide the backdrop and context to our results.

In Swiss franc terms, despite the tariff shock in April, stock and bond markets were up by mid-single-digit percentages with the Swiss market outperforming global indices. And in terms of FX moves, I would highlight that the dollar weakened by 13% versus Swiss franc.

We saw further rate cuts across the board with the Swiss National Bank reducing rates in the first half by another 50 basis points to 0 and the European Central Bank reducing the main refi rate by a further 100 basis points. The U.S. Fed kept its rates steadfastly unchanged in the first half, before reducing in three 25 basis point steps in the second half.

The third set of graphs on the bottom left of the page shows that the shape of the key yield curves continued to normalize for European and Swiss rates throughout the year and the 1- to 5-year belly of the U.S. yield curve started to flatten again in the second half.

Finally, stock market volatility saw a massive spike in early April after Liberation Day in the United States, but then swiftly normalized down to lower levels again during most of the rest of the year.

Moving on to Slide 7, which shows assets under management up 5% to CHF 521 billion after having been down 3% in the first half as the positive effects of the CHF 14.4 billion haul in net new money and the CHF 57 billion uplift in markets were partly offset by the steep weakening of the dollar to the tune of CHF 38 billion as well as the sale and deconsolidation of our onshore Brazilian business in H1.

Monthly average AUM, important for the margin calculations, grew by 7% year-on-year to CHF 499 billion, and total client assets, including assets under custody, were up 4% to CHF 614 billion.

Proceeding to net new money on Slide 8. Against the backdrop of continued derisking of the client book, the net new money reached CHF 14.4 billion by year-end or just shy of 3% annualized, essentially in line with our guidance at the start of the year.

In terms of regional contributions from key markets based on client domicile, I would highlight Asia, especially our key markets, Hong Kong, India, Singapore and Thailand, Western Europe with a strong contribution from the U.K. and Ireland, Germany and Iberia, and the Middle East, particularly the UAE.

After releveraging came to a halt in the first half, there was an initial amount of releveraging in H2, adding 0.6 percentage points to the net new money pace in H2 and 0.3% for the full year. This marks the first year of client leverage coming back in earnest after 2021 and is consistent with the normalization of the shape of the yield curves we saw in the market backdrop slide.

So now let's go to revenues on Slide 9. As a reminder, as of 2025, adjusted operating income now excludes M&A-related impacts, the same way we adjust on the expense side. On that adjusted basis, operating income was unchanged year-on-year at CHF 3.861 billion.

However, as the comprehensive credit review led to a significant increase in loan loss allowances in 2025, excluding the resulting net credit losses from operating income would result in a more meaningful overview of the underlying revenue development.

As a reminder, we announced a CHF 130 million increase in gross loan loss allowances in May, a further CHF 149 million in November for a total of CHF 279 million which after taking into account net recoveries at the end of the year was reduced to net credit losses for the year of CHF 213 million. If we strip out those CHF 213 million negative revenues in 2025, then the underlying operating income showed a year-on-year increase of 6% to almost CHF 4.073 billion.

Looking at the revenue composition and starting from the largest contributor to our revenue base, we see that net commission and fee income was up 5% year-on-year to CHF 2.314 billion, largely driven by the year-on-year increase in average AUM.

Moving beyond commission and fee income, we saw a CHF 252 million decline in net interest income being more than compensated for by CHF 326 million increase in net income from financial instruments or trading income.

NII was strongly impacted by the year-on-year decrease in interest rates by a mix shift to lower interest rate Swiss franc-denominated loans and slightly smaller treasury bond portfolio, a weaker U.S. dollar and to a lesser extent, the further shrinking of the private debt portfolio, which is now virtually completely wound down.

As a result, while deposit expense fell substantially by 22%, on the asset side, interest income on the loan portfolio decreased by 29% and interest income from the treasury portfolio fell by 11%, resulting in NII of CHF 125 million.

Against that, net income from financial instruments at fair value through profit and loss improved by 25% to CHF 1.608 billion, essentially all on the back of a 51% rise in treasury swap income or quasi NII as we like to refer to it. This was the result of a 28% year-on-year increase in average swap volumes to CHF 27 billion as well as higher average spreads.

While income related to structured products and FX trading initially grew in the first 4 months of 2025, especially during the market volatility spike following the liberation Day announcement in early April, it then normalized to lower levels in the remainder of the year.

On Slide 10, we regrouped the IFRS revenue lines in an alternative way with the aim to better reflect the three key business drivers, i.e., recurring income, interest-driven income and activity-driven income. For the definitions on how we derive this alternative split from the IFRS view, please refer to the appendix, and I note that the treasury swap income figures we use are based on management accounts.

What this alternative view shows clearly is how the CHF 252 million year-on-year decline in NII has indeed been more than compensated by CHF 358 million higher treasury swap income. In other words, what we call interest-driven income, which is the sum of accounting NII and treasury swap income, actually increased year-on-year by CHF 106 million or 10% to almost CHF 1.2 billion. Recurring income grew by 5% to over CHF 1.8 billion, while activity-driven income was unchanged at just over CHF 1 billion.

On Slide 11, we show the same, but in gross margin terms. The slight 1 basis point decrease in underlying gross margin to 82 basis points is essentially the result of a small, almost 1 basis point increase in the interest-driven gross margin to 24 basis points.

This was more than offset by a small, slightly more than 1 basis point decrease in the activity-driven gross margin to 21 basis points. The recurring gross margin remained at 37 basis points on a rounded basis.

The exit gross margin in the last 2 months was 77 basis points, of which just over 37 basis points from recurring, slightly over 24 basis points from interest-driven income and around 15 basis points from activity-driven income, as client activity slowed down towards the end of the year from the more elevated levels seen in September and October.

By the way, in the appendix, you can find an overview of the half year gross margin development, including on the basis of the IFRS revenue split.

Now let's move on to operating expenses on Slide 12. While, as I showed earlier, underlying revenues were up 6% year-on-year, costs were up only 1% to CHF 2.808 billion, mainly driven by somewhat higher personnel expenses being largely offset by a decline in general expenses, partly as a result of internalizations of 184 formerly external staff.

Costs include CHF 40 million cost-to-achieve related to this year's cost saving program, of which CHF 31 million in personnel restructuring costs compared to CHF 24 million included a year ago. Personnel costs increased by 4% to CHF 1.848 billion, in part due to a rise in incentive and performance-related costs, a small increase in pension fund-related expenses and the slightly higher severance payments.

General expenses came down by 7% to CHF 714 million, while legal provisions and losses increased by CHF 12 million to CHF 56 million. Excluding provisions and losses, general expenses decreased by 9% to CHF 658 million, mainly on the back of stringent vendor management, leading to a reduction in consulting and legal fees and lower spend on external staff.

Depreciation and amortization went up by 4% to CHF 246 million, following the rise in capitalized IT-related investments in recent years. As a result, the expense margin improved by 4 basis points year-on-year to 55 basis points and the underlying cost-to-income ratio by 3 percentage points to 68%. In other words, a satisfactory return to driving operating leverage in the business.

