Julius Bär Gruppe AG (BAER) Earnings Call Transcript & Summary

Good morning, and a very warm welcome to the Julius Baer strategy update. It's great to have so many of you here in the room and on the webcast. My last count were about 60 of you here in London and many more on the webcast. Thank you for everyone who joined in person, especially those who traveled as far as from the U.S. It's the first time we do our strategy update in London. This is where the majority of our analysts and investors are based, and we come to you. A special welcome also to the Chairman of the Board of Julius Baer Gruppe, Sir Noel Quinn. Noel, it's terrific to have you on board. And it's great to be here with our whole leadership team from the Executive Board and the Global Wealth Management Committee or GWMC, as we call it, a set up, we have in place since the beginning of February. Let me briefly introduce the team. [ Joel ] Nic, who has been an Interim CEO and long-term CEO -- COO, very unique; Evie needs no introduction as you have all interacted with her over the years. Our newest ExB member Ivan, is a designated CRO sitting right here. And Christoph is our long-standing General Counsel now also in charge for all our legal functions. From the GWMC, we have Carlos and Thomas. They run our new region Western markets in Switzerland; Rahul, who runs emerging markets; and Jimmy, who has been running Asia for a very long time for us. And then we have Luigi and Rajesh, who co-run our GPS, Global Products and Solutions unit. And of course, you all know Yves, our CIO. And last but not least, Nicolas, who recently moved from products into the COO organization to run digital business transformation. I believe it's very important that we have the whole team here. It's for you to get a sense of who we are, what we're up to and give you an opportunity to engage with all of us. As for me, it has been 20 weeks into the job. Although I have to say, given what has happened in the world and with Julius Baer, it feels a little bit longer than that. At least, I could make good use of some of the things I learned in my career. Things like commercial rigor, excellent and discipline in execution and of course, relentless focus on risk management in everything we do. Why are we doing this strategy update now? First, because you ask for it. You told us that we didn't give you an update on our strategy for 18 months. We also are fully aware that our targets that we set in '22 are out of line with financial reality. Second, because we have done a huge amount of change, and we want to update you on our priorities and progress. And third, because I want to look ahead and provide clarity on the path forward and how I see the Julius Baer value creation story unfolding. Now I have been in the seat for 5 months. Noel has been in the seat for 5 weeks. So this strategy update is an important milestone in our broad transformational journey. We are very committed to update you regularly, and we'll do so at our full year and half year results, the first time in February next year when we present our full year '25 results. Let's have a look at the agenda today. After my introduction, I will hand over to Noel for some perspective from the Chairman. After that, I will talk to you about 3 things: how I see the bank; what we have undertaken so far; and our strategic agenda going forward. This is all an integral part of our value creation story. Our CFO, Evie Kostakis, will explain how our priorities translate into financial outlook and midterm targets. We then transition to Q&A. After a formal part, we'll disconnect the live streaming and host an informal lunch next door. This is a great opportunity for all of you to meet the leadership team and also see some of our technology in action. So without further ado, I would like to invite our Chairman, Sir Noel Quinn, on to the stage.

Thanks, Stefan. Thank you all. Thank you all for coming. It's great to be here today. And what I want to do is just share some immediate thoughts that I have 5 weeks into the role and obviously preparing for this role. It's actually very early in both the tenure of myself and Stefan to be giving an update on strategy. But we wanted to do it and we believe it's the right thing to do, to share our thinking on the strategic direction of this bank, the direction of travel we want to take it into and to get some tangible goals shared with you to underpin that direction of travel. Why? There's a lot of noise out there in the press with regard to Julius Baer. And we wanted to give you our story and where we want to take the business going forward, so you can make your assessments on our intentions, not just what you read in the press. There are some statements on strategy that even after only 5 weeks, in my view, are very clear. However, as you would expect, we have work to do on a detailed execution plan for some of the direction that we will share with you today. Stefan, as you said, will take you through an update on his strategic thinking shortly. He will, in the first instance, share some reflections on what he has observed so far in his first 5 months, what actions he's taken to address some of those reflections and the strategic priorities for the future. Before that, and based on my discussions with the Board and management over the last few weeks and months, let me share some of my observations on the way forward. Julius Baer has a tremendous inherent capabilities as a private bank wealth manager, a very strong client base, well diversified across high-net-worth and ultra-high-net-worth, a well-diversified geographic presence in the U.K., Europe, Asia and the Middle East, a strong product capability and a very good investment track record on behalf of our clients. The size of the market opportunity in wealth management is extremely large in the geographies I mentioned with strong growth potential. So why the noise and why the need for change? First, the financial performance has been inconsistent and volatile and not what you would expect from a pure-play wealth manager. A root cause of that volatility, in my view, has been strategic drift over recent years. A few years ago, the business expanded its product offering into lending to clients that were invested in long-term fixed assets as the primary source of the client's wealth. In my view, those clients and the transactions that followed were more aligned to corporate banking than to wealth management or private banking. And the required expertise and capabilities did not exist at the required level in a pure-play wealth management business. That will not be the case going forward. We will revert to a strategic perimeter for Julius Baer that aligns with the wealth manager, not a corporate bank. We must go back to our core purpose as a wealth manager. We have work to do this year to make sure we have identified all the relationships that fall outside of that core purpose and make sure we understand the risks inherent in that file and have mitigating controls in place. That review is progressing well, and you'll hear more of that later, and you heard some of that at the IMS a couple of weeks ago. But the work continues. My second observation is focused on the performance of the core wealth management business. The inherent returns of the core business are very strong at around 30% return on CET1. So capital generation potential of the business is excellent. However, there has been inconsistency in the growth story of Julius Baer. Its cost management story and the broader risk and compliance track record. These inconsistencies need to be addressed. Growth needs to be sustainable and repeatable, achieved with disciplined risk and cost management. A singular focus is not acceptable going forward. And this is the culture we need to change and the culture we need to create. Furthermore, that cost management and that cost environment must have capacity created for investment in enhanced processes and systems. We need to supplement excellent frontline relationship management experience with a supporting set of processes and digital experiences to meet our client expectations. Stefan will take you through his thinking on these 4 topics: growth, risk, cost and tech investment in his presentation. There is much work to do, but the priorities are set and will be implemented with discipline. So at a high level, that is the journey we are on. We are fortunate that we inherit a very strong set of inherent capabilities to build upon. And the fixes are within our control. It's a journey I'm looking forward to working with -- working on with Stefan. I enjoyed my many discussions with Stefan towards the end of last year and the beginning of this year when I was looking at the opportunity to join the Board. And it was clear from those discussions that we had a shared vision of what needed to be done. I will be here to help him on that journey and make sure it becomes a reality. Many people have asked me why I took on this role after spending 38 years with one institution. Well, the answer is pretty straightforward. I felt it would be a waste not to use my 38 years of experience in banking. I like leadership, and this is a different form of leadership, different from being an executive leader. I believe Stefan and I can make a strong team. And most importantly, I see significant upside opportunity in the business. With that, I'll hand back to Stefan to take you through the journey.

