Credit Suisse Group AG

Adam Gishen - Credit Suisse Group AG Tidjane Thiam - Credit Suisse Group AG David R. Mathers - Credit Suisse Group AG

Kinner Lakhani - Deutsche Bank Magdalena L. Stoklosa - Morgan Stanley & Co.

International Plc Jeremy Sigee - Exane BNP Paribas Anke Reingen - RBC Europe Ltd. Jernej Omahen - Goldman Sachs Kian Abouhossein - JPMorgan Securities Plc

Good morning all and welcome to the third quarter 2017 results call. Before we begin, let me remind you of the important cautionary statements on slide two, including the statements on non-GAAP financial measures and Basel III disclosures.

In this presentation, when we discuss our results, we focus on our adjusted results, as it is the way we manage the operating performance of our businesses. For a detailed discussion of our reported results, we refer you to the Credit Suisse third quarter 2017 financial report.

With this, I turn it over to our CEO, Tidjane Thiam.

Thank you, Adam. Good morning, everyone, and thank you for joining this call.

With me today is David Mathers, our Chief Financial Officer. He and I will now present the third quarter 2017 results for Credit Suisse.

I will give an overview of our results then highlight some specific aspects for our quarterly and year-to-date performance. And David will then, as usual, present the detailed financials, focusing more on the discrete third quarter.

We both look forward to taking your questions at the end of the sessions. So, let's start with slide four.

Our third quarter earnings demonstrate, but we continue to generate positive operating leverage by growing profitably in our Wealth Management business and by, in parallel, reducing operating expenses. Against the backdrop of typical summer slowdown, we have continued to create operating leverage.

At nine months, group revenues are up 6% year-on-year and costs down 6% year-on-year. Our Wealth Management operations have delivered a very strong performance with higher flows, record AUM and higher net margins.

In a seasonally-challenged quarter, our more market-dependent activities delivered a resilient performance. We have achieved these results with a significantly lower risk profile and we have continued to make progress in the wind down of the SRU, reducing this drag on our profitability.

As a result, we have been profitable for the third quarter in a row with group-adjusted pre-tax profits of CHF 620 million in 3Q and CHF 2.2 billion since the start of the year, a significant improvement over 2016 respectively of 90% and 394%. Now, looking at this in more detail and following the plan of this page, first point is that we are delivering broad-based profitable growth in Wealth Management.

We attracted more than CHF 33 billion of net new assets at nine months 2017 and achieved adjusted pre-tax income of CHF 1 billion in 3Q 2017. We have gained share in IBCM and in Global Markets, both divisions delivering a resilient performance in a seasonally-slow quarter with muted client activity and historically low levels of volatility.

Second point, we continue execute with discipline. We continue to make significant progress in reducing our cost base.

Our operating expenses in the third quarter were the lowest in the past four years with CHF 4.4 billion, note that this is the FX neutral number. The actual number is CHF 4.3 billion, but on a claiming credit for the FX.

In the third quarter alone, we reduced operating cost by further CHF 0.4 billion, CHF 400 million, bringing the total cumulative nine months 2017 cost savings to CHF 1 billion. And you will remember that our objective for the year was CHF 900 million, so it's already exceeded.

In the SRU, we are continuing to deleverage at pace, and we'll give you more detail later on this, both I and David. The third key message today then is that we have been able to generate CHF 400 million of organic capital accretion in the quarter on a look-through basis.

Organic capital generation and ultimately the return of the capital to our shareholders has been central objective of our strategy since the start. It is comforting for us that 7 quarters for a 12-quarter restructuring program and as we still carry a heavy drag from the SRU, we have been able to accrete capital.

We ended the quarter with a CET1 ratio of 13.4% or 13.2% as published this morning after adjusting for the 26 basis point operational gross add-on, which we flagged at Q2. Our three year (5:16) program is based now on a few priorities that have not changed, you're familiar with this slide, we've used it before.

I'll address very quickly, it's deliver profitable growth, and as I was saying earlier, generate capital organically. Key objective, reduce cost base, right-size and de-risk Global Markets, strengthen capital, resolve legacy.