As usual, we also show the approximate split of expenses by currency, and it is encouraging to see that despite the significant year-on-year strengthening of the Swiss franc, the share of Swiss franc denominated cost has actually come down year-over-year. The share is now 55%, whereas a year ago, it was 56%.

The sensitivity to changes in the key FX rates is largely unchanged to what we showed last June. A 10% weakening of the dollar with ceteris paribus and not including any potential mitigating actions, impact our cost-to-income ratio by approximately 2 percentage points.

On Slide 13, we provide some statistics on our now completed 2025 cost-saving program. As you may recall, last February, we announced we would extend the pre-existing program and aim to save another CHF 110 million gross in 2025.

In the end, we overachieved on this by CHF 20 million and delivered CHF 130 million of gross cost savings on a run rate basis by the end of 2025, of which CHF 60 million were already reflected in the full year results. Furthermore, initially, we had budgeted around CHF 65 million of cost to achieve, whereas ultimately, we were able to limit that number down to CHF 40 million.

And as a reminder, the main measures applied were the simplification of the organizational structure, the optimization of the front operating model as well as a significant reduction of non-personnel spend.

And finally, just to reconfirm that in the strategy update, we also announced further structural efficiency improvements also for CHF 130 million with a phased implementation by 2028 and against estimated cost-to-achieve of around CHF 65 million. The incremental P&L benefit of these further measures will be back-end loaded as the cost-to-achieve will mostly be booked in '26 and '27 and the improvements realized mostly in '28.

Slide 14 summarizes the profit development. IFRS net profit was impacted by the nonrecurring release of tax provisions in 2024, the increase in loan loss allowances following the completion of the credit review in '25 and the mostly noncash impact from the sale of Julius Bär Brazil earlier in 2025.

But on an underlying basis, i.e., excluding M&A-related items and the net credit losses, it is pleasing to see meaningfully positive operating jaws with operating income up 6% and expenses up 1%, resulting in 17% year-on-year increase in underlying pretax profit to CHF 1.27 billion, and the underlying pretax margin improving by 2 basis points to 25 basis points.

As the tax rate normalized from 2.9 percentage points in 2024 to 17.2%, underlying net profit was just CHF 1 million higher at CHF 1.05 billion. Due to a very significant buildup in capital, as we will see a few slides later, return on CET1 on this basis was 28% compared to 32% a year ago. Our forward tax guidance for the new strategic cycle is unchanged at between 18% and 20% and takes into account the currently expected impact of the implementation of the OECD minimum tax rate in different jurisdictions.

On to the balance sheet on the next slide. Our balance sheet remains highly liquid with a loan-to-deposit ratio of 62% and one of the highest liquidity coverage ratios in Europe at 261%. As a large portion of the balance sheet are denominated in dollars, the year-to-date weakening of the dollar against the Swiss franc had a meaningful impact on how those balance sheet items developed in Swiss franc terms.

For example, the loan book increased by 1% or CHF 0.5 billion to CHF 42.1 billion. But on an FX-neutral basis, the increase in loans was 5% or plus CHF 2.3 billion. And deposits declined by 3%, minus CHF 1.9 billion to CHF 66.8 billion. But on an FX-neutral basis, deposits actually increased by 3% or plus CHF 2 billion.

Turning to the capital development on Slide 16. The Basel III final standard was fully implemented in Switzerland as of the 2025 financial year. And with this full implementation, the Swiss framework went significantly further than the ones currently applicable in, for example, the Eurozone, the United Kingdom and the United States.

In the graph on this slide, we show for end of 2024, the CET1 capital ratio pro forma for Basel III final at 14.2%. And then the development from there to the 17.4% print at the end of 2025.

CET1 capital grew by 10% to CHF 3.9 billion as the combined benefits of net profit generation and the continued OCI pull-to-par effect more than offset the impact of the dividend accrual.

At the same time, risk-weighted assets decreased by 10% to CHF 22.7 billion, mainly on lower operational risk positions as the 2015 U.S. case dropped out of the calculation as well as lower credit risk positions, partly due to a decrease in the treasury portfolio and partly as a result of a further wind-down of the private debt loan book, which typically carries a risk weighting of 100%.

So as a result, the CET1 capital ratio improved on a like-for-like basis by around 320 basis points to 17.4%, almost fully restoring capital levels to pre-Basel III final levels in the space of just 12 months. The risk density was 21% at the end of 2025. However, our risk density guidance for the new cycle is unchanged from the 22% to 24% range we gave in the June strategy update.

In line with our dividend policy, where the dividend is the higher 50% of adjusted net profit or last year's dividend per share, the proposed dividend is unchanged at CHF 2.6 per share.

And as we also discussed extensively last year, any additional capital distribution in the form of future buybacks remain subject to regulatory approvals from our home regulator, FINMA. We continue to have an active and constructive dialogue with them, but it is ultimately the regulators' time line.

Finally, on Slide 17, a quick review of the development in the Tier 1 leverage ratio. As a result of the CET1 capital development and the net impact of the CHF 350 million AT1 call in June, and the $400 million A Tier 1 issuance in February, Tier 1 capital increased by 4% to CHF 5.5 billion.

The leverage exposure increased by 3% to CHF 111 billion, basically in line with balance sheet growth. As a result, the Tier 1 leverage ratio was essentially unchanged at 4.9%, comfortably above the regulatory floor of 3%.

With that, it is my pleasure to hand the microphone back to Stefan for an update on the strategy execution.

Thank you, Evie. Let me start with a few comments on our financial results in the context of our 2026, '28 midterm targets.

First, on net new money. Overall, there was positive momentum last year across all our regions and client segments. We aim to gradually improve the pace to 4% to 5% per annum by 2028.

Second, on cost income ratio. We have made excellent progress last year with an improvement of over 300 basis points to 67.6%. We're starting our new strategic cycle with front-loaded investments for backloaded returns and remain committed to achieving a cost income ratio of below 67% by 2028.

And third, on capital. We significantly improved our CET1 ratio to 17.4%. And given the capital generative nature of our business model, we reiterate our midterm target of a return on CET1 of above 30% with a 14% underpin.

Overall, last year's results are a testament to the resilience of our franchise, the trust of our clients and the commitment of our people. This sets us well on course to achieve our midterm targets.

Let's now look at 2025 in the context of our overall transformation journey. It was a crucial transition year for us. The focus was twofold. On one hand, to address pressure points and strengthen our foundations, and on the other hand, to define and start executing our new strategy. As I said in my introduction, we delivered on both of those objectives.

To give you a few highlights. First, on strengthening foundations, we made significant progress in derisking. As part of that, we defined a new group risk appetite framework. We also upgraded our risk organization and carved out separate compliance function.

And last but not least, we completed our credit book review, which allows us to turn the page and fully focus on our business. We enhanced our leadership structure with a smaller executive Board and the newly introduced global wealth management committee, including key leadership appointments.

We also reinforced accountability and ownership across the bank by enhancing the first and second line of defense, introducing a new front operating model and the new compensation framework.

Now on to strategy execution. We sharpened our high net worth and ultra high net worth client proposition, and we are launching a comprehensive growth agenda. More to come in a minute. On the cost and efficiency front, we implemented our cost program and overachieved the target set for 2025.