Thank you, Noel. Let me now walk you through how we see the Julius Baer value creation story. Each value creation story starts with a foundation to build on, and we have a very strong one, great brand, great people and a great business model. This franchise has all the ingredients to capture future opportunities. Or as we call it internally, we have all the ingredients to be the most admired international wealth manager, admired by our clients, our people, our regulators and over time, hopefully, also by all our shareholders. I had the opportunity to meet over 400 clients in person across our network and many of our other key stakeholders. And it only reinforced my conviction in the strength of our platform. Clients have played back to me what I believe is totally unique. We are global and we have scale, yet we have independence and are purely focused on wealth management. Now more than ever, clients look for trust and stability. We have been profitable every single year for over 90 years, and we have a rock-solid, highly liquid balance sheet. We are headquartered in AAA-rated Switzerland, a country far less affected by geopolitics than most. In this changing world, having a Swiss family heritage is again a competitive advantage in a way that it hasn't been for decades. That said, we also have been facing significant performance challenges, especially over the recent past. These challenges are reflected in sluggish net new money and negative operating jaws since 2022. The most recent credit incidents also affected our reputation. And let's be honest, they absorbed a huge amount of senior management time, taking them away from our clients. Now if you take a big step back and look at the longer history, we had self-imposed cycles. As Noel said, we had periods of good growth, we had periods of sluggish growth. We had some risk management issues along the way, creating lots of stop and go. It has not been consistent, and we need to bring back consistency. And for this, the first thing we need to do, we have to stay in our core wealth management lane. Let me now share some other observations that we look to turn into opportunities. As I just said, to be less cyclical, we need to balance cost, growth and risk and stick to our core wealth management franchise. We have fantastic people, but they were held back by the organization, too complex, too many silos, too much bureaucracy. We over rely on externals. I want this organization to take back control and unlock the great potential of our people. What is also clear is our cost base is too high and not sustainable. We want to run a tighter ship, and we can. We have a great client franchise, but significant growth potential across client segments, products, geographies and in further activating our front office. I will talk about this in a moment. On digital and technology, we have made really good progress in certain areas, but we have to digitalize further to improve our client experience and create scale. At the same time, we have to upgrade our legacy infrastructure in Switzerland, which I'm very committed to do. Overall, I'm convinced that Julius Baer has significant potential to unleash as I see untapped opportunities everywhere. On the right-hand side, you see the 5 principles guiding our actions that I outlined to you on February 3. Let me just highlight 2 again. Back to the roots, back to the values that serve this organization so well over decades, an obsession for clients, fast decision-making and great teamwork and collaboration and disciplined entrepreneurship. We want to be entrepreneurial, but we want to have discipline in everything we do, discipline around investments, discipline around cost and discipline around risk decisions. Twofold. On one hand, address key pressure points and on the other, launching a strategy review. We implemented multiple actions across 3 areas. We focused on conducting a solo risk management review. We changed our governance and management structure, and we sharpened our operating model. To start with risk management. Since joining, my focus was on 3 areas: First, normalizing relationship with our regulators by being proactive and transparent. Second, looking at all the potential risks across the franchise, treasury, AML, tech infrastructure, markets, credit and so forth, looking at risks holistically across the entire organization. And third, enhancing our risk culture front to back. I spent the last 20 years at an organization that is obsessed with risk management. And before that, I was advising clients on corporate risk management. So you can and should expect me to do the same at Julius Baer, be laser-focused on risks. Now let me talk more about governance and management changes. Beginning of February, we announced a reduction of the Executive Board from 15 to 5 and the creation of the GWMC. We have now a clear delineation and clear accountability and ownership. The ExB is focusing on governance and the GWMC focused on clients and growth. Beginning of April, we simplified our regional structure from 5 to 3. At the same time, we set up the new GPS unit. And 2 weeks ago, we announced a new risk organization with clear delineation of the risk functions. We also made a public advertisement to find a high-quality Chief Compliance Officer. To summarize, we have now a leaner, faster and more client-focused organization, starting right from the top. And we want to bring this lean, fast and client-focused organization deeper into our organization. This is what we have been doing with the new front operating model that we had announced beginning of April. Our front leaders are some of our historically best producers, but they were doing management jobs and often were bogged down by admin. So what have we done? We simplified the organization. We removed one layer. We reduced the numbers of leaders by 1/3 and increased team sizes by 50%. We repositioned our front leaders to be producers or producing managers and refocus them on clients. At the same time, we moved roughly 100 management and front risk teams directly under the RMs. With this new setup, we create net new money generation capacity while strengthening at the same time the first line of defense. We talked about the 20 weeks that I've been in the job. Let's now pivot to the future and look ahead. As a result of our strategy review, we have defined 5 key strategic priorities. First, driving profitable growth in our core business; second, cost discipline with a focus on restoring positive operating leverage; third, disciplined risk management, including all the elements from staying in our wealth management lane to processes and culture; fourth, leveraging technology to support growth, cost control and risk management; and fifth, fostering a performance and ownership culture. No organization can be successful with the right culture -- without the right culture. All those 5 priorities must be underpinned by a disciplined resource allocation. Let me start with how I see our growth story. As I mentioned, we have all the ingredients to capture future growth. We have a unique portfolio of high-net-worth and ultra-high-net-worth clients, but we need to sharpen our value proposition and be more focused in our coverage. We have an independent and broad product offering, but we need to increase the penetration of our solutions. We have a great presence in both mature and high-growth markets, but we need to scale up in our established markets where we are profitable, and we need to double down on growth opportunities. We have fantastic client teams with a focus on building long-term relationships, but we need to continue to hire the best RMs on the market and empower our existing RMs to increase productivity as well as forming a pyramid. On experienced RM hiring, we'll continue to hire more than 150 a year, and I'm very confident that we are a great destination for talent. Our only clients are wealth management clients. So our RMs don't compete with commercial bankers or M&A bankers where economics are much higher than in our wealth management relationships. They are our most important client-facing staff and they like it. Our seasoned RMs contribute less than 20% of net new money, and we need to help them to grow again by making it easier for them to do business, simplifying processes, giving them the right technology and reducing the admin burden. We need to create a pyramid in the RM structure by bringing in juniors, what we call associate RMs and develop them. We have another cohort of 50 joining us next month. Now let's talk about client segmentation. There's a lot of commonality across high-net-worth and ultra in terms of what they want, independence, holistic proposition and wealth planning. At the same time, they have very different needs and styles of servicing. So we need to recognize this in how we're organized. In the ultra space, we're extremely well positioned. As you can see, we have around 45% of our assets or more than CHF 200 billion in this segment. And there's much more potential. In the markets that we operate, there's a CHF 20 trillion market, and it's the fastest-growing segment. To capture that potential, we will increase our focus and set up deal teams, bring the whole Julius Baer to clients, powered by the new ultra-high-net-worth competence center. A good example is our global custody offering that we need to integrate into this holistic offering as it is a key value proposition for our ultra clients. We also need to address some gaps on the technology side. Reporting and connectivity services are good examples. On the high-net-worth side, we need to embed more technology to enable RMs to be more productive as we started to do with the Wealth Navigator that we will show you a little bit later in a video. We need to increase client access to alternatives in an efficient manner, such as embedding them in discretionary mandates. And we need to proactively manage asset transfers across generations. Now let's talk products. We have an award-winning CIO office led by Yves, managing around $100 billion of assets. Julius Baer just won the Euromoney Award, Global Best for Discretionary Portfolio Management for a second year in a row. So we have had fantastic performance in recent years, and we need to leverage this to increase our penetration. In private markets, we currently have low single-digit penetration. If you look at our strategic asset allocation, we have around 10% in private markets for high-net-worth and double that for ultras. So a lot more potential. Structured products and hedging solutions, especially in a portfolio context is another great opportunity. The creation of GPS enables seamless and integrated delivery of all our products and solutions, make it much more simple for our RM and their clients to consume our services. In terms of geographies, we have a great portfolio mix between high-growth and mature markets. 40% of our assets are in the high-growth markets of the Middle East and Asia. We have a strong starting point with Asia as our second home market and license #1 in the DIFC in Dubai, clearly a place where we want to double down on RM hiring. In Europe, we are profitable in all our onshore markets already and are well positioned to capture market share. Take the U.K., where we have successfully built a franchise around the narrow segment of entrepreneurs. We can now broaden that into other segments of the market, leveraging our footprint of 7 locations across the country. And in our home market, Switzerland, there are some obvious opportunities in ultra, given there's just one large local bank left, and we have the perfect scale and capabilities on the ground to capture market share. We are focusing on specific regions, but we have also reshaped the portfolio overall. We exited onshore Brazil and went onshore in Italy, moving from a loss-making market to a business that we already do very successfully from offshore. I said previously, the way I think about operational efficiency is restoring positive operating leverage. Cost is a problem if it's out of balance with revenues. We just covered a part of growth. I'm highly confident we can deliver on growth drivers. You see them again on top of the page. We, at the same time, remain laser-focused on our cost base. Further efficiency measures are needed. As you know, we announced at the beginning of February, a gross cost program of CHF 110 million. We'll overachieve this by CHF 20 million. On top of this, we are looking to further reduce our gross cost base by CHF 130 million by 2028. Evie will take you through the details. Overall, I want to move away from the notion of constant gross cost program. And instead, I want to move to a culture where cost discipline becomes part of who we are. Let's turn our focus on the critical topic of risk. As I said before, risk management is my DNA, and I will be laser-focused on this. I think about risk management across 4 cornerstones. First, since the beginning of the year, we have been defining the scope of our wealth management activities much more clearly. As an example, we concentrated our lending activities on wealth management clients where it is an integral part of our value proposition. The second cornerstone is a new focused risk organization and at the same time, clear accountability by the first line of defense. Third, we're changing the risk culture by launching a culture and conduct program, which I will personally chair. And we are reviewing with urgency our front office compensation model to better align incentives between RMs and the bank, managing tail risk and enforce consequence management. Fourth, we'll review front-to-back processes and start to differentiate with a risk-based approach. This will simplify processes in low-risk area and improve client experience along the way and free up resources to focus on higher risk areas of the organization. Let's now take a look how technology drives our business, including the Wealth Navigator that I already mentioned earlier on. [Presentation]