Now, let's take these five points in turn to see how much progress we've made, and we'll start with Wealth Management related businesses. In the Swiss Universal Bank, IWM and APAC Wealth Management, net revenues have increased by 9% at the top there in the first nine months of 2017.

We have been able and we must continue to invest in our growth businesses, investing in people in recruiting, in technology and in our control functions, while maintaining a fixed cost discipline. As you see, costs went up 3%, opening some nice churns between the revenue and the cost.

So, this has resulted in CHF 3.1 billion of adjusted pre-tax profit, a 24% improvement year-over-year as a result of operating leverage. Moving on to costs.

You are familiar with this slide too, it shows you quarter-after-quarter, year-by-year trend. You can see this trending down, progressing in the third quarter.

It was particularly strong. While we traditionally then see higher costs in the last quarter, this chart helps you analyze basically our position vis-à-vis the CHF 18.5 billion cost target.

On an FX-neutral basis, we need to be below CHF 5.1 billion, that's the line on the chart there for us to beat the CHF 18.5 billion operating cost base target for end 2017. And we are confident that in our fourth quarter, costs will come in below CHF 5.1 billion, allowing us to end the year below the target announced.

Moving on to risk rightsizing. We have right-sized Global Markets.

You can see here RWA down 47% and leverage down 34%, so very significantly. And at the same time, we have also de-risked.

You can see that the group's VaR is down 53%. So, our group profitability per unit of risk has significantly improved, whilst better protecting the group against periods of severe market dislocation.

Recently, we run three market shock in our news on the current Global Markets portfolio, simulating the market conditions of 4Q 2015 and Q1 2016, which we all remember. The key takeaway is that the impact of the shocks would have been reduced by approximately two-thirds, and Global Market would have been profitable in those quarters should such an event happen now.

This illustrates the magnitude of the de-risking implemented in just seven quarters. Then, capital.

Strengthening our capital has been a core objective of our strategy. Over the past two years, our capital position has been transformed for a number of measures, including raising equity, but also asset sales, the reduction of the SRU, and most recently and for the first time in Q3, capital accretion – organic capital accretion.

All these actions combined give the next picture, which you are familiar with and we just updated with the Q3 numbers. We believe that in dark blue here, the quality of our franchise will become more visible as we do two things in parallel.

One, we improved the intrinsic profitability of the core business, the dark blue here; and two, we reduced systematically the drag from the SRU. Core adjusted profits have grown by 29%, and in the same time, the SRU drag has decreased by 38%.

It's what I call double compound effect and this leads to a significant increase in group adjusted pre-tax income as you can see here, 394%. So, at this point, I'm going to transition to the next section, which is really to give you a few highlights, I think, points that are worth noticing is the performance of our various businesses.

So let's start with Wealth Management. Let me say a few words about our approach to Wealth Management.

We have been, first of all, allocating more capital to Wealth Management and I will illustrate this. We have been very deliberate and explicit about our focus on ultra-high-net-worth and entrepreneurs.

We have also said that we would follow a balanced approach between mature and emerging markets. And finally, we're offering an integrated approach and believe it's highly valued by our clients with – alongside Investment Banking, Global Market, Wealth Management, and Asset Management.

And I meet more than 100 Wealth Management clients a year and I can say firsthand that they all value this very much. And finally, we developed advisory and investment solutions to generate recurring income, which for us is a high quality, high multiple stream of earnings.

We have a good focus on controls and risk management to ensure that we generate quality sustainable compliant growth. In spite of all the cost cuttings underway, the budget of the control functions is basically up 11% at the back level.

So, we are investing in controls, whilst we're cutting cost. So, that's all with capital allocation.

You can see here that we are allocating increasing amount of capital towards our Wealth Management and IBCM businesses as we significantly deleverage both Global Markets and the SRU that we call markets activities here. So turning to the next slide that's the most important for us.

You can see the impact of this on the shape of the group. From the starting point, mid-2015, we have significantly shifted the balance of capital allocation within the bank.

Wealth Management typically generates more predictable annuity-like revenue streams with higher fee income and recovering revenues. As we continue to allocate more capital towards Wealth Management, we expect these benefits to compound and to drive returns higher for our group.