And on technology, we launched the IT infrastructure renewal project in Switzerland and delivered on time our new global finance platform.

Now looking ahead, let's talk about our new strategic cycle. This is what I believe matters most. It comes down to a few simple transformational imperatives. First, on profitable growth. It's about reviving our organic growth engine to our full potential.

Second, on cost, the imperative is to instill everyday cost consciousness in everything we do. Third, on risk and compliance. It comes down to disciplined entrepreneurship fully in line with our core wealth management lane.

On the technology front, it's about scaling and harmonizing our infrastructure to deliver the best digital experiences. And finally, it is critical to drive our culture transformation and promote performance and ownership.

Over the last few months, we've been talking a lot about cost and risk. Today, I want to talk about growth. We have a comprehensive agenda which cover all the relevant dimensions: productivity, client propositions, product access and geographic footprint. And everyone has a role to play, regions, products and group functions.

With everything we did last year, we have set the stage to execute on it. There are three main components driving that execution as we enter our new strategic cycle. First, it's about front productivity and growth mindset. We continue to operationalize our new front operating model, including processes and incentives.

Under the umbrella of ease of doing business, we are streamlining processes supported by digital tools for relationship managers. A good example is the rollout of our new wealth navigator. And on the talent front, we're doubling down on internal mobility and career development programs.

We are scaling up our associate relationship manager program and completed our first ever summer internship program. Second, on regional and product priorities, starting with our home market, Switzerland, we see significant further potential.

It comes down to leveraging all the great capabilities and expertise we have on the ground and developing new client solutions tailored to local needs. Since the beginning of the year, we have strong leadership in place with Marc Blunier and Alain Kruger.

On Region Asia, our second home market. This year marks the 20th anniversary of our local presence. We have a very strong position there and continue to grow, especially with ultra high net worth clients through our hubs in Singapore and Hong Kong.

We are well positioned to also capture opportunities arising from a changing geopolitical landscape by leveraging our global scale, independence and Swiss heritage. An example is our Lat Am business, which delivered positive net new money for the first time in several years. And with the arrival of Antonio Murga to lead LatAm, we're looking forward to further grow this franchise.

And now on products. Our new Global Products & Solutions unit as well as our independent CIO office are now fully operational and already creating tangible impact. We see strong traction on structured products with a significant increase in volumes. We're also expanding alternative investments and high-end advisory and discretionary mandates.

Third, to deliver on our growth agenda, we need the regions, products and group functions to come together. To do so, we are launching a 3-year dedicated revenue and growth program to support execution and ensure focus on organic growth.

We can't talk about growth without talking about clients. What we see is renewed energy, strong momentum and continuous engagement with our clients. It is clear when the regions, products and functions come together, we unlock the power of our franchise. I've seen this firsthand having personally met with more than 1,000 clients since I joined.

In summary, our transformation is about striking the right balance across growth, cost and risk. On cost, we will further optimize our front-to-back operating model and simplify our processes and IT landscape. We'll also continue embedding cost consciousness and ownership in the day-to-day business.

I'm convinced that our designated Chief Operating Officer, Jean Nabaa, with his track record in driving operational excellence will bring additional momentum to our efforts.

On risk. We are just about to complete the rollout of our bank-wide culture and conduct awareness program. And our designated Chief Compliance Officer, Victoria McLean, will focus on operationalizing our new compliance function.

Before we go into Q&A, let me reiterate my key takeaways. We have delivered a strong underlying performance, a testament to the strength of our franchise and overall transformation momentum.

2025 was a crucial transition year for us. We addressed legacy issues, strengthened our foundations and mobilized the organization around the execution of our strategy. We have a clear growth agenda focused on reviving our organic growth engine. We have a plan, we have momentum, and we are on track to achieving our midterm targets.

With that, let's transition to Q&A.

[Operator Instructions] Our first question comes from Amit Ranjan from JPMorgan.

The first one is on the dedicated 3-year revenue and growth program that you talked about, what are some of the key metrics that you are looking here to measure progress? And if you could also talk about the phasing of this? Is it mostly a 2028 measurement? Or there are some guideposts in between?

And in that context, if you could please also talk about your net new money expectations for 2026 and adviser hiring expectations after the decline that we have seen in 2025?

Amit, thanks for the questions. Let me start with the second batch of questions on net new money and RM hiring. So first, on net new money. Last year, despite derisking and the year of, I would call it, transition, we were able to bring in CHF 14.4 billion of net new money or 2.9% on an annualized basis, pretty close to what we thought we would do and what we said we would do at the beginning of the year at 3%.

When I look at 2026, we aim to do a bit better than that, but please do not forget that our midterm targets stipulate that we will gradually improve to the level of more than 4% by 2028.

And then on the RM hiring front, last year, we hired 120 RMs on a gross basis. We intentionally shifted some of the hiring into early 2026 to align with both bonus cycles and onboarding readiness. You're right in that we did have a decrease in the net number of RMs. That's due to the sale of Brazil, the intensification of low performer management and natural attrition, so the net number ended up lower.

However, we are planning to hire more than 150 RMs this year. And hiring momentum has picked up. In January, we saw 16 new RMs join with another 8 hires already signed. And as I said, we have the ambition to hire 150 plus this year, focused on our key strategic markets and always subject to strict quality criteria.

I think we're quite confident in our ability to attract top talent. We've shown it again and again. We have a strong employer brand. We're dedicated to RM enablement, and I think people appreciate the performance-driven culture.

The next question comes from Benjamin Caven-Roberts from Goldman Sachs.

Just actually one for me, please, on the cost income. If you could talk a little about how you expect the cost income to develop into 2026. You mentioned the fact that there is the CHF 130 million of savings targeted with cost-to-achieve mostly front-loaded and savings largely back-end loaded. But I just wanted to check how should we think about progress on cost and efficiency there.

Good question, Ben, thank you, and good morning for the question. In the second -- I think we didn't answer Amit's second question. So Stefan, over to you.

Yes. Amit, the revenue and growth program specifically addresses the organic growth dimension and provides a structural central framework for systematic sales management, pricing and product adoption, think discretion mandates, high-end advisory mandate, structured products, alternatives funds lending and so forth.

If you think about how this is then going to play out, an obvious example is our existing seasoned RMs and giving them the tools to deliver growth. This will be a combination with the things I mentioned around products, but also ease of doing business is an important component of that.

And then going back to your question, what I would say is that based on an 80 basis point gross margin as an input factor and assuming the other key input factors provided at the strategy update in June, including reasonably normal market performance, AUM and no big change to the initial input factor of a dollar exchange rate at spot rate, we would from today's perspective expect to land at levels slightly higher than 2025 underlying, on track towards our target of less than 67% by 2028.

The non-steerable cost growth as shown in the cost-to-income ratio walk for the '26 to '28 cycle on the strategy update is more front loaded. You might recall that was around 6 percentage points.

The benefits of the further efficiency improvement program will be more back ended in 2028, plus the cost-to-achieve needed to realize those improvements will be booked mostly in '26 and '27 and then fall away in '28. And therefore, the resulting net benefits will normally only start to come through in '27 and more fully, I would say, in '28.