The video shows you how the Wealth Navigator can power our RMs. The example we used here just to elaborate a little bit more is a simple situation where a client has a bond maturing and a tool suggests new investment opportunities based on the client's risk profile, market conditions and our in-house views, all while doing automatically the suitability checks. It also shows you how we can -- have integrated our click-to-trade structure product platforms into that workflow. As you can tell, we made good progress in certain areas with some great proprietary tools, but we need to take digitalization deeper into the organization. As a consequence, I've set up a new digital business transformation function, and we initiated a project to modernize our IT infrastructure in Switzerland. This is all included in the cost/income ratio road map that Evie will present to you. It has to be done, and I want to do a substantial proportion in the current strategic cycle. We did it in Asia. We have a template for what good looks like, and we have a great team in place under the leadership of Nic Dreckmann to deliver on it. As I said before, we can't be successful without the right culture. Our focus here is on 4 areas. Teamwork, we must operate as one team, one Julius Baer. We need to attract and develop the best in wealth management. I want everyone to think and act like an owner as if we're still all part of the Julius Baer family owning this bank. Now that we are a listed company, we need our people to own our stock to create the right alignment and to incentivize the right long-term behavior. We made some changes in our employee share participation plan in February, and the number of participants increased by 30%. We want to be a proud winning team that takes back control by in-sourcing key skills and reduce external consultants and third-party providers. The 5 principles continue to guide our actions as we move forward. Let's discuss how the strategic priorities will be translated into our medium-term 2026 to 2028 targets. To say it upfront, I'm going to present you with realistic targets. I want to break with that tradition of overpromising and under-delivering. My management team and I are fully committed to achieving these targets. Net new money is a new target, and I want it there because it emphasizes growth. I strongly believe we can progressively trend towards 4% to 5% in 2028. I'll be laser-focused on cost/income ratio. We set a target at below 67%. It is ambitious versus recent history, but also realistic to achieve. Last but not least, we reaffirm our continued commitment to deliver excellent returns with a return on CET1 above 30%. These targets reflect my strong desire to deliver a balanced strategy, growth, cost, risk and stop the cyclical nature of our performance. Shareholder value creation is about repeatable, predictable and reliable performance. To do that, we need to continue to be focused on our clients and extremely disciplined in execution. As a next step, we'll focus on further detailing strategic initiatives and the execution road map. As I said before, we keep you updated every 6 months next at our full year '25 results in February next year. With that, I will now hand over to Evie.

Thank you, Stefan, and good morning, everyone. Let's dive straight into the targets. We set our targets for this cycle with an eye on what really matters for our shareholders, safe and sustainable growth underpinned by discipline in managing risks and tight cost management without compromise on investments. With careful execution, this should enable a return to positive operating jaws. As such, first of all, we are reintroducing a net new money target. As you know, for 2025, we have, for a variety of reasons, guided to net inflows of around 3%, partly impacted by derisking, partly by the fact that the preconditions for releveraging are not yet in place and partly because of the significant changes in the organization this year. And in our recent IMS, we were indeed close to that number, annualizing at 2.5% or 2.7% excluding the impact of deleveraging. As Stefan said earlier, we want to lead Julius Baer back on to a higher growth path, but certainly, certainly not at the expense of quality. We believe that after 2025, we can gradually and sustainably build up to a net new money pace between 4% and 5% by 2028. In terms of the cost-to-income ratio, you may recall that for 2025, we said that if the gross margin is around 80 basis points, which is where it was in the second half of last year, then we would expect to end up with a cost-to-income ratio of around 71% this year. That guidance still stands. But as I said, based on an input factor or assumption of an 80 basis point gross margin. You saw in the interim management statement that in the first 4 months of the year, the underlying gross margin was meaningfully higher at 87 basis points, which resulted in an underlying cost-to-income ratio landing at 66% for the first 4 months. In our planning for the business, we believe it is prudent not to take an aggressive view on the gross margin. Of course, we will continue to work on our recurring fee margin, but we have less control over how clients react to meaningful changes in interest rates and also no control over market direction and volatility, which, to a certain extent, drives client activity. In that context, we believe setting our business plan based on a gross margin input factor of 80 basis points is the prudent thing to do, just as we believe it makes sense not to take an aggressive view on any rebound of the U.S. dollar. For AUM market performance, we assume 2% in our business planning, which is more or less in line with what analysts on average assume in their models. And in terms of credit penetration, we have assumed no change versus where this stood at the end of 2024, i.e., just over 8% in relation to assets under management. Now using these various input factors and assuming we will execute in a disciplined manner on what we set out to do, including in terms of cost management, we believe it is realistic to target an adjusted cost-to-income ratio gradually improving to 67% or less by 2028. The third target is for the return on CET1 capital, which is set at 30% or more over the cycle. The change we made here versus how we set this target in the previous cycles is that the 30% is based on a pro forma CET1 capital ratio of 14%. On Slide 30, we delve a little bit deeper into how we intend to improve our net inflow generation. One of the key planks of our net new money strategy is to enhance the productivity of our seasoned relationship managers. As Stefan already showed in quite some detail, we have made changes to our front organization, which will lead to giving back time to the RMs by deloading certain administrative tasks. We also are refocusing front office leadership into more client-facing and thereby inflow-generating roles. This should drive up client acquisition and share of wallet expansion for our more seasoned RMs. The aim here is for our seasoned RMs to be more consistent and systematic contributors to growth. At the same time, Julius Baer continues to be a very attractive destination for high-performing RMs from the market. Over the past years, the aggregate business case achievement rate for new hires has been 60% or more, resulting in steady net inflows from this source. In the next 3 years, we plan to hire 150 or possibly more on a gross basis every year across our key markets, of course, and as always, subject to continued strict performance management, meaning that the net increase in RMs will be lower. We will also continue to build up relationship manager talent internally, partly to support seasoned RM succession planning, but also with a view to shaping the next generation of client relationships. To help both the seasoned and the newly hired RMs succeed, we will continue to work on sharpening our client value propositions, expanding our product capabilities and calibrating the RM's business cases around market share potential in certain markets, potentially enhanced by an expanding office network in some of those markets. Now let me take you through our cost-to-income ratio walk. From the starting point of 70.9% in 2024, the combination of our existing gross cost saving program and the further efficiency measures we announced today would, other things equal, lower the cost-to-income ratio by 7 percentage points to 64%. Portfolio optimization, including the recently completed divestment of our onshore operations in Brazil will further contribute a net decrease of 0.5 percentage point. The combined effects of the gross cost savings and portfolio optimization will be partially offset by 6 percentage points of nonsteerable cost growth, including committed IT investments, inflation, rent and other contractual obligations, taking the cost-to-income ratio to just below 70%. Now the last 2 steps must be looked at together. Here, we show in what way we will reinvest into the business to generate growth. How? Number one, by continuing to hire high-quality RMs and expanding our office network in focused markets such as Portugal and Abu Dhabi and new onshore markets such as Italy. And number two, by launching a series of strategic revenue initiatives such as segment-specific pricing and extending the offering shelf with the aim to gain more traction in terms of wallet share capture from existing clients, just to name a few. The goal here is for those investments to yield incremental revenues. Our reinvestment approach will remain responsive to market conditions, i.e., we can still adjust some of these steerable investments if the environment changes. So in cost-to-income ratio terms, 3.5 percentage points worth of growth investments and 6.5 percentage points worth of revenue growth, taking the cost-to-income ratio down to less than 67%. The next 2 slides focus on our cost improvement programs. First, on Slide 32, an update on our existing cost program that started in 2023, running into 2024 and then this February was extended into 2025. By end of 2024, we had achieved CHF 140 million of gross cost savings. And last February, we extended this into 2025 with a target of a further CHF 110 million in gross cost savings. It now looks very much like we will overachieve that CHF 110 million by around CHF 20 million, taking the total for 2023 to 2025 to CHF 270 million. Several key initiatives are helping the achievement of the efficiency improvements this year, including a simplification of the organizational structure through the streamlining of the regional setup down from 5 to 3 regions, creating the newly combined Global Products and Solutions organization and the consolidation of functions under a leaner COO organization. And the earlier mentioned optimization of the front operating model is clearly helping as well via a delayering of the management structure and streamlining of the front support model. Now we are targeting an additional gross cost takeout of CHF 130 million at an expected cost-to-achieve of around 50%, what we call further structural efficiency improvements. First, a good portion of these structural efficiency improvements will come from completing the front-to-back optimization of our operating model, in particular, through realizing structural synergies in our mid- and back-office units, accelerating our near and offshoring initiatives for non-front operations to Spain and India, thereby diversifying our expense base a bit more away from Swiss franc-denominated costs and reevaluating our footprint as well as selected ancillary business propositions. Second, additional targeted savings are expected to be delivered through further process and IT simplification, including a redesign of front-to-back processes such as client onboarding and periodic reviews, helped by productivity-enhancing AI solutions and streamlining and consolidating our IT application landscape. Third, the remainder of the savings will fall under the header of cost discipline and performance culture, including through further rationalizing external spend in procurement, vendor consolidation and improved demand control and continued stringent low performer management across the organization as well as very careful management of natural attrition. On Slide 34, we provide an overview of some of the key sensitivities to important beta factors. Undoubtedly, we have a meaningful mismatch between dollar-denominated revenues with at the end of 2024, 54% of our assets under management denominated in U.S. dollar, but only 4% of operating expenses in U.S. dollars or 10% if one includes the Hong Kong dollar in that bucket. In our planning, a 10% lower dollar versus the Swiss franc would add ceteris paribus and assuming management does not take action on the cost side, around 2 percentage points to the cost-to-income ratio by 2028. And vice versa, a 10% higher dollar would ceteris paribus shave around 2 percentage points from the cost-to-income ratio. In terms of euros, the mismatch is far less significant with a 10% move in the euro versus the Swiss franc, other things equal, moving the cost-to-income ratio by just around 70 basis points. On this slide, we also update our interest rate sensitivity estimates against a 100 basis point parallel downward shift in rates. Please note that this is based on the balance sheet and assets under management as of the interim management statement, therefore, end of April. Such a decrease in the dollar and the euro interest rate curves would at unchanged AUM, unchanged balance sheet size and unchanged balance sheet structure negatively impact our gross margin by approximately 1 basis point, whereas a similar sized decline in Swiss rates would on a model basis, be positive by approximately 2 basis points in gross margin terms. Finally, on Slide 35, we summarize here our unchanged stated capital distribution policy, under which we pay a dividend that is equivalent to a 50% payout ratio or the previous year's dividend per share, whichever is higher. Our policy states that if our CET1 capital ratio at the end of the year, the financial year is meaningfully above 14%, then that excess above 14% will normally be allocated to a new share buyback program to be launched in the subsequent year. However, given where we are in our process and discussions with our regulator, FINMA, it is important that we make absolutely clear that the Board of Directors will only consider resuming share repurchase programs when the requisite approval has been received from FINMA. Julius Baer's business model is normally a highly capital-generative one, as you can also see from some of the statistics on the right-hand side of the page, including the fact that we've paid out CHF 1.6 billion in dividends in the last 3 years and regularly deliver industry-leading returns on CET1. On top of that, unlike in many other jurisdictions, including the one we are in here today, the Basel III framework is now fully implemented in Switzerland. So normally, from this point on, capital generation will not be hurt by any further Basel III final regulatory inflation. So the 100 basis points of capital build in the first 4 months of this year is a genuine increase. With that, it is my pleasure to hand the microphone back to Stefan for the Q&A session.