So, that's on capital. Let's move now to something close to our hearts, clients and we try in everything we do to be client focused and client-driven and we want to lift the lid a little bit on what we do with clients.

So, this is a busy slide, and I'm sorry, but what it shows you in light blue is basically kind of revenue per clients curve. And this is actual data that we – we have not given you the vertical axis, but it's a revenue by client.

We have been explicit about our focus on ultra-high-net-worth and entrepreneur. So, this revenue by client in 2016.

The point we want to illustrate is how we move from 2016 to 2017 on this chart. Just a point of principle for us.

We believe that wealth in the economy is created by entrepreneurs. And we know that the wealth-creation process leads to concentration at the top.

That is why we believe that being a bank for entrepreneurs is a winning strategy, particularly in emerging markets. So, using here the example of APAC, we illustrate that progress.

We have chosen four specific clients, three of which brought us little revenue in 2016, you can see (12:13) low revenue, and you can see one large existing client in one. And we're going to show you what we did during 2017 with these clients.

And fundamentally, we have been increasing our share of wallet by offering our range of asset and liability solutions to these clients, as well as by managing their personal wealth. And this results, in this case, in more value for our clients, but also more NNA, more revenue and more profits for our firm, by bringing together Wealth Management, investment management and advisory solution.

For example, we take client two, we did a number of transactions for him, DCM transactions in the billions of dollars and as a result of its relationship, we got an NNA of an inflow of $400 million, and we can multiply the examples. So, keep in mind that these are existing clients, all of them.

They're well-known to our cover, it seems, but they have been underserviced in the past. So, the growth we generate with them by increasing our share of wallet carries no new additional compliance with whatsoever.

So, three final comments on this slide, when you think about growth, three things that happened, first is what I just illustrated, increasing the share of wallet that brings us NNA. Two, all of these people are becoming wealthier.

Over time, they are successful entrepreneurs, so that light blue curve goes up. And three, those economies produce new billionaires every year.

So that population itself grows. So, the reason why we're not worried about the growth potential is that we've got three phenomena for penetration; increase of share of wallet, the enrichment of this population, and the growth of that population in size, we believe there's plenty of growth to go for.

And we believe this has been working for us, that's the next slide. If you look at NNA, the progression is very strong.

We have, in nine months 2017, gathered more NNA than in the whole of 2016, which was already a good year. And keep in mind that really, the major part of resource comes from ultra-high-net-worth, a major part of resource.

So, this leads to record AuM. Next slide – no, the one before.

Yes. You can see the AuM here, 10% to 12% progression.

It's grown at double-digit rate neutral in the past two years, but within that it's important that we have to be transparent about that. It's not NNA.

NNA -our NNA growth which is 100% organic, no acquisitions here, so 100% organic is attractive at 7%. So, 7% of 12%, a bit more than half is organic and the rest frankly is a tailwind, and that's been good for us.

But the thing we're most happy about is this one because it's good to get the flows, it's good to get the AuM, but it's very hard to grow the net margin as you do that, and that's what the teams across our businesses have achieved. So, the strategic decisions we made in 2015 to hire relationship managements, no sorry, managers, to upgrade their skills is paying off, we believe, as we have generated quality, as I illustrated earlier, profitable growth combined with disciplined cost management.

And this illustrates the operating leverage in our model as volumes grew and has allowed us to produce, we believe, industry-leading performance. Now, this growth comes from both mature and emerging market after a balanced approach which is Switzerland, and it's a very, very strong performance, we believe.

Net new assets up 147% on the two phenomena for growth in net flows from CHF 2.3 billion to CHF 4.8 billion but also the decrease in regularization outflows. So, those two components has led us to a really good performance at nine months 2017 and also good progress in PTI on next slide, which is 14% up, double digit in a mature and crowded market in two years, and we're very pleased with the work done there by the Suisse team and Thomas.

So now, if we look the emerging markets, which were mostly IWM with Iqbal Khan and APAC with Helman. Progress has been good, as you can see here, which is just the third quarter with really standout performance from Asia with CHF 5.8 billion of NNA.

And this is translating also in profitability, most importantly for us. Profits for those two divisions are 64% in two years at nine months stage, which is a very, very strong performance.