So in short, in the near term, overall, a slight upward pressure on the cost-to-income ratio and then a clear drop towards 67% or lower in 2028. And as a reminder, again, this is based on an input factor of 80 basis points gross margin and a USD 0.80 exchange rate against the Swiss franc, and we're already about 4% weaker than that right now.

The next question comes from Anke Reingen from RBC.

Just one, please. Just on the buyback. Basically, your commentary says it's for FINMA to decide on the share buyback. Sorry to be wanting to be precise on the words, but does that basically mean you requested for the buyback and you're just waiting for FINMA to confirm?

And then secondly, on client releveraging, so you saw a bit more pickup in releveraging here. Do you think that's something that's going to continue into the start of the year, obviously, a function of markets? Or is it like not something we can extrapolate?

Thanks, Anke. On the share buyback question, you may recall that in November, we talked about some conditions still to have to be in place, and we pointed out things like the Chief Compliance Officer only arriving at the end of this month. So we're not yet in a position to ask for a share buyback.

And on the second question, Anke, we were pleased to see releveraging come back in earnest to the tune of CHF 1.7 billion in 2025. This was -- we saw some releveraging, particularly in the low-yielding Swiss franc, including from clients in emerging markets and Asia, but also on the euro side as well, less on the dollar where rates remain still quite high.

We don't know now with the appointment of the new Governor for the Federal Reserve, whether rates will come down faster on the U.S. dollar than we have expected. But if we continue to see yield curves normalize, and if we continue to see relatively benign market action, then I don't see any reason why we shouldn't see a continuation of releveraging. But just as a reminder, in terms of our midterm planning, we have factored in stable loan penetration at current levels of around 8%.

The next question comes from Hubert Lam from Bank of America.

I've got three questions. Firstly, on RMs, I saw that you gave us a guidance on the gross RM hires. But can you talk about RM attrition? Are you seeing more turnover there? Are there -- has there been any unwanted departures and you should expect more to come this year as -- once bonuses are paid and new incentive schemes are put in place?

Second question is, can you give us also an update on the timing of the Swiss IT project, the time line, implementation and the cost around that? And lastly, I have a question around flows and derisking. Evie, I know you gave guidance for this year around flows, but does that imply also some further client derisking? Or is that process largely over last year?

Hubert, thanks for the questions. Let me start with the RMs. I mean we did have a net decrease in RMs, as I mentioned in Amit -- to Amit's question earlier on. That was, to some extent, a result of the intensification of local management that was part of the cost program. We also had some regular attrition as we do on a yearly basis. We had the sale of Brazil as well, where 28 RMs left the platform.

So I would say that last year was indeed a year of decline in RMs. But in our planning, we are factoring in a slight increase of RMs year-on-year from '26 to '28 going forward, including hiring about 150-plus RMs every year.

On the IT project, time line, implementation and costs, as Stefan mentioned, we've embarked on this journey to replace our core infrastructure in Switzerland. We hope to do this in a time-boxed approach, so in the next 3 years, recognizing that there's always risks to delays and all the costs associated with that core infrastructure renewal are embedded in our cost-to-income ratio targets for 2028.

And then I think your other question was on derisking. I mean, client risk management, as we have said in the past, is an ongoing exercise in wealth management, particularly as the geopolitical landscape evolves. So there will always be some client risk management that we do. And indeed, in the last couple of years, we've done more than you would do on a usual basis. As I said, we aim to do better than last year in terms of net new money this year and to gradually improve our net new money growth potential to 4% to 5% by 2028.

The next question comes from Benjamin Goy from Deutsche Bank.

Two questions please from my side. So first on Asia, trends look actually very positive. So maybe you can comment a bit specifically on this important region for you. And then secondly, your cost/income ratio, as you mentioned, made significant progress in '25, and it was also better than expected. Clearly, there were some headwinds like currency. Nevertheless, just trying to understand where did you overperform versus initial expectations.

I'll take the cost/income ratio question. So I think we had said at the November IMS that we expected to land the year at less than 69% on an underlying basis. We ended up doing a little bit better than that. We ended at 67.6%. There was a pickup though in costs. So I think November to December, the cost-to-income ratio was around 75%. There are some seasonal costs that came in. They were just a little bit less than what we expected. So I would say that it's mostly a cost-driven beat compared to that initial guidance.

Then Stefan, do you want to take the Asia question?

Sure. Look, in Asia, we had a strong year, and I think there's a very positive momentum. As you know, there was a flurry of IPO activity, particularly in Hong Kong with over 100 IPOs last year. And in these IPOs, there's always a lockup period until clients actually get the liquidity, which will happen in the coming months and years, and this will bode extremely well for our business. And I feel we're very good, well positioned to capture those opportunities.

And do you see trading activity from clients improving as well?

I think -- I guess your question is what we've seen so far in January, right, with all the turmoil we've seen in the precious metals market.

Yes.

Well, indeed, we have seen a notable pickup in activity in January, as you would expect, given the turmoil in the markets.

The next question is from Jeremy Sigee from BNP Paribas.

These are both follow-ups actually. So the first one links to your last comment about transaction income. I just wanted to check, you mentioned the 80 bps sort of gross margin guideline or plan assumption. Are you still happy with that versus the exit rate that you mentioned, which was lower? Is 80 bps still a reasonable expectation?

And then second clarification, again, on the adviser numbers, you said that on a net basis, you're expecting slight increases in RMs year-on-year in '26 onwards versus quite meaningful gross hires. So by implication, you're assuming quite chunky attrition or performance management of advisers. I just wanted to check that's the right understanding.

Jeremy, thanks for the question. Let me start with the second one. In 2025, we didn't indeed have higher overall attrition than we usually have on a year-on-year basis, and that was a result of all the factors that I discussed before. Of course, every year, we hire on a gross basis, but we also have some natural attrition. And that natural attrition is in the single digits percentage-wise on a normal basis.

Then on the 80 basis points input factor, what I can say is that our recurring margin at 37 basis points is, I think, a pretty good starting point. It's going to be -- of course, we want to get that up, but it's going to be a slow grind towards 2028.

Then assuming on interest-driven income, assuming stable balance sheet structure and stable AUM, we think 24 basis points is a reasonable assumption for interest-driven income. And then the hardest one to forecast always is activity-driven income. It was 15 basis points in November and December. For the half year, it was 19 basis points. For the full year, it was 21 basis points. In January, we've seen a strong start to the year. So I think that's kind of the piece that's the hardest one to forecast.

The next question comes from Mate Nemes from UBS.

I have two questions, please. The first one would be on net inflows. So it looks like in November, December, we've seen some acceleration from the July, October period. And given the derisking of client base, given the performance management in the RM side, you seem to be off set up actually for some acceleration in net new money in '26. I was just wondering, based on recent trends, where do you expect net new money to drive mainly the group numbers, where do you expect really good momentum in influence? That's the first question.

The second question would be just a follow-up on the Sphere Swiss Core booking platform replacement and modernization. Could you give us a sense what part of the overall spending will be flowing through the P&L and what could be capitalized?