Thank you very much, Evie. We'll now proceed to Q&A. I would like to open the floor first to people in the room, and then we'll take questions from the webcast.

It's Hubert Lam from Bank of America. I've got 3 questions. Firstly, on net new money, have you changed the incentive schemes for your relationship managers? I know that you talk about trying to help your seasoned RMs more around support services, but have you changed any incentives to try to get them to generate more net new money? That's the first question. The second question is on ultra-high-net-worth clients. Currently, it's about 45% of your assets. Do you have any target as to how big that can get? And also, what are you doing differently to differentiate yourself against the large investment banks, which you mainly compete with in this segment? And lastly, on your Swiss IT system, can you talk about more -- can you elaborate more about the changes that are needed? Firstly, how old is the IT system in Switzerland? What needs to be done? And what are the implementation risks that you have in to change that around?

Thank you for the question, Hubert. Let me start with net new money. In terms of incentives for our RM, we want to incentivize them predominantly to focus on long-term sustainable growth. And therefore, we are very focused on quality of net new money. Think about a short-term deposit versus a discretionary mandate and how do you incentivize people to do one versus the other. You can also think about our lending activities and the RWAs on a Lombard loan versus, for example, a mortgage and how do we incentivize people to do the right thing. So when I talk about changing incentives for RMs, what is really important to me is that we have the RM aligned with the bank. And we -- when I talk about cutting tail risk, I mean that when an adviser gets us into a relationship that turns out to be problematic that they face consequences. And therefore, it will be so painful for them that they will do what they're supposed to do as a first line of defense and not engage with any clients that is the wrong one. I mean specifically around how we incentivize our seasoned RMs that now deliver less than 20% of net new money, my personal view is that they are currently what they call or tell myself, they're suffocating because there's so many new processes, so much more stuff coming on to them, and we need to free them up from admin. We need to free them up from doing a lot of things that takes them away from the clients. And that in itself will be the easiest way to make them grow. Because if you go to any RM, and I have happened to spend a huge amount of time with them, given I've seen over 400 clients, I've met in person, and I've interacted with over 1,000 clients. And every time you do that, of course, you speak to an RM, you talk to them about how they feel. And my typical question is what percentage of your time you spend with clients. If we can bring this percentage into a different direction that it has gone in the last 2 years, it will already make a very meaningful difference. Maybe on your point on ultra, I would just highlight one thing that has been played back to me by many clients. The fact that we are independent makes a huge difference. The fact we have no conflict of interest is really, really important. I went to see on my second day, one of the richest families in Europe. And what they told me is that they want to bank with us because they know we are going to be on the journey with them throughout generations. We don't want to IPO their company. We have no private equity firm that tries to take a stake. We don't give any commercial loan that maybe then force us to do something where we find ourselves on a different side of the table in a negotiation. We can just be with the family. My second example is around wealth planning. I was very surprised that actually our ultra clients consume much more of that wealth planning service than our high-net-worth clients, and it's a very crucial part. How do we think about family governance, how do we prepare the next generation to manage their own wealth. These are critical topics that are top of mind for families. And given our independence, I think we are extremely well positioned to be the trusted advisers of these families. And on the IT system, look, this is not an operational risk issue. This infrastructure can run like this for a longer period of time. What we are focused on is client experience and scale. And given we want to scale up our business and bring more technology to our relationship managers and our clients, we want to have an infrastructure that is enabling all of that.

Maybe I can add a point on the second question, Hubert. You asked whether we have a target. The answer is no. Both segments are extremely important for us. If you look at the opportunity in terms of market size, I have some market study in front of me. Ultra-high-net-worth as defined, CHF 20 million above is slated to grow from '23 to '28 to the tune of CHF 19 trillion to CHF 37 trillion worldwide. What -- and this study is called high-net-worth 1 to 20. Obviously, the segmentation is slightly different than what we do. The opportunity there is CHF 43 trillion, going from CHF 114 trillion to CHF 157 trillion. So there's really ample room to capture growth in both segments, and that was -- that is what we will continue to focus on.