So, we're going to just look in a little bit more detail at IWM and APAC, and I think you're going to see similar stories there of operating leverage, revenue up, cost control, PTI up. So, these are revenue slides for IWM.

Net interest income rose 12%, the middle bar here. Revenues in total is up 10%, double digit, at this scale of the business, that's a very good performance.

But most pleasing is at the bottom, recurring commissions and fees, that grew strongly year-on-year 11%, demonstrating solid client demand for House View linked advisory solutions, but also progressing our Asset Management operations did very well this quarter. We have been transitioning our Asset Management business towards a model, more focused on recurring fees, recurring management fees, and we have seen improved efficiency as well as higher revenues from specific growth initiative, in particular, from better collaboration with our Private Banking activities where we have been selling very well, but only when they have best-in-class products.

So, this was, of course, enhanced by a few market tailwinds. So, if you combine this 10% revenue growth, with an effort to self-fund the investment we have to make in platforms, people and controls and sorry, it's going too fast, still on the cost side, so progression of 3% of the cost, you of course get a step-change in profitability, which is the next slide, with pre-tax income up 38% over the past two years.

And the other interesting thing is that this is accelerating each quarter if you look on the right at Q1, Q2 and Q3, you see plus 22%, plus 39%, plus 55%. So, really very good performance inside the year.

So, that's for IWM. Moving on to APAC.

Same thing if we look at revenues, revenues in the private bank. Revenue growth is 21%, which year-on-year is very strong.

And this is driven by higher productivity. So, I'm sure you would have seen that the number of RMs is down.

Productivity per RM is up 24% in Asia. So, higher productivity, better RM and banker productivity.

Transaction and performance fees are up 33% year-on-year, while recurring fees and commissions are up 20%. Both of these revenue lines have record performances in the third quarter.

Now, let's look at costs. Here, we must be clear what we're investing.

We're investing in controls and infrastructure and talent. It is worth noting that part of the cost increase is just a result of increased volume-related expenses.

Volume is up 21%, so that grows. But we work hard to mitigate this by generating efficiencies in the non-volume-related expenses, taking it to 12%.

So, volume up 21%; expenses, up 12%. We still maintain positive jaws there.

But it is also worth noting that it's a priority for us to have compliant growth. So, we have significantly increased our risk and compliance spend in APAC, which is reflected here.

So, all this leads to profitability, we have generated very strong profit growth in APAC Wealth Management over the past two years, up over 150%. PTI is already, as for nine months, significantly higher than the full year of 2016, and this is driven by higher levels of divisional collaboration, with that divisional approach we have put in place and innovated with and activity levels with client.

In spite of the progress already made, we remain positive on the opportunity in APAC, with ultra-high-net-worth on entrepreneur wealth expected to double over the next five years, in a market which remains still underpenetrated. So, we still believe there is a huge potential there.

And our integrated model is proving attractive for our clients. We have seen a 30% increase in revenues from strategic clients through the large ultra-high-net-worth entrepreneur clients and 40% of our clients are multiproduct.

In APAC advisory, underwriting and financing, we have generated CHF 150 million of revenue for the fourth consecutive quarter and very importantly, the IBCM bankers have referred CHF 1 billion of NNA to a private bank in the third quarter of 2017 alone. And that's a unique characteristic of our model.

We don't just get NNA from the RMs, we also get NNA from the bankers. And we believe that's a big part of the value of the integrating model.

So, in APAC markets, sequentially in Q3, we grew revenues by 19%, you know that that activity is under deep restructuring and we continue to make progress in reducing operating expenses by 19%. And year-on-year, we believe we're on-track to meet our ultimate return targets of 10% to 15%.

I wouldn't read too much into CHF 52 million frankly, that business is still recovering, still quite fragile, still quite dependent on market volatility and we'll see how Q4 unfolds. But the point is, expenses are down 19%, business has been restructured, and we hope it's going to follow on the path of Global Markets in terms of performance, which give me a good transition to Global Markets.

Global Markets is a fundamental component of our strategy. Our Corporate & Institutional client base is core for Credit Suisse, as much as I've talked about the ultra-high net worth to make that point strongly, and central to the effectiveness and credibility of our integrated approach.