Thanks for the question. Let me start with the second one. Typically, we capitalize around 70% of our change the bank and expense the remainder. On net inflows, indeed, we did see an acceleration in November and December in that 2-month period, we annualized net new money at 3.2%. As I've said, I think, quite often in the past, the net new money is a very volatile time series. So you should not extrapolate any 2-month, 4-month or 1-month number. We do plan to do better than what we did in 2025 and 2026 and reiterate that we target a 4% to 5% increase by 2028.

The next question comes from Stefan Stalmann from Autonomous.

I have two, please. The first one on your new compensation framework. Could you maybe outline in general terms what has changed compared to the previous one? And maybe also if you had applied hypothetically this new compensation framework in 2025, would that resulted in higher or lower compensation expenses?

And the second question on a regulatory topic. There's obviously quite a lot of debate in Switzerland, among others on the treatment of software assets in CET1 capital. And it now looks as if maybe the government is going to a potential outcome where there's partial deduction as opposed to full deduction on CET1. Would you expect that to actually have a benefit for you going forward?

Thank you, Stefan. I would say on the compensation framework, the main purpose was twofold. First, to create accountability and ownership of the first line of defense and then make sure that they do the right thing from a risk point of view. Think about how we think about compensation for clients with higher reputational risk, more credit intensity and other things.

And on the other hand, the revision of the compensation framework was done to incentivize our RMs to deliver organic growth. As you say, we are now going through this compensation cycle. And of course, time will tell what the results will be, but the early indications are very positive.

Stefan also from my side. I guess you're referring to the proposed amendment of the 2 big to fail regime. But let me remind you that's mainly directed to SIPs. As we aren't one, we do not expect any substantial impact on our regulatory capital and liquidity. We already treat software as an intangible asset. And consequently, we deducted from CET1 capital, as you know. Regarding DTAs, there's no tax loss carryforwards that we have remaining on the books as of today, which we -- which were previously deducted from capital. I would say our CET1 is, therefore, already of high quality.

The next question comes from Nicholas Herman from Citi.

I have 3 questions left, please. Just firstly, on your targets, you said that you are firmly on track to achieve the 2028 or medium-term targets. Just curious, is that a reference to the much higher revenue power of the business on the back of higher AUM and strong markets last year? Or is it also a reference to the fact that you are ahead of your transformation process?

Secondly, on risk density, other than deleveraging and maybe perhaps some increased investment into the treasury portfolio, are there any other factors expected to drive the risk density higher from here from 21% to the guidance of 22% to 24%?

And then finally, on your swap volumes, I think you said CHF 27 billion, just curious how you expect that to trend from here, please?

Nick, thanks a lot for the questions. Let me start with the swap volume. So it was around CHF 27 billion in 2025, up from roughly around CHF 21 billion in 2024. That's primarily driven by our excess funding position primarily in dollar deposits. Sometimes there's some seasonality in that if we issue, for example, term deposit notes from our markets business. So I think you can sort of model how we think about that based on the 24 basis points interest-driven income guidance we've given and the interest rate sensitivity we show in the appendix of the presentation.

On risk density, we do stick to our guidance of 22% to 24%. It's on the credit side of things, again, we're assuming stable lending penetration. So loan growth pretty much tracking AUM growth. Operational RWAs, we've had the big U.S. case drop out of the operational loss database at the end of 2025 and we don't see any other large cases dropping out before 2029. And then, of course, you have the markets RWA, which is more seasonally driven.

So I think we stick to 22% to 24%. Yes, I would say that it's more likely to be closer to 22% than to 24%, particularly if you take into account the fact that we're also managing down the CHF 0.7 billion portfolio that we announced in IMS, which carries a higher risk density.

And Nick, to your comment that we are firmly on track in terms of the midterm targets. What I was referring to is that when we announced our strategy last year in June, we still had a lot of wood to chop. We had to complete the credit review. We had to hire a new Chief Compliance Officer, implement a new risk appetite framework, new compensation framework and so forth. What I meant is that having made all these changes and entering our 2026, '28 strategic cycle, we feel very confident that we have made the changes necessary to have the right conditions to reach those targets.

[Operator Instructions]

The next question comes from Giulia Aurora Miotto from Morgan Stanley.

I have two. The first one, going back to the core banking system change in Switzerland. And when is the bulk of this project happening? So is it in '26 or '27? I'm referring to basically the migration of clients. When do you expect that to start?

And then secondly, on the FINMA discussion, any color that you can share with us in terms of what FINMA is waiting for essentially? What are the next deliverables? And is there any time line? Would it be realistic to expect the second half of this year to see the end of this enforcement action?

On the second question, there's no migration of clients happening in '26 or '27, probably '28 if everything is on track.

And on FINMA, look, we are just waiting for the enforcement proceeding to be completed and this thing can take time. I would say that our interaction with FINMA and all our other regulators is very active, proactive, transparent, and we feel we're making good progress. We will take a little bit more time.

The next question comes from Nicolas Payen from Kepler Cheuvreux.

I have two questions, please. The first one would be on the credit recovery that we saw in H2. Just wondering if it's final or we should -- we could expect something more going forward? And then a follow-up on the net inflows contribution. Could we have the split between seasoned RM and newly hired RM, please?

Sorry, your second question was how many seasoned RMs versus RMs business case? Well...

Split regarding net inflows contribution between seasoned RMs and newly hired RMs, please?

Super. Thank you. So roughly about 70% of the net new money call came from RMs and business case with 30% coming from the seasoned RMs and RMs on business case represent roughly 31% of the population of RMs, which is the highest proportion of RMs on business case we've had in 6 years. So I think that bodes well at least for that portion of net new money generation in the coming quarters.

And then on your question on credit recoveries, yes, the bulk of the credit recovery was from the 2023 largest private debt case. However, there were a few others. I would say that the vast majority of the 2023 case is already in the books.

The last question comes from Tom Hallett from KBW.

Can you just remind us what your exposure to China is in terms of AUM and revenue, please?

And then secondly, I'm just trying to reconcile the kind of strong performance in costs with your relatively downbeat assessment of the cost-income ratio. I was wondering if you could kind of bucket the moving parts in costs into kind of the underlying inflation rate, the cost saves and the investment rates and those related to compsn?

Tom, thanks a lot for the questions. Let me start with China first. So it's Chinese domicile clients are roughly more than 1/4 of our total AUM base. So you can make your assumptions on gross margin and work out revenues. This is something we don't disclose, obviously.

The second point on cost-to-income ratio, you characterized as downbeat. I would not characterize it as downbeat. I would characterize it as realistic. So we said that some of the investments, the non-steerable investments that we talked about in the June strategy update will be front-loaded. And that was roughly 6% in cost-to-income ratio terms across the '26 to '28 cycle.

Then we have non-steerable investments that will power the growth in terms of the revenue and growth program that were around 3.5 percentage points, leading to an uptick of 6 percentage points in terms of additional revenue and cost-to-income ratio terms for '26 to '28. What we said is that some of these non-steerable investments will be front-loaded in '26. And therefore, that's why we're giving realistic guidance on where we'll land on the cost-to-income ratio in '26.

Just to clarify, our Asian assets are over a quarter, not just China.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to the management for any closing remarks.