It's Nicholas Herman from Citi. 3 from me as well, please. So just a follow-up actually on Hubert's question on net new money. I guess just where do you see that 20% and 80% split between seasoned and new going to by 2028? And I guess as part of that, how should we think of -- is there going to be any change in emphasis on hiring between teams and individuals? And so how should we think about the business plans on average for those RMs going forward? Second question -- on the recurring margin, please, you're saying you're expecting it to be around 37 to 39 basis points. I guess just why -- it feels a little bit low? And within that, I guess, what is the kind of implied mandate penetration? I was also kind of surprised for what it's worth to see only one reference to private markets in the presentation in the deck. And then finally, just on the cost, I guess you said -- Stefan, you said the cost base is too high. Why not reduce costs by more? I mean, how do you conceptualize what is the appropriate level of cost, particularly for CHF 4.5 billion of revenues, which is what your target seem to imply.

You want to start with the numerics and then I can share some more context?

Sure. Thank you, Nicholas, for the questions. So look, there is no doubt that in the short run, our net new money engine growth is powered by continuing to hire successful RMs. Let's be clear about that. However, we don't manage the business with an eye to the short term. We manage the business with an eye to the mid and long term. And therefore, it is imperative that we enable our seasoned relationship managers to be more systematic contributors to growth going forward. So in our planning horizon, to answer your question, from a current level of 20% and as you know, this is cyclical, we should -- we ambition to edge up to about 1/3 of the contribution coming from seasoned RMs by 2028. But if you cast your eye a little bit further than that, it should be even more. The question on recurring margin, 37 to 39 basis points. It is -- admittedly, I think we were slightly too ambitious in the previous cycle. We are laser-focused on revenue quality. Hence, we mentioned explicitly the fact that we ambition to get to a recurring revenue margin of 37 to 39 basis points. And let's be clear, the levers are the same as they've always been. We're not going to pull rabbits out of a magic hat here. It's discretionary mandate penetration. It is expanding our advisory offering to locations where we haven't done so and thereby capturing the recurring element of that advisory offering. It is further focusing on alternatives. It is improving our set of offering on the fund side and so on and so forth. The third question on the cost basis, maybe I'll make a comment, Stefan, and please then complement. As we said, what is very important for us in the next 3 years is to restore positive operating jaws. And as you saw from the cost-to-income ratio walk, we plan to reduce costs on a gross basis. Some of that has to be reinvested into the business as a non-steerable cost driver. And some of that, which is more steerable, will be reinvested back into growth. What that all translates to is a cost growth over the next 3 years that is muted and a revenue growth, hopefully, that is double or triple the percentage point compound annual growth rate than the cost growth.

Maybe I'll just make a comment on private markets. As you know, from my background, this is an area I spent a lot of time, and you would expect me to be very focused on. I mean, overall, I would maybe just to put into context, in our strategic asset allocation, and Yves can elaborate on this further. We have about 10% of our strategic asset allocation in high-net-worth in all and then about 20% in Ultra. But there's a very good reason why Yves and team have under allocated in the recent years. As you know, private equity has been extremely expensive and frothy. And obviously, the fees are very high. And what we need to do is we need to ultimately deliver performance for our clients because what is the easiest way to generate more revenues is generate performance for your clients because you earn fees on a higher base. And so we have to make sure that we do alternatives, not just as a fee generation opportunity for us, but because it's good for our clients. And in the recent past, there just have not been the opportunities there that you would justify the high fees. So as we move forward, there's a lot of opportunities we see in, say, private credit and other parts of the market. And so you can expect us to be very focused on getting more involved. I think the great thing is -- and this is a general comment, but it's obviously specifically true in private markets is that every single provider wants to do business with us because we are the biggest pool of capital without an asset manager. And therefore, it's up to us who we want to work with and we dictate the terms. So we can get great terms for our clients. We can get great access for our clients. And this really, really shows the strength of our open architecture, infrastructure and our independence, which, by the way, is the same when I look at how we source liquidity for our clients. It's just incredible how we can get the very best price in the market for our clients because we can deal with anyone and everyone.

Benjamin Caven-Roberts from Goldman Sachs. So just 2 questions, please. First, on the risk review, if there's any incremental color you can provide following some of the helpful comments you gave with the interim statement a few weeks ago, any of the lessons learned or focus points looking forward? And then secondly, just on the remarks around being a prime spot for prime talent, effectively, how you're sort of bridging to that? And if you think there's potentially any tension with some of the incentive structure reviews you're talking about with the relationship managers or sort of more holistic thoughts there, please?

Okay. First, on the risk review, I would say what we said at the IMS is still true. We are overall okay, but maybe this is a good opportunity to invite Ivan Ivanic, our designated CRO, to explain a little bit who he is and what he has been doing in terms of reviews to give you a sense of how deep the review has been so far that we are conducting.

Thank you, Stefan, and good morning, everyone. My name is Ivan Ivanic, and I spent 28 years in the finance industry, of which 22 in managing risks across several institutions. I started my career in corporate banking in the emerging markets of Eastern Europe at Citigroup, moved to London via Citi into investment banking, where I became a credit officer covering financial institutions and hedge funds. I spent the 2008 crisis covering a large portfolio of hedge funds at Credit Suisse First Boston. I moved in 2011 into wealth management and became the Head of EMEA Credit at Credit Suisse in Switzerland. And 3 years later, I moved to APAC, where in total, I spent 9 years covering various types of risk, ultimately as the APAC Chief Risk Officer for UBS. And before joining Julius Baer in February this year, I spent about 2 years unwinding the old Credit Suisse investment banking books on behalf of UBS here out of London out of the Investment Bank. Now with regards to the portfolio review that you have asked for, we have about CHF 42 billion in loan size, of which CHF 33 billion is in Lombard and about CHF 9 billion is in mortgages. Now the Lombard book has been tested over and again by market events, most recently liberation day crisis and performed without any issues. It is at large a model-driven type risk approach like across any other private banks. And therefore, we focused our review on the remainder of the portfolio and in particular, on income-producing real estate. In the first phase, we focused on what I would call potentially higher risk pockets within that book as well as a reassessment of the private debt book that is in unwind, and that resulted in the provisions that we have communicated during the IMS. Since then, we have gone down through the portfolio and the overall size of our focus is about the top 1/3 of the total loan book across 250 credit files. So we have gone down. And by now, in terms of size, we are to single-digit per client exposures. And the rest of the book, so the other 2/3 are spread across thousands of clients within the normal wealth management exposures. From what we have seen so far on the basis of this assessment, the provisions that have been communicated in the IMS are considered to be adequate taking into account the current assessment.

Should we move to the second question, which was around prime spot for prime talent. I'm not sure you wanted me to have a stab at your organization, but the reality is that when you talk to an RM, these are very proud individuals, and it's very important how they feel about life. And it's just really difficult to be in a large complex universal bank to feel that you're the most important person, and it's very difficult to think that it's the most important thing you do for the organization. You know it. I know it. I've seen it. It's just extremely different that we are having the RMs on top of our pyramid as, if you will, our rainmakers. And I think this is a very, very strong proposition. And on the incentives, look, this is a very important balance that we need to strike between having the right risk culture embedded at the same time, having appropriate focus on profitable growth. And we are working through this in a very diligent manner. And the reason why we haven't done any changes yet is because we want to be sure we get it absolutely right. You pick.

Mate Nemes from UBS. I have 3 questions, please. The first one would be a more conceptual one. At the introduction, I think both you, Stefan and Sir Noel also alluded to the desire to reduce the volatility in the business. I'm just wondering what makes you confident that you can reduce that top line and bottom line volatility with only 45% of revenues recurring and the 37, 39 basis points recurring income margin basically kept it constant. I hear you on making RMs and net new money more consistent. But what else is there that can help you become more consistent on a bottom line level? The second question would be on the cost/income ratio target. And specifically, if we could discuss perhaps the time line around that cost/income ratio improvement. For revenues, you mentioned double and triple the pace of cost growth overall versus costs. But can we expect already meaningful improvement in '26 and '27 in cost income ratio? And the last question would be around alignment of incentives. I think, Stefan, you mentioned there's been a review of share-based incentives. There's been an increase in participation. Could you talk about how significant that share-based incentive can be for RMs going forward and what that could mean in terms of the share buybacks and excess capital usage?