Our flows and activities in Global Markets provide access to capital, to ideas, to information and solutions, with potential to generate significant offer as we leverage these capabilities with Wealth Management clients. Clients, whether institutional or ultra-high-net-worth, require best-in-class global execution capabilities.

Under Brian Chin and his team, we are further strengthening these capabilities, and we will continue to invest going forward. Now, looking at the financial performance at nine months 2017, we have made good progress in creating operating leverage, growing revenues by 8%, while cutting cost by 8%, highlighting the strength of our current franchise and our sustained leading market share across our trading and underwriting businesses.

Now, a few words on Q3, again, a tough quarter. The division Global Markets posted a resilient performance in the quarter, which is seasonally challenging.

This was amplified by continued historically low levels of volatility, muted client activity and a very strong comparable period in Q4 2016, which benefited from a number of idiosyncratic events such as Brexit and the U.S. elections.

And so, higher levels of volatility. So in 3Q, revenues and equities increased by 5%, which we consider a good performance in an area where we have now a refreshed management team.

Fixed income revenues were down 8%, a solid quarter in sales and trading supported by particular strength in securitized products. We are pleased about our risk management and controls in Q3 as the market is characterized by unusually low levels of activity and revenue, we remain disciplined in terms of our risk appetite.

With these results, we remain on track to achieve our 2018 objectives of CHF 6 billion of revenue and CHF 4.8 billion of costs. Let's turn now to IBCM.

IBCM achieved a strong relative performance across products in nine months 2017 and continued to deliver against its strategy in the traditionally slower third quarter, increasing share of wallet in advisory and equity underwriting. Jim Amine and his teams achieved top five rankings in M&A, Leveraged Finance and ECM, including a number one position in IPOs in 3Q 2017, which we're quite proud of.

Adjusted pre-tax income reached CHF 54 million for the quarter and totaled CHF 297 million in nine months 2017, up 92% compared to nine months 2016. So, after these highlights by division, I'd just like to say before handing over to David, a few words about cost and capital.

We have talked to you for a few quarters about our workforce strategy and also a few words about technology here because we're taking a technology-led to costs in order to ensure that the efficiency gains we are achieving are sustainable. We've got a few examples here.

It's far from existing that we have decommissioned more than 30% of our application since 2012. But the point here is that we use some of the savings generated by the de-commissionings to invest in new technologies and digitalization.

We have put 150 live robots in place with another 60-plus in development. And we're running an ambitious program to move an increasing share of our operating system to the cloud.

But we will, at the Investor Day, give you much more color on this. Now, all these efforts lead to cost reductions that are continuing at pace.

As I mentioned at the beginning of my presentation, we have achieved an additional CHF 1 billion of saving at nine months 2017, putting us ahead of a full-year target of CHF 900 million. These savings are in addition to the CHF 1.9 billion of net savings we already achieved in 2016.

So, cumulatively, we are at CHF 2.9 billion at this point. Now, a word on the SRU, we have continued to make progress in deleveraging the SRU.

We have reduced RWA by CHF 3 billion in the quarter or 13% sequentially and 53% year-on-year. Leverage is down 43% year-on-year and 10% sequentially.

Costs are down 35% and 10% sequentially. Q3 was a quarter of strong progress, which sets us well on track to complete the accelerated wind down of the SRU by 2018.

And to illustrate that point for 2017 of RWAs to be compared to the 11% objective for the end of 2018. So, completely achievable.

Capital, we have continued to strengthen our capital base with almost CHF 35 billion of CET1 equity at the end of Q3, benefiting from the accretion of CHF 400 million of capital during the quarter. It's a good foundation from which we can serve our clients and show regulatory compliance and maintain a buffer against future market shocks.

So, wrapping up on our year-to-date performance, I will close with the following slide which you are familiar with. It illustrates the significant operating leverage in our business model.

Our jaws of 6% revenue growth combined with strict control in operating expense is down 6%, have resulted in nine months 2017 pre-tax income of CHF 2.2 billion, up almost fivefold from the same period 12 months ago. So, in summary, we remain focused on delivering profitable growth across Wealth Management, exceeding our 2017 cost target and completing the accelerated wind down of the SRU by end 2018 and maintaining a strong capital position.