Thank you all very much for your engagement and your questions. Julius Bar is now stronger, simpler and fully focused on the future. We'll be back with our next update at the IMS in May. The IR team is available offline in case of further questions. Thank you all and have a great day.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Q&A for analysts and investors following the release of Julius Bär's interim management statement. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The introduction will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Alexander van Leeuwen. Please go ahead, sir.

Good morning, and welcome to this IMS Q&A call with CEO, Stefan Bollinger, CFO, Evie Kostakis and in light of the completion of our credit review, our CRO, Ivan Ivanic. The reference document for this call is the interim management statement or IMS, for the first 10 months of 2025, which was published as a media release this morning. As stated in the immediate release, the IMS is as usual based on unaudited management accounts and the numerical information provided in the IMS is based on non-IFRS alternative performance measures or APMs.

For that, I also refer to the APM section at the end of the release where you will also find the usual cautionary statement. That cautionary statement also applies to the information provided verbally in this Q&A session. We aim to end the call latest at 9:00 Swiss time and therefore, we would like to ask you to limit yourselves to maximum 2 questions, please, so that other analysts also get a chance to ask their questions.

With that, it is now my pleasure to hand over to Stefan.

Thank you, Alex, and good morning, everyone. Today's IMS is an important milestone in managing through our transition year 2025 for 2 reasons. First, we delivered a strong operating performance, which confirms we are on the right path in the execution of our strategy. And second, we concluded our credit review, which allows us to put legacy credit issues behind us and turn the page. Let me start with a few remarks on the results of our credit review conducted under the leadership of our new CRO, Ivan Ivanic.

As you know, we announced additional loan loss allowances of CHF 149 million. These relate to a subset of positions amounting to about CHF 700 million, predominantly within our income-producing residential and commercial real estate book. All these loans were originated before 2023, and we have decided to manage them down. As for the size of those allowances, they are appropriate and adequate and reflect the thorough review, which was undertaken. Most importantly, they are fully in line with the overall shift in our strategy, as announced in June.

And with our revised risk appetite framework, which we finalized over the summer. I am personally very pleased that this marks the completion of the credit risk review and allows us to draw a line under our legacy credit issues. The credit risk review is behind us. We have a well-defined risk framework and a strong risk management team in place, which will be completed with the arrival of our new Chief Compliance Officer, Victoria McLean by end of February next year.

As a result, Julius Bär is simpler, stronger and fully focused on the future. Our results are underpinning that. As you can see, we have delivered strong operating performance in the first 10 months of the year. Our assets under management reached a record CHF 520 billion, the first time in our history that we have crossed the CHF 0.5 trillion mark. We managed to attract net client inflows of about CHF 12 billion despite the further derisking of our business. And we continue to optimize our footprint with the opening of Abu Dhabi and Lisbon. Our operating leverage is back into positive territories for the first time since 2021. And our capital position has further improved with the CET1 increasing 210 basis points since the start of the year.

Today, thanks to the decisive actions taken we can now put our energy back where it belongs into serving clients and delivering sustainable, predictable and high-quality growth. With that, I'll give the floor to Evie for her take on the operating performance.

Thank you, Stefan, and good morning, everyone. In the first 10 months of the year, we generated close to CHF 12 billion of net new money despite the further derisking driven by continued inflows across our key markets in Asia, Europe and the Middle East. Together with rising global equities and despite the headwind of a much stronger Swiss franc, we saw a record client asset print and strong underlying year-on-year revenue growth. Our gross margin has remained broadly stable year-on-year at around 83 basis points on a like-for-like basis.

And importantly, operating leverage has improved with the underlying cost-to-income ratio at 66%, down a full 5 percentage points so far this year. This partly reflects disciplined cost management and the early benefits of our efficiency program which remains on track to deliver CHF 130 million of gross savings on a run rate basis by year-end, exceeding our original target by CHF 20 million. And also very importantly, as Stefan mentioned, our capital position strengthened further with a CET1 capital ratio of 16.3% at the end of October, up 210 basis points since the start of the year.

Let's leave it at that in terms of introductions and in the interest of time. Let's now move straight to Q&A.

[Operator Instructions]

The first question comes from the line of Anke Reingen from RBC.

Firstly, can you please clarify your comment you seem to make on Bloomberg about when you would be ready to start discussion about share buybacks? Are you basically saying you could start before February or you would start -- you would only ask if not asked before February. If you can maybe just clarify what you're specifically referring to.

And then on the net new money trends, are we still very much on track around the 3% for this year? And what are relationship manager trends in the last couple of months.

Maybe I'll just start and then Evie can add. In terms of the share buyback, what I was saying earlier at the media call is that we have completed some important milestones. Obviously, the conclusion of the credit review. We have done significant upgrades to our risk organizational processes. And with the appointment of our Chief Compliance Officer we now have -- we're going to have completed our new risk organization at the end of February. What I was referring to is that this means that we're not quite there yet to ask FINMA for a share buyback.

And the earliest we'll do so if you can think about this is end of February that will even be a position to contemplate. But from my point of view, there are a number of things that we still need to work through on our side before we can ask them. And ultimately, of course, it's their call and to let us do this again.

On your questions around net new money and trends in relationship managers. So net new money landed at 2.8%, a little bit short of our 2% guidance. It's possible that we will land at similar levels for the full year. Let's see how the next couple of weeks stack up. Since the end of October, we've seen some more inflows above that CHF 11.7 billion. But let's see what happens until year-end. As you know, our net new money does continue to be impacted by ongoing client derisking, which is continuing on a linear basis as well as the stringent low performer management we've been deploying in the context of the efficiency program. As you know, we clearly focus on onboarding high-quality net new money with ensuring long-lasting client assets.

And we reiterate our guidance, given the strategy update in June, we aim to gradually improve our net new money growth potential to 4% to 5% by 2028, supported, of course, by continued efforts in hiring quality RMs, and of course, a reactivation of our seasoned RMs. And now that's a good segue into the relationship manager trends. On a net basis, the number of RMs remained stable since June, and it will be fair to assume we will end the year at a similar level. However, on a gross basis, we continue to execute on our strong hiring pipeline in the last 4 months.

We've added 50 high-quality relationship managers and another 30 associate RM, and this is very, very important to build internal talent. And as we already indicated in the first half, based on today's outlook and current pipeline, I think it would seem fairly reasonable to assume a gross onboarding number of around 130 for the year -- for this year.

For next year, as we disclosed in the strategy update on a gross basis, our current plans are to hire more than 150 RMs per year over the strategic cycle.

The next question comes from the line of Ranjan Amit from JPMorgan.

The first one is on the credit review. If I read the statement, it says the charges reflect forward-looking risk, possibility of tighter customer refinancing during the process? Should we see these charges as conservative with potential for write backs, et cetera, in the future if these things don't materialize?

And the second one is on costs, where the cost/income ratio progression is quite positive. Can you please talk about some of the drivers here? Has the adviser compensation model been approved? And any other things which are driving this positive progression, please?

Thank you for the question. Look, I would be very hesitant to characterize any provisions as conservative. That's not an IFRS term, as you know, we've characterized these provisions as appropriate, adequate and forward looking. I will pass on to my colleague, Ivan Ivanic, to give you a little bit more color. And then I'll take the cost-to-income ratio question.