Absolutely. Maybe we start with the third, and then we go backwards. I mean, in terms of alignment and the share purchase plan that we launched in February, as I said, the participation ticked up by 30%, which translated into instead of 25%, 30% of our employees owning stocks, which is, of course, not at all where we want to be. We are looking at different concepts that we can implement across jurisdictions in terms of regulation, taxes and other things. But ultimately, the idea would be that we have first, across the whole population, an opportunity to do a pay-as-you-go so that you can just deduct money from your monthly salary and accumulate ownership. Second, in our RM population, we have a deferred cash component, and we're looking to see what part of that we can actually transform into share ownership. And then, of course, ultimately, the test will be once the stocks [ west ], are our people actually going to hold on to it and see this as a valid value creation opportunity and -- but there's a lot more to do.

Maybe on question number one, Mate, on the reduction of volatility on our top line and bottom line. I think you hit the nail on the head. We -- one lever is obviously increasing the proportion of our revenues that are recurring in nature. At the end of '24, that was about 45%. Based on our planning, we want that to edge up to more than 50% by the planning -- the end of the planning horizon. And of course, less volatility comes with fewer incidents as a result of a much tighter focus on risk management. Now you also asked about the development of the trajectory of the cost-to-income ratio, and that will depend to some extent on the implementation timing of the various components I outlined in my opening remarks. Assuming that there's no change to the input factors or assumptions, the improvement will be gradual, but most likely somewhat back-ended. And the cost to achieve 50% will be more front-loaded with some already coming in the second half of 2025.

Maybe I'll just add something on -- because you said conceptually, how do you reduce volatility. And it is actually a very similar point that I made around why we are a great destination for RM talent. If you're in an organization that you can do commercial banking deals and investment banking deals that have much higher economics, it's really difficult to focus people, to actually focus on their core wealth management business because everything around you looks much more attractive. And by going into places that maybe looked like commercial banking business, we distracted everyone and any rational adviser you would expect them to go and try to originate some of these higher-margin opportunities, higher risk but also higher margin. And so it was a huge distraction for our people, our clients, and this is why I've been so focused on making sure that we are clear what it is that we're going to do going forward. When I talk about we have to be in our core wealth management lane, this is what I mean. We have to tell our people that which is the type of things that we want to do and that we don't want to do so that they are focusing on our core competencies.

Stefan Stalmann from Autonomous. I have 3 questions, please. The first one is on your client segments. In the past, you suggested that you have maybe around 30% ultra-high-net-worth share of AUM. Now it's 45%. Is that real growth? Is it a real shift? Or have you redefined the boundaries? Second question on your investment budget. Slide 31 suggests 3.5% cost income. That's around about CHF 140 million, CHF 150 million in absolute numbers. That doesn't strike me as a particularly large number. You could probably come up with a scenario where this is mostly eaten up by new relationship managers. Could you maybe talk a little bit about what the moving parts are in this investment budget? And the final one, can you actually tell us what share of your revenues coming from distribution fees? And whether there's any potential for you to increase this component meaningfully as you move into more structured or alternative products?

Thank you, Stefan. Maybe I'll take the first in terms of client segmentation, as you know, what is an ultra client is an evolving definition. And of course, also since we last looked at this, as you know, there's been significant appreciation of asset values and a lot of clients got richer and therefore, clients that may not have been classified as an ultra client now is an ultra client, but there's definitely apples and pears. So I wouldn't directly compare it. To me, the maybe the main thing that changed is that we previously looked at is the client in terms of the assets that they have with us an ultra client, whereas now we looked at clients' liquid net worth overall. And so if you would have, say, CHF 10 million with a client that has CHF 1 billion, we would now classify that as an ultra client, whereas previously, it was below the definition.

In terms of the investment budget, Stefan, let me say the following. So on the steerable component, that 3.5 percentage points, that is primarily associated with hiring relationship managers to the tune of 150 plus per annum. Secondly, branch expansion, and we referenced some of these in our presentation. And thirdly, a small chunk of that has to do with the strategic revenue initiatives that may require some IT investment. The bulk of the IT investments that Stefan outlined in his presentation, we have slotted into the nonsteerable cost bucket because we are absolutely focused on delivering these. Now the third question was on the share of revenues from distribution fees. It's well less than CHF 200 million. I don't want to comment on -- make any forward-looking statements around the trajectory of that because, obviously, it depends on the regulatory environment and the jurisdiction in which we operate.

Amit from JPMorgan. Can I talk about the geographic presence and the 7 booking centers that you have? Exited Brazil onshore, entered Italy onshore. Do you see more such opportunities in the future? And then second one is on the adviser numbers. Should we still expect the net adviser numbers to be going up? How do you think about that?

Thanks, Amit. I will talk about geographic footprint first and then hand over to Evie for RMs. Look, if I -- even from very far, if you looked at Brazil onshore, it is a market that has been very tough for any foreign banks. And the reality is a market -- that the market standard in terms of compliance is different than what we think is our global standard. And given where we are with our regulator, this is just a total no-fly zone to even think about having a different standard in a market like Brazil to compete. And so apart from the fact that we were a long way away from making this profitable, we didn't have the right business model. It was also a market that I didn't feel comfortable from a risk and reputational point of view. So it was an obvious one to do from offshore, which we do very well and we are committed to do. We have a presence in Uruguay, which is just next door. We have a great presence in Switzerland, and we have a great presence in Spain. We're opening in Portugal later this year. And as you know, there's a lot of Brazilian wealth moving particularly to Portugal. Setting up Luxembourg structures, and therefore, we can capture that wealth from offshore. I mean, generally, in terms of offshore versus onshore, you see different trends. In places like the U.K., you would expect the majority of the money we manage from onshore in markets where the political situation is a little bit more uncertain. You see a lot of money actually moving out of the country and being managed offshore. And I think these 7 booking centers really play to our strengths. I was talking about the fact that being a Switzerland-headquartered bank is a real competitive advantage. But it's also a competitive advantage that we have booking centers in all the places where people want to have their money. Think Singapore, think Luxembourg, think Monaco. These are places where clients want to have their money because they see it as places of stability. And in times like this, it's a huge competitive advantage.

On the RM growth, as we said, we plan to hire at pace more than 150 per year on a gross basis. However, obviously, at the same time, we will be disciplined about performance management. And therefore, you should expect a net growth in RMs, but obviously, the number is going to be much, much smaller.

Anke Reingen from RBC. Thank you very much for taking my 3 questions. The first is on 2028. So if we think about the 80 basis points gross margin and some variability around this, given you want to reduce volatility in the business, where would the upside be coming from? And then if we translate this on the cost-to-income ratio, how do you see the marginal cost-to-income ratio? And then on the return on core Tier 1 capital. So you put a 14% core Tier 1 ratio against it, which would suggest you feel very comfortable about this level and not having going back to the drawing board. Is that something you have discussed with the FINMA? And then lastly, you talk about the time spent with clients. I mean where does it currently stand? And where do you want it to go?

You'll take 1 or 2?

Maybe I'll take -- yes, 1 and 2. So on the gross margin, Anke, obviously, the most predictable component of our gross margin is the recurring margin. And there, we ambition to edge up between 37 and 39 as we progress closer to 39 rather than 37. Second is the interest-driven income component, and that obviously depends on the level of rates, the shape of the yield curve and appetite, if you will, of clients to releverage or not. And the third, of course, is the one that's the most difficult to predict, which is the activity-driven component of the gross margin. Now in our planning, we've taken what I would call a prudent approach and focus most of our efforts in increasing that share of recurring revenues as a percentage of the total gross margin. The one which is the most difficult to predict is obviously the activity-driven component. And I would say we've been, I would say, rather conservative also on the interest-driven income piece as well. With respect to the cost-to-income ratio, I've explained what the input factors or assumptions are for the gross margin. Assuming that level of around 80 basis points from '26 to '28, then we do see a path to get to less than 67% cost-to-income ratio. Now with respect to return on CET1, what we can say is that for any capital distribution decision the Board of Directors will make, we will have to get the requisite approval for FINMA. But maybe, Noel, you want to say some words?