With that, I will hand over to David. Thank you.

Thank you, Tidjane. Good morning, everybody, and I'd like to thank you for joining our third quarter earnings call this morning.

I'm going to start with the usual summary of our third quarter results on slide 41, and we show here the group numbers on both the reported and the adjusted basis, and these have been prepared on the same definition that we've used in prior quarters. As is our normal practice, we provide a full reconciliation of the adjusted and the reported results in the appendix.

If we look at the results for the third quarter, we achieved a reported pre-tax income of CHF 400 million on net revenues of CHF 5 billion. And I'd note that the reported pre-tax figure includes the charge of approximately $80 million in connection with the MassMutual Life Insurance Company settlements that we announced in September, as well as restructuring costs of CHF 112 million.

On an adjusted basis, we achieved a pre-tax income of CHF 620 million, which is a 90% improvement compared to the third quarter of last year. Year-to-date, our adjusted pre-tax income was CHF 2.2 billion, which is a significant increase compared to the CHF 444 million in the first three quarters of 2016.

Our net income was CHF 244 million in the quarter with an effective tax rate of 38%, which takes our year-to-date net income to CHF 1.1 billion at an effective tax rate of 31%. As I said in July, we'd expect our effective tax rate for the full year to be in the mid-30%s range, and this view has not changed.

Now, as per our usual practice, for the balance of this presentation, I will focus on the adjusted numbers as I believe these more accurately reflect the operating performance of our business. Let's now turn to slide 42 to review our capital and our leverage positions.

We show here the walk across for our risk-weighted assets and our leverage exposure quarter-on-quarter. You may recall that when we announced our second quarter results back in July, I said that we would expect to see a net 20-basis-point adverse impact in respect to the incremental operational risk RWA relating to our RMBS settlements with the DOJ and the NCUA.

And this included an expected offset over time from reduction in the op risk RWA from the business exits and position downsizing achieved by the SRU division. In terms of the impact for the third quarter, we've now included CHF 5.2 billion of additional op risk RWA, which equates to a gross 26 basis point reduction in our CET1 ratio.

This has been booked in the Corporate Center. A further tranche in respect of the NCUA settlement totaling CHF 3.2 billion for RWA we booked in the fourth quarter.

We continue to make progress in our discussions with FINMA around the offset from the SRU, but we have not yet booked any credit from this. But we would confirm our guidance of a net impact of approximately 20 basis points in due course from these two offsetting measures.

Now, in terms of business reductions which, as you know, are net of FX moves, the most significant reduction was gained in the Strategic Resolution Unit, where we reduced risk-weighted assets by CHF 3 billion. As a result, at the end of the third quarter, RWA excluding operational risk in the SRU stood at $17 billion.

Now, given the progress that we continue to make towards reducing positions in the SRU, we remain ahead of the schedule required to reduce our RWA excluding op risk to $11 billion by the end of 2018, when we will close the SRU. If we look at the overall group, at the end of the third quarter, risk-weighted assets stood at CHF 265 billion, that's an increase of CHF 6 billion from the second quarter with nearly all of the increase coming from the op risk add-on.

That equated to a CET1 ratio of 13.2% at the end of the third quarter. That note, as Tidjane has said already, that without the 26 basis point deduction from the op risk add-on, the CET1 ratio would've been 13.4%.

That underlines our capital generation. I'd note that both our operating free capital generated as well as our CET1 capital increase was approximately CHF 400 million in the quarter.

Leverage exposure for the group stood at CHF 909 billion at the end of the quarter, and that's an increase of CHF 3 billion from the end of the second quarter. The majority of this was due to FX movements, partly offset by business reductions, primarily within the SRU.

Our tier 1 leverage ratio was therefore stable at 5.2%, which continues to surpass 2020 Swiss too-big-to-fail requirement and in line with our stated guidance to operate at approximately 5% tier 1 ratio going forward. The CET1 component of this was 3.8% at the end of the third quarter, which again exceeds the Swiss 2020 TBTF requirement to be at 3.5% or greater.

With that, let's now turn to our cost program on slide 43. We continue to make further significant progress in reducing our expense base, and we achieved approximately CHF 400 million of net – further net savings in the third quarter.

