UBS Group Conference Call Summary Company Overview - **Company**: UBS Group AG (NYSE: UBS) - **Date of Call**: September 30, 2025 Key Points from the Call Industry Context - The call focused on UBS's response to the Capital Adequacy Ordinance consultation, emphasizing the need for balanced and internationally aligned regulations following the Credit Suisse crisis [3][4][10]. Core Arguments and Positions 1. **Support for Regulation**: UBS supports strengthening regulations based on lessons learned from the Credit Suisse events, provided they are targeted, proportionate, and internationally aligned [4][10]. 2. **Concerns Over Capital Requirements**: Proposed capital requirements would unduly penalize UBS, which has operated without regulatory concessions and played a key role in stabilizing the financial system during the Credit Suisse crisis [4][8]. 3. **CET1 Capital Impact**: The proposals could eliminate around CHF 11 billion (12%) of group equity as eligible capital, significantly impacting UBS's financial position [10]. 4. **Software Capitalization**: The proposal to remove capitalized software from regulatory capital is seen as detrimental, as software is crucial for operational efficiency and competitive differentiation [11][12]. 5. **Deferred Tax Assets (DTAs)**: The full deduction of DTAs from regulatory capital is unprecedented and not aligned with practices in other jurisdictions, potentially harming UBS's financial stability [14][15]. 6. **Prudential Valuation Adjustments (PVAs)**: The proposed stricter treatment of PVAs does not reflect UBS's progress in reducing valuation uncertainty and could misrepresent the bank's financial health [16][17]. 7. **AT1 Instruments**: UBS supports strengthening AT1 instruments but opposes automatic suspension of coupon payments after losses, advocating for a more transparent approach linked to predefined capital ratios [18][32]. Additional Insights - **Regulatory Landscape**: The current Swiss regulatory environment is already stringent, with UBS's minimum capital requirements being higher than many peers [7][8]. - **Market Confidence**: UBS's ability to restart AT1 issuances post-Credit Suisse indicates strong investor confidence in these instruments [18]. - **Political Engagement**: UBS is actively engaging with Swiss authorities and stakeholders to ensure that the regulatory changes are balanced and consider the broader economic implications [44][46]. - **Future Outlook**: The timeline for final ordinance changes is expected by mid-next year, with parliamentary deliberations extending into 2027 [19][30]. Potential Risks - **Competitive Position**: The proposed capital measures could undermine UBS's competitive position relative to international peers, particularly if they do not align with global standards [7][10]. - **Political Uncertainty**: The ongoing political process surrounding the consultation may lead to unpredictable outcomes that could affect UBS's operational strategy [41][46]. Conclusion The UBS conference call highlighted significant concerns regarding proposed regulatory changes that could impact the bank's capital structure and competitive position. UBS remains committed to engaging in constructive dialogue with regulators to ensure that any changes are reasonable and aligned with international standards.

UBS's Position on Regulatory Proposals - UBS supports enhancing regulation post-Credit Suisse but opposes the proposed capital measures as disproportionate and not internationally aligned[10] - UBS supports most proposals if they are proportionate, targeted, and internationally aligned[13] - UBS strongly opposes extreme measures misaligned internationally that don't address lessons from the Credit Suisse crisis[14] Impact of Proposed Capital Measures - Proposed changes to the Capital Adequacy Ordinance (CAO) would eliminate approximately $11 billion in UBS Group AG CET1 capital, representing about 15% of the total[10] - The CAO proposals would understate UBS's CET1 ratio by approximately 2 percentage points[10] - The sum of proposed capital measures would result in the strictest regime among peers[15] - The proposed capital measures would make UBS a pronounced outlier and understate its stated CET1 ratio[17] Specific Concerns Regarding Capital Deductions - Full deduction of capitalized software lacks regulatory and economic justification[22] - CAO proposals would eliminate approximately $45 billion of CET1 capital related to capitalized software at the Group level[21] - Deduction of temporary difference Deferred Tax Assets (TD DTAs) would be misaligned with other major jurisdictions and would not reflect realizable asset value[28] - Prudent Valuation Adjustment (PVA)-related measures should not be based on business combination accounting[30]

Financial Data and Key Metrics Changes - Western Alliance Bancorporation reported over $1 billion in sequential loan growth for the second consecutive quarter, funded by nearly $2 billion in quarterly deposit growth [7][12] - Net interest margin increased by six basis points sequentially, rising above 3.5% due to robust average earning asset growth and lower interest-bearing deposit costs [7][10] - Net interest income grew to almost $700 million, reflecting a 7.2% quarter-over-quarter increase and nearly 29% annualized growth [12][15] Business Line Data and Key Metrics Changes - HFI loans increased by $1.2 billion quarterly, with C&I loans contributing over two-thirds of the growth from both regional and national businesses [18][19] - Non-interest income rose 16.4% quarter-over-quarter to $148 million, driven by a 25% increase in mortgage loan production volume [12][19] - Mortgage banking revenue was approximately $78 million, with core mortgage banking revenue tracking flat year-over-year [12][19] Market Data and Key Metrics Changes - Deposits grew by $1.8 billion in Q2, including a $300 million decline in wholesale brokered deposits, with solid growth in non-interest-bearing and savings products [19][20] - Regional banking deposits increased nearly $800 million, demonstrating continued relationship momentum within commercial clients [20] - Digital asset banking program generated $400 million in quarterly growth, indicating strong demand in the blockchain payments sector [20] Company Strategy and Development Direction - The company plans to unify six legacy division bank brands under the Western Bank brand by year-end to present a unified marketing presence [10] - The focus remains on achieving organic growth up to and through the $100 billion large financial institution level over the next eighteen months [36] - The company is optimistic about the potential for increased deposit growth due to regulatory changes and new deposit strategies under the new CFO [84][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of asset quality, expecting criticized assets to decline over the next several quarters [30][21] - The updated guidance for 2025 includes loan and deposit growth outlooks of $5 billion and $8 billion respectively, with net interest income growth revised higher to 8% to 10% [27][28] - Management anticipates that the mortgage business will remain flat year-over-year but expects commercial banking activities to drive the bulk of earnings growth [44][45] Other Important Information - The company announced a planned CFO succession, with Dale transitioning to a new role overseeing deposit initiatives and innovation [4][5] - The total equity grew to $7.4 billion, and tangible book value per share increased to $55.87, reflecting a 15% year-over-year growth [25][26] - The company remains asset sensitive on a net interest income basis but is essentially interest rate neutral on an earnings-at-risk basis [16] Q&A Session Summary Question: Insights on the CFO transition and its timing - Management expressed excitement about the organizational change, emphasizing that it will enhance the team's versatility and capitalize on new opportunities [34][36] Question: Clarification on deposit growth targets - Management indicated that they are on track to meet the $8 billion deposit growth target, with expectations for a more muted seasonal dip in Q4 [37][39] Question: Fee income growth expectations - Management anticipates a rise in fee income driven by seasonal activities in mortgage and growth in commercial banking activities [44][45] Question: Outlook on expenses and investments - Management clarified that the increase in expenses is primarily due to seasonal deposit costs, with planned investments to support growth initiatives [46][49] Question: Credit quality and non-performing assets - Management expressed confidence in asset quality, stating that they believe they are at a peak and expect stabilization in the market [94][96] Question: Loan growth expectations for the second half of the year - Management confirmed that they are maintaining the $5 billion loan growth guidance, with strong pipelines and expectations for loan yields to decrease slightly due to anticipated rate cuts [99][100]