Yes. If you could put me on mic, please. Thank you. Just a quick statement about the volatility because I used that word deliberately in my opening comment. And what I was talking about was volatility that you do not expect from a wealth manager. That's the first thing to remove because I believe that's creating a discount to our share price because you're not expecting those level of losses to come from a pure-play private bank wealth manager. That's the level of volatility that's got to get removed from the organizational performance. There will always be a level of volatility in the underlying financial performance of a wealth manager based on market conditions, interest rates and everything else. But you can understand that, you can price that in, you can adjust your models accordingly for different market conditions. What you're finding difficult to adjust for is unexpected large losses. That's where the priority is. Get rid of that level of volatility by bringing the core proposition of the bank back to what it should be. In terms of capital -- look, it's a very good question about the capital. The capital policy has not changed. That's up there. But clearly, any dialogue that we have with FINMA, any dialogue I have with them as a Board member, as Chair of the Board, I'm going to have it based on, firstly, a good, clear understanding of what risk is left inherent in the business. So I'm not even going to entertain a dialogue with FINMA about a buyback program. It's not the right time to do it. It's not credible. It's not appropriate when we've just taken another CHF 130 million of losses. I, as a Chair of the Board, and the Board will want to make sure we've done a very thorough review of the underlying risk portfolio that's there, that we've got it well managed, mitigating actions in place and that we have a clear understanding of going forward. So there are 2 preconditions for me as a Board member on any dialogue on buyback and any dialogue with FINMA. Never mind whether FINMA wants to have it with us, whether I want to have it with them, and that is make sure we've got the strategic envelope of this bank back into where it should be so that, that level of historic volatility, what I call strategic volatility, does not repeat. That's the first precondition, change the shape of the bank to be back in the envelope of a wealth manager. Second, complete the final review. And once you complete the final review and I'm comfortable on the risk position and that is well mitigated, then it's the time to start having a dialogue about capital levels and buybacks. But that's down the path. So that's the position I take. It's not just a one-way dialogue, in my view, FINMA to us. It's us to FINMA because we've got to be comfortable we can make a recommendation that is the right recommendation for the bank. I hope that helps.

Thank you, Noel. Let me talk a little bit about clients. Maybe I address 2 things first. When I joined on January 9 in the town hall I did to our people, I said I will see 1,000 clients every year. And just to be clear, this is not a KPI. This is not a target that you should measure me on, but it was an expression of a state of mind because the next thing I said when we launched GWMC, I said, if I can see 1,000 clients, you should see 2,000 clients a year. And my point was that from the top of the organization, we need to be obsessed with clients. One of our most interesting differentiating factors is that I can see all of our important clients. It's just not happening at the big universal bank because they have to see the corporate clients and the asset management clients and investment banking clients. I have only to see our wealth management clients, and they love it. They want to engage with the CEO. They want to engage with the CRO. They want to engage with all our senior people, and they can. And I think giving this access and having the people at the top getting the feedback loop is really important because if you think about how you derive strategy, of course, you have your view and then you think about how do you execute. And every time I see a client, I ask, what do you think about our technology? What do you think about our relationship managers, our products and so forth. And so you get a constant feedback loop that informs you if your strategy is correct and if you're executing it correctly. So to me, this is something that I want our whole leadership team to do. They all should get the feedback from clients, engage with them and add value to relationships. Then sort of the question what are clients telling me. I already told you about our value proposition, how it resonates. This global and scale, at the same time, independence is really, really resonating. Some clients have told me we are the equivalent of a large independent M&A boutique. They can do all the big M&A without the balance sheet, but they have independence and they have trust. And they never are in a situation where they conflicted out, which is something that happens all the time when you're part of a large institution. I also get told all the time that we're a relationship-driven organization, not transactional. Our people build long-term relationships. They have a long-term focus. We're not after 5 minutes pitching a product. We are doing what is right for the clients and do so over decades. And I think it really resonates with clients. And the final thing I would say, it's just incredible how we make clients feel. Any events you come to -- and I hope all of you at some stage will become our clients as well. It's incredible how we make clients feel that this is the place for them to be, and not just for our clients, but also the next generation and the generation afterwards.

Giulia Miotto, Morgan Stanley. So my first one, I just want to go back to the technology investments in Switzerland. Did I understand it correctly that this is mostly focused on the client interface? Or are you also changing the core banking system? Then secondly, there is quite a big FX mismatch. Is there a plan to perhaps fix that strategically, maybe relocating some costs to dollar-denominated locations? And then my final one, just following up on the comments on FINMA. What can you tell us about the enforcement procedure and by when that will be done, if you have an expectation on that?

Thanks a lot. Maybe I'll start and then Evie, you can add. On the tech investments, it is both. We need to have the right core infrastructure in -- able to create scale and client experience, and we are doing both. And specifically, in Switzerland, we are upgrading our core infrastructure. On the FX mismatch, Evie can give you more detail, but there's 2 natural levers that we have. I talked about our opportunity set in Switzerland. If we grow our market share in Switzerland, which is one of the largest markets globally, we're going to have a lot more revenues in Switzerland. Therefore, we can offset some of our costs. The second is that we can do offshoring and we can move into high-value locations. I would say that this is a process that is always taking longer than you think. So the progress will be gradual, but over time, we absolutely want to do that and are committed to do that. And then on the enforcement, as Noel just said, we are very engaged with our regulator, but the timing is clearly not up to us. It's up to them.

I don't have that much to add, Stefan. I mean, as you said, our efforts to reduce the currency -- first of all, there's no magic solutions. Let me be clear about that. But our efforts to reduce or dampen, if you will, the impact of the currency mismatch are primarily focused on driving near-shoring opportunities. And for that, we have recently inaugurated our IT service center in Spain as well as in India. For some of the large technology investments that we plan to do in the next 2, 3 years, we will be able to leverage both our Spain IT service center as well as locations in India, in Mumbai and in Chennai, where there's a lot of very good IT talent.

Benjamin Goy from Deutsche Bank. Two questions from my side. So the first is on the 150 relationship managers hiring gross, which is about 10%. If I combine that with improving seasoned RM or flows from seasoned RMs, it seems like you actually factored in quite some attrition. Maybe you can help us understand it in terms of net RM growth a bit better or how many of the AUM you retain once -- after -- let's say, after performance management. And has the platform or the strength of the platform improved? And the second question is on the capital ratios. They are -- or targets. They are unchanged. But nevertheless, you can maybe still explain or remind me why you keep the 11% group floor. And when does it become applicable? Is there, let's say, M&A? Obviously, not happening now, but 3 years can be a long time. Would you dip below 14% for such a transaction? Or why is the 11% out there?

Okay. Thanks, Ben, for the questions. So on the RM gross hiring and net development, we do assume some attrition over the next few years, in '26 in double digits and then falling down to single digits in '27 and '28. In terms of our assumptions around how many assets we would lose in the event RMs leave the platform, it's in 10% to 15%. And in terms of our business case achievement assumptions, so far, we have about 29% of our RM population that is on business case. They have an average tenure of 17 months. And the business case achievement rate is around 66%. And remember, this is always defined in terms of assets under management. Looking forward, we obviously will continue to hire. That's in our plans. And we're factoring in business achievement -- business case achievement rate of around 60%, which is in line with the longer-term historical trend. Now on the capital and the 11%. Let me just remind you that the 14% is not a target. It is a buyback threshold. And the 11% management floor is a level where we never want to go below, even in the case of a strategic M&A transaction, which is anyway not in the cards right now as we're focused on organic growth.

Mike Holton from BNY Newton. 2 or maybe 2.5 questions. Ivan talked about the credit portfolio review a little bit. What's the timing for that to be finished? And then also along the same lines, you've noted some risk and compliance function changes. The reorg there, general thought on timing when that will be finalized, you'll be moving forward? And then the last one is for Evie. The CHF 130 million of additional structural efficiency improvements, how much of those should be personnel savings versus nonpersonnel?