That brings our total net savings for the first nine months of the year to around CHF 1 billion, which surpassed the target for the full year for net savings to be over CHF 900 million. Our total cost number for the first nine months stands at CHF 13.4 billion which, as you can see, puts us well ahead of our target to be below CHF 18.5 billion expenses for the whole of 2017.

I'm sure you don't need this reminder, but just please note, our cost program continues to be measured on an FX constant basis from the full-year 2015 baseline of CHF 21.2 billion. Now, in terms of the main components of the CHF 1 billion of net savings we've achieved so far this year, this has been primarily driven by the reduction in our contractor and consultant count and to lesser extent by reduction in our permanent workforce.

The savings were driven by expenses and wide-ranging workforce strategy, which continues to be aimed on removing duplication and a fragmentation across our businesses and building integrated processes in lower-cost locations. As a consequence, we are seeing a sustained reduction in costs, continued gains in efficiencies, and reductions in operational risk.

This remains a core component of our ambitions to drive costs to well below CHF 18.5 billion this year, putting us on target to deliver the further improvements in productivity to achieve our goal, reducing our cost base to be below CHF 17 billion for 2018. With that, I would now like to turn to each of the division's performance, and let's start with the Swiss Universal Bank on slide 44.

For the third quarter, the Swiss Universal Bank delivered a solid pre-tax income of CHF 448 million, and that's an increase of 4% year-on-year. Now, please note that the reported PTI which you see in our accounts for the third quarter of 2016 did include a gain last year from a single real estate sale, which totaled CHF 346 million.

But if we focus on adjusted profits, which is a core measure of the division's performance, that marks the seventh consecutive quarter of year-on-year pre-tax income for the division. Year-on-year net revenues were flat at CHF 1.3 billion with higher client activity offset by lower revenues from our trading service operations.

Operating expenses declined by CHF 3 million year-on-year with reduction in personnel costs being partly offset by investments in our regulatory infrastructure. And I'd note that the continued low level of provision for credit losses in the third quarter reflects the high quality of our loan portfolio.

In Private Clients, we saw an improvement in operating leverage with pre-tax income of CHF 217 million, an increase of 11% year-on-year. Revenues increased by 3% year-on-year, driven by an improvement in client activity.

I'm also pleased to announce in the third quarter, we successfully launched the Viva Kids banking package, which includes the very well-received Digipigi savings tool for children, Within Corporate & Institutional clients, lower trading service revenues impacted transaction-based fees. Our net performance was also impacted by a decline in recurring revenues due to lower discretionary mandate fees and the selected EAM exits that we discussed before.

We saw continuing momentum in the Investment Banking business in Switzerland with good deal flow in M&A, ECM and DCM. If we look at net new assets division, we saw good progress in product lines, with further net new asset inflows of CHF 1 billion in the third quarter, taking the total for the nine months to CHF 4.7 billion.

That equates to an annualized growth rate of 3.3%, which is one of the highest levels we've achieved in recent years. Now notwithstanding this, I would caution the fourth quarter does normally see a slowdown given the mortgage repayment cycle in Switzerland in terms of our net new asset flows.

If we turn to Corporate & Institutional Clients, net new assets were negatively impacted by a CHF 13.3 billion outflow from a single public sector mandate. But I would note, however, that the loss of this mandate will have a very limited impact on revenues due to the low margin of this contract.

Now, finally, I'd also note that in the third quarter, we finalized our review of the selected EAM exits, and these totaled CHF 0.7 billion of outflows in the quarter, which takes the total to CHF 2.5 billion for the first nine months of 2017. Let's now turn to International Wealth Management please on slide 45.

In IWM, we continue to drive improved profitability in the third quarter with a pre-tax income of CHF 382 million, up by 59% year-on-year. That means that the pre-tax income of CHF 1.1 billion for the first nine months of the year is in line with the full-year pre-tax level that we achieved in 2016.

The improved operating leverage in this business was evident as higher revenues in all major categories, coupled with continued cost control, resulted in a significant step change in the quarterly pre-tax income. The cost-to-income ratio improved to 69%, which is down from 78% in the third quarter of last year, and return on capital increased to 29%, up from 20% in the third quarter of last year.