Yes. Thank you, Evie. So look, we benchmarked our entire credit book against our new strategy that has been announced in June and against the revised risk appetite that has followed on after that announcement and strategy, and we decided to manage down a subset of residential income producing and commercial real estate mortgages. Now these positions will be managed down in an orderly and disciplined manner, respecting our contractual obligations working in a consensual way with our clients with the main goal to protect shareholder value. And so on the basis, I would say and I would just repeat what Evie said, we consider them adequate, appropriate and forward-looking.

Thank you, Ivan. And on the cost-to-income ratio, Amit. So the underlying cost-to-income ratio improvement over July to October is a result of both strong revenues and lower costs. On the revenue side, it mainly comes from treasury swap income, where we had 22 basis points of gross margin contribution and other commission and fee income, where we had about 11 basis points of gross margin contribution.

On the cost side, this reflects the positive developments from the cost program, which we're executing at pace, including a lower average number of full-time employees, very stringent, nonpersonnel expense management, including better demand management and tight vendor control as well as internalizations. But please note that over July to October, we have also seen lower costs to achieve, including restructuring costs than expected and some seasonality in the summer months, things like lower holiday accruals.

Hence, the 63% cost/income ratio for July to October should not be extrapolated for November to December as the seasonality effect will be reversed, then we will likely book higher CTA versus July and October.

And Amit, on your question on the new compensation framework for relationship managers. We have revised the compensation framework as part of our culture transformation. In the summer, we implemented a new relationship manager compensation framework. Basically, it aligns the incentives of the relationship managers with that of the bank and hence with our shareholders. We have also updated our scorecard for senior managers, all in light to make sure that we have the right incentives and we create the right accountability and ownership in the first line of defense.

We now have a question from the line of Ben Caven Roberts from Goldman Sachs.

Just 2 please. First, a follow-up on the credit provision. So could you please just shed a bit more light on the CHF 149 million effectively and how you expect that to materialize what you really see driving that provision in terms of how it would materialize into loan losses? And then comments around your level of confidence regarding the rest of the loan book, just given I see you note that it's predominantly related to those income-producing residential loans, but the rest of the book seems resilient.

And then maybe second question would just be to reconfirm on the DOJ that, that is still something you're expecting to get the benefit of op risk in the CET1 that you'll book at the end of this year.

So on the credit provisions or the loan loss allowances, we will be booking them all in November. I pass on to my colleague, Ivan for some further color on the loan book.

So look, as we said in the statement, this approximately CHF 700 million book is predominantly income-producing residential and commercial real estate. The collateral is mostly located in Switzerland. The rest is in Western Europe. And there are several positions, let's just say about a dozen. The spread here is somewhere between 100 and 150 basis points. The reason why we're doing this is because since these loans have been initiated before 2023, the wealth management business case did not materialize. And so these are mostly or at large lending relationships.

The provisions are considered adequate and appropriate as I keep on repeating and we are planning to manage them down in a consensual way working with our clients, respecting our contractual obligations. And as I said before, our main goal is to protect shareholder value. Now with regards to the rest of the book or to the other parts of the book, so the total book size is about CHF 42 billion, so not much has changed, of which Lombard is CHF 34 billion and a subset of those CHF 34 billion, about CHF 4 billion is in structured Lombard. Now the difference between standard Lombard is that this is listed diversified and liquid collateral, where structured Lombard is also listed but more concentrated and less liquid.

And when I look at the remainder of the mortgage book, which is CHF 9 billion total in size. The LTV in that book is overall just below 50%, and it is at large a residential owner-occupied mortgage book in Switzerland.

Thank you, Ivan. And on your second question, Ben, as we said in the full year results earlier this year and the half year results, we do expect the operational RWA that's associated with the loss from 2015 to roll off of our operational loss database as of December 31 of this year, and this will have a positive CET1 pro forma impact of more than 100 basis points.

The next question comes from the line of Giulia Miotto from Morgan Stanley.

I have 2. First of all, the new Chief Compliance Officer, who starts in February. What is the risk that the first thing she does when she starts is launching yet another review of client books, which may lead to, let's say, some further clients leaving and therefore, impacting the net new money rate for next year?

And then secondly, on the FINMA enforcement action, what is left there? Because now the credit review is complete, you have a Chief Compliance Officer, changed the remuneration policies. So what is left and then a small ask, since you are changing things and improving things, in case you are considering moving to quarterly reported that will be welcome from our side. Thank you.

Okay. Giulia, let me start with the easier with the 3 questions. Unfortunately, reporting, it is under consideration. However, we haven't yet decided to pull the trigger yet. I'll leave it to Stefan to comment further with the full year results if and when we might move to that. But it is something we have been discussing and we have taken your feedback. Maybe, Stefan, do you want to address the first question?

Yes, absolutely. And look on quarterly reporting, it's just a matter of prioritization. And I hope you understand that we're focusing on other things, and we will want to be more on steady state before we contemplate doing that. I mean in terms of your question on the new Chief Compliance Officer, I would say, first, of course, I'm very pleased that we're going to have our risk organization complete with a distinct risk compliance and legal functions. And that's a really important step forward.

Second, I would say, de-risking is an ongoing and continuous process in wealth management, particularly if you think about AML risk that is inherent in cross-border wealth management. So you're never done. And I would also highlight that we have done a lot already to think about our new risk appetite statement where we naturally have self impose some constraints on what type of risk we want to take. We have created a lot more accountability and ownership in the first line. I talked before about the compensation changes and all the culture transformation we are doing. So overall, we feel very good about the status of where we are and where we're going.

And just maybe on the second question, I mean, look, it's hard for us to comment. What we can say is that we continue to have a very active and a very constructive dialogue with our regulators, and we're working very hard to build a relationship of trust by being proactive and transparent. It's a top priority for Stefan since his arrival, but I think it would be not appropriate for us to comment on any enforcement proceeding.

We now have a question from the line of Hubert Lam from Bank of America.

I've got 2 questions. Firstly, on flows. So if I look at the July to October flows and I back it out, it's about 2%, 2.5% annualized. So how much of this weakness here is due to derisking and deleveraging as we probably expect that Asia would probably be pretty strong. So just wondering around what's going -- the dynamics within the last 4 months? And also, where are we in the client de-risking process? Should we expect more to come in for the rest of this year? And how much also into 2026. So that's it, a question on flows.

The next question is on the credit provisioning. So any assets under management that are associated with the loans winding down and will there be any impact on risk weightings just because of the losses you're experiencing in 2025?

I'll start with the second question. So in terms of AUM attached to this subset of loans in the portfolio, we have decided to manage down is de minimis. In fact, it's less than CHF 170 million. In terms of the risk density of these exposures, it's around 100%, Ivan before referenced that most of these have a spread between 100 and 150 basis points. So you can well imagine that by managing these down, we are bringing capital to redeploy in our standard Lombard book, which has a risk density of around 10% or a traditional mortgage book, which has a risk density of around 38% and comes at a spread at the lower end of the portfolio we're managing down. So much better risk reward in terms of profitability going forward.