Thank you, Michael. In terms of credit portfolio review, we expect to conclude that over the summer. So hopefully, we can give you an update after the summer. In terms of the risk functions, the key here is that we have a clear delineation between legal compliance and risk. I personally think these are very different skill sets. If you have a compliance versus a credit function, they are just very different things. And I want to make sure we have the best subject matter experts in all our risk functions. So this structure is now in place. The one thing that is still missing is the Chief Compliance Officer. We do a search, open for internal and external candidates, and we'll take our time to find the very best person that is a subject matter expert on compliance, conduct, AML, FCC and so forth.

And Mike, on the cost side, I mean, look, 70% of our cost base is personnel expenses. So there will be some headcount reduction spread across over the next 3 years for this next, let's say, batch of CHF 130 million cost saves. But we will also very much focus on structurally improving things like processes on better control of demand around third-party vendor services. So we will have a very close eye on general expenses as well. And that should be a significant portion of the CHF 130 million as well.

Should we take a final question? Okay. Let's -- we can take 2. Go ahead. Yes, please go ahead.

This is Daniel Regli from Zürcher KB. Just one question on net new money growth and the trajectory from today or this year, 3% to 4.5% -- 4% to 5% in 2028. Can you just -- you mentioned a couple of temporary factors bringing the net new money growth down to 3% this year. Can you just split how much of the bridge from 3% to 4% to 5% is kind of due to the falling away of the negative temporary factors and which is kind of the acceleration of net new money growth? Sorry, maybe a little bit complicated question.

Now you want exact road map with decimal points. Okay.

No, not in decimal points. But just do we have to expect like a bigger term from '25 to '26 and then a more gradual acceleration? Or you see the gradual acceleration starting from 3% to 4% to 5%?

Okay. Let me try and take a stab at that one. So the reason why we talked about or we gave the guidance around 3% for this year is 3 things. One is continuation of the derisking that was initiated last year in the aftermath of the events. The second is the large organizational changes that have happened this year. And the third is because, quite frankly, we don't yet see all the necessary preconditions for a return to releveraging. Now if you look ahead to next year, the first 2 levers will no longer be there, hopefully. And therefore, you should expect that this 3% will gradually have to tick to 4% and then to 4% and 5% as we go through -- at least that's the basis of our planning, right, as we go from '26 to '28.

Andrew Coombs from Citi. Just a couple of follow-ups. Firstly, just on the risk and support headcount being reassigned from the corporate center to the front office teams. I kind of understand the rationale for that in terms of first line versus second line and being better integrated. But how does the reporting structure work? And to what degree is there still an independence of the risk manager versus the person they are potentially now reporting to when you're making those credit decisions? And then the second question, I'd love to get Noel's opinion on this as well. But for years, if I think the Swiss banks were seeing very strong Asia net new money, yourself included, and the likes of HSBC and Standard Chartered were actually laggards. If you look over the last couple of years, that's really flipped around. And I appreciate the definitions around net new money are a bit different. The client base is slightly different. They've got more of a wealth-continuing strategy. But would love to know your thoughts on the competitive dynamics in the region now.

Great. Thanks for asking the question on the operating model on the front. Maybe I should have spent a little bit more time on this. So what we have done is that we had previously people in the second line of defense in risk. And then separately, we had people in the first line that we call front risk manager. But rather than being in the same team and rolling up to the same reporting structure, they were separately distinct in the different, what we call at that time division. And so there was a very easy excuse for the first line of defense, which really should be the relationship manager, to say, well, I'm doing my job, but this person in this other unit hasn't done his job as a front risk manager. So by combining them, we are making sure that the relationship manager is not only accountable and has ownership but also has the ability to, in fact, perform the risk function. And then the business managers, they were as well in a different reporting structure. And sometimes it wasn't clear for the relationship manager if that person is actually delivering value to them or is doing something else. And now these people work inside the teams. They provide leverage. And so we'll have, hopefully, more time for the relationship manager allocated to clients rather than dealing with other tasks. And at the same time, we really want the relationship manager him or herself to feel accountable for the first line of defense. Noel, do you want to go first on the competitive dynamic?

I'm not sure it was a competitive dynamic. I think it was excellent leadership by myself and Bill personally. Listen, look, the one thing I'd say, and I got to be careful -- I shouldn't talk about my past organization on their behalf, but let me just be clear on what the situation was. Private banking and wealth management in a universal bank, and particularly HSBC when I was there, probably didn't get the investment dollars it needed in terms of product development, distribution, digital and technology. We corrected that and we invested quite heavily in my 5 years as CEO in enhancing the capabilities, product, distribution, digital, more RMs. So we -- frankly, we were letting money -- leaving money on the table from entrepreneurs that we already banked as corporate clients. We weren't transitioning the corporate wealth into the private wealth because of underinvestment. We corrected that, so we caught up. Now how does that play into what Stefan said about the core capabilities of Julius Baer? I think it plays in consistently -- look, if you're an entrepreneur, if you're a wealthy individual, you're going to have your wealth distributed across 2, 3, maybe 4 institutions. There is a role for a pure-play wealth manager as one of those groups. There is a role for the entrepreneur, the bank of the entrepreneur as a corporate to transition into a personal wealth manager as well. I don't think it's an either/or. I think it's what Julius Baer needs to do and has done for decades is be the go-to place for independent wealth management advice. And there is a role for that alongside a universal bank wealth manager as well because they're not going to be wholly concentrated on one wealth manager. Now there is a point I wanted to say, look, about the volatility, about incentives. I know for a fact that in our own -- my own time running different parts of HSBC, frontline bankers get affected by reputational damage as well. They don't like being part of an organization that has reputational hits. It knocks their confidence. It knocks their ability to -- or it knocks your ability to attract new talent into the bank. So that's why I emphasize very much upfront we need to get those reputational hits behind us. We need to put that volatility that is unexpected volatility behind us and those reputational hits. What I have seen is you can turn the motivation of people far faster than you think by putting the history behind us and having a clearer future and a more confident future. You can turn people's motivations, whether it's clients' or internal colleagues' motivations, a lot faster than you think. And actually, that can be more powerful than just the incentive scheme. Now we are going to change the incentive scheme as well because it needs to be balanced. It needs to be balanced around conduct, risk and growth. It can't be -- we are no longer going to run this bank where there is only one factor that is the overriding factor of success. We have to succeed on cost management, risk management and growth at the same time. If we do that and you have inherent returns on tangible equity -- or not tangible equity, CET1 of 30%, you have an immense capital generation opportunity. That -- and if you avoid that unexpected volatility, that's how we'll get the multiples up on this bank. So I don't think the competitive landscape is something I'm worried about because there is absolutely a place for a pure-play wealth manager alongside the universal bank wealth managers. And what I think we did -- myself and Bill did, is we basically claimed back business we should have been winning over many years from other universal bank wealth play -- wealth managers. That's what we did. We claimed back that which we should have always had. So I don't think it's an either/or. But the motivation of our people will improve significantly if we stop the hits. And I hope your motivation as investors and analysts, you too will -- your motivation and understanding of what we do will be far better and far more positive. That's the ambition. Thank you.

Thank you so much. Time is up. So let's wrap up.

Don't tell Bill I said anything nice about him, okay?

Can we have the next slide, please? Thank you so much. So thank you all for your engagement and the excellent questions. Definitely, from your questions, I'm getting a lot of food for thought. I just want to reiterate, we want to be proactive, transparent, and we want to restore a relationship of trust with all of you. Let me just wrap up with a summary of today's key messages. We have a unique wealth management franchise with significant underlying business potential. We have made a lot of progress on multiple fronts since January. Those actions form a solid foundation for the transformation process ahead. With our strategy, we strive to unleash the full potential of Julius Baer. We'll focus on delivering a balanced strategy, growth, risk, cost and stop the cyclical nature of our performance. We set ourselves new medium-term financial targets that are realistic, and we are committed to achieve them, breaking with the tradition of overcommitting and underdelivery. We have a management team that is committed and mobilized around our strategic agenda and priorities. And most importantly, we need to continue to be focused on our clients and extremely disciplined in execution. With that, I thank you, everyone, on the webcast to join us. We go off record now. Goodbye.