Now your questions on flows. You're right, in the July to October period, we did about CHF 3.7 billion, which is 2.3% on an annualized basis. We still saw some releveraging. In fact, we saw about CHF 0.9 billion of deleveraging from July to October. And year-to-date, we're about at CHF 1.3 billion. I wouldn't read too much in terms of idiosyncratic derisking, as we've said, that derisking will continue on a linear basis and it's something that's hard to time. So I wouldn't read too much into that.

The next question comes from the line of Mate Nemes from UBS.

I have 2 questions, please. The first one would be still on the credit review and provisions. So it sounds like the CHF 149 million charges came out at least partly from the finalized credit framework and risk appetite that you did over the summer, i.e., after the June Capital Markets Day. Could you confirm better bit this new framework and risk appetite, you are not doing any, let's say, lending activities without a strong wealth management case. That's number one.

And number two, if you could talk a little bit about the delta between gross and net hiring, perhaps also beyond this year. So it seems like you're on track for 130 RM hiring this year. But Evie, you mentioned that on a net basis, it's broadly flat in terms of RM numbers and the situation should remain the same by the end of the year. When can we expect to have net hiring also going substantially higher? Is that simply a function of the derisking exercise that you are doing this year and that means next year, you should be on a firmer footing and you can grow RM numbers sustainably?

On the first question, with respect to our new risk appetite tolerance framework, which we finalized over the summer. Indeed, one of the key tenets is that we lead with wealth management and not with lending. But I'll pass it on to Ivan to give you a bit more color.

Yes. Thank you, Evie. So first of all, you asked whether these provisions have happened after the June Investor Day. And the simple answer is yes. And the reason why is because we have benchmarked our entire book against the new risk appetite framework, which has followed the announcement of that new strategy. And probably, rather than going into too many details with regards to what exactly has changed in the policy, let me give you an example, imagine, we have a client with, say, CHF 50 million in asset under management and they want to diversify their investment strategy into a commercial or income-producing residential real estate, and the request alone of about CHF 20 million, that is certainly a deal that we would look at.

However, if there is a client with, say, CHF 5 million and they want a similar loan amount of, say, like CHF 50 million or CHF 20 million or whatever else, this is a business that going forward, we will no longer entertain. And that's probably the main change and the best way to explain this.

And on the gross and net hiring dynamics in the outer years for relation managers, Mate, let me just remind you that we have been running a pretty substantial cost program this year, which has entailed an intensification of low performer management. We've also radically transform the front operating model, and that has led to some moving pieces. And hence, the numbers that I quoted before in terms of relationship managers on a net basis for this year, for the outer years, as we said in the June strategy update, we are looking to hire in excess of 150 RMs per year, and that will translate to a positive net number of RMs year-on-year. That's what I can say right now.

And maybe to give you a little bit more color in terms of our relationship management base today, we have about 401 RMs that are on business case. So that's roughly 31% of the total RM population. We're very pleased with the business case achievement rates of these relations managers on business case, they've -- they're tracking at around 71%. And as you know, we plan the numbers at 60%. So if we can continue to excel in doing quality hiring, I'm confident that next year, things will look good.

[Operator Instructions] We now have a question from the line of Jeremy Sigee from BNP Paribas.

Can I just press you a bit more on the comments you're making about seasonality and costs? Just either qualitatively what you're expecting to pick up in cost to be in November, December? Or I don't know if you want to give us a sort of idea of a run rate at the second half. So if it was 63% in July to October, what should we normalize to for the second half as a whole?

All right. Thanks for pressing me further, Jeremy. Okay. Look, definitely, you should not extrapolate the 63%. There will be some seasonal costs that hit in November and December. So my best case from where we stand today is, on an underlying basis, somewhere below 69%.

For the half year, that's for the second half?

For the full.

For the full year?

Yes.

The next question comes from the line of Stefan Stalmann from Autonomous Research.

I wanted to get back to the credit risk provisions. Are the loans actually Stage 3 and are those stage 3 provisioned and are those new Stage 3 loan...

Stefan, sorry to interrupt your line is not very clear. If I -- let me try and translate your question because you're cutting off a little bit. You're asking whether these loans are Stage 3?

Yes, indeed and if there were already Stage 3 loans or whether those are new stage 3 loans. And I hope you can hear me, but I also wanted to ask about the recent media reports about BAER using Temenos for its new core banking platform. Can you give us any hint on the investment volume of that project and the timing?

Yes, super. Thank you. So let me start with the loan loss allowances. These are predominantly performing loans with increased credit risk. There's a small balance that are impaired, Stage 3, you will see the movement of exposures, loan loss allowances by lending products, so mortgages and Lombard in the equivalent of Note 21B in our annual report. So that's question number one.

And question number two, on the IT infrastructure. As we said in our strategy update in June, we intend to upgrade our core infrastructure in Switzerland and Guernsey. As you know and appreciate, we don't comment on individual vendors, but we are looking in the long run to harmonize our operating model, hence, you can draw your conclusions from that. And with respect to investment volumes, they are embedded in the cost-to-income ratio targets that we laid out as part of our midterm plan in the strategy update.

[Operator Instructions] We now have a question from the line of Nicholas Herman from Citi.

I have a couple of questions, please. So thank you for the clarification on the full year cost-to-income ratio of less than 69%. Can I just ask you, I mean that still implies a level of cost that is notably below consensus for the second half. So just wondering, is that going to be -- appreciate the July to October costs are always seasonally lower, and we shouldn't extrapolate this, but just wondering whether the -- on a full second half basis, whether that's a good base for future years or whether available compensation is particularly low, for example, in terms of accruals.

And then my second question, please. You said that year-end -- by year-end, the number of relationship managers will be stable versus the end of October. So clearly, the rate of turnover of relationship managers has remained elevated. Can I just confirm that you still expect double-digit attrition next year, please? In percentage terms, that is.

Yes. Super. Thank you, Nicholas. So on the second question, I would say, high single digits in terms of attrition. We've done -- we've intensified low perform management this year, but I expect that to normalize next year, so high single digits. And in terms of the outlook for costs, look, we're currently finalizing our planning cycle, and we will provide a comprehensive update on strategy and financial outlook at the full year results in February.

Until then, I think it's good to reiterate the framework that we shared both at the strategy update and the half year. Transformation and franchise investments will be front-loaded with associated costs coming through in 2026 and beyond. So of course, while the recent cost-to-income ratio developments are very encouraging, the road to sub-67% remains back-end loaded. So the biggest set both investment and payoff lie ahead in '26 and '27.

We have a follow-up question from the line of Ben Caven Roberts from Goldman Sachs.

Apologies. It was just a clarification to check that below 69% for 2025 was on an underlying basis. I think you've already answered that.

Yes, it is.

We have a follow-up question from the line of Nicholas Herman from Citi.

Since we're at the tail end of the call, I just thought, I'd sneak in a third question, please. Just how much income-producing real estate is remaining in the book following the write-down of this CHF 700 million?

So the total amount of residential income producing and commercial real estate is about 1/4 of the mortgage book. And this includes the CHF 700 million.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Bollinger for any closing remarks.

Thank you all for your questions and your attention. As I said before, today, Julius Bär is stronger, simpler and fully focused on executing on our 2026 to 2028 strategic cycle. I'm looking forward to speaking with you again at our full year results presentation in February. Thank you, and have a good day.

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