If you look at the Private Banking results for the third quarter, we saw continued improvement in profitability in all regions, with a third quarter pre-tax income of CHF 272 million, up by 43% year-on-year. This improvement was driven by a net 10% increase in net revenues, coupled with stable costs year-on-year.

Now, if you look at the components of revenues, net interest income was up by 13% year-on-year, driven by higher loans and margins. We've continued to broadly match the growth in assets under management with similar growth in recurring commissions and fees, which increased by 12% year-on-year.

Transaction-based revenues increased by 3% year-on-year, driven by significant increase in client activity-related revenues, but offset partly by lower revenues from trading services. The overall growth in Private Banking was supported by our focused efforts to improve client engagement and sharpen the visibility of our Chief Investment Committee's House View solutions.

We've continued to see a significant improvement in structured product sales with clients benefiting from the uptick in yield of these products. This is an area where we remain extremely focused, and we're going to further enhance the collaboration between our Private Banking and our trading businesses through the formal partnership between IWM, Global Markets, and the Swiss Universal Bank.

Private Banking net new assets amounted to CHF 3.6 billion from the third quarter, equivalent to a growth rate on an annualized basis of 4%. For the first nine months of the year, net new assets stood at CHF 12.9 billion, an annualized growth rate of 5%, with strong inflows across both Europe and emerging markets.

Regularization-related outflows remained relatively muted with a total of only CHF 1.2 billion so far this year. I think at this point, therefore, I would like to revise down our guidance for regularization-related outflows from the CHF 3 billion to CHF 5 billion range I gave in July to an expectation that these would total only around CHF 2 billion in the whole of 2017, and that compares to regularization-related outflows of CHF 5.7 billion last year.

In Asset Management, the third quarter pre-tax income of CHF 110 million more than doubled year-on-year. I'm very pleased to say that we've successfully transitioned our Asset Management business towards a higher revenue contribution from recurring management fees with a lower reliance on investment and partnership income, which does tend to be more volatile.

This shift should also reduce the historic skew in our Asset Management results towards the fourth quarter. Now, if we look at net new assets for the quarter, Asset Management reported net new inflows of CHF 1.1 billion.

In the third quarter, we saw good contribution from alternative investments partly offset by outflows from our emerging market joint ventures. Year-to-date, net new assets amounted to CHF 18.9 billion, largely driven by inflows in both traditional and return of investments.

And I think these net new assets inflows demonstrate the success with the increased collaboration of our Private Banking businesses both in Switzerland and globally. Let's turn now to Asia Pacific, please, on slide 46.

In the third quarter, Asia Pacific delivered a pre-tax income of CHF 228 million, an increase of 30% year-on-year. We saw continued momentum in Wealth Management & Connected activities.

Whilst in markets, we saw a significant improvement compared to the last quarter. In WM&C, we delivered our pre-tax income of CHF 178 million for third quarter, up by 75% year-on-year.

The return on regulatory capital is equally strong at 25% for the quarter, compared to 17% in the third quarter of last year. Net revenues for the business grew to CHF 548 million, a 14% increase year-on-year.

We saw a particular strength in the private bank, with revenues up by 16% year-on-year, driven by higher transaction revenues and increased recurring commissions. If we look at advisory, underwriting and financing, revenues are up by 10% year-on-year, primarily driven by financing activities for ultra-high-net-worth and entrepreneur clients.

Equity underwriting activities were lower year-on-year, but we would still expect to see a pick-up in the fourth quarter. Looking at net new assets, we generated inflows of CHF 5.8 billion in Asia Pacific in the third quarter and annualized growth rate of 13%.

I would note though that in terms of inflows, the fourth quarter of the year does tend to be seasonally slower, we saw that in 2016 and I'd expect to see it again this year. The net margin improved significantly by 16 basis points to 31 basis points year-on-year and that reflects higher client activity, as well as a lower provision for credit losses.

And that's been achieved simultaneously with a 13% growth in assets under management. In markets, I'm pleased to say that we are seeing the significant benefits from the various restructuring measures with the business achieving a pre-tax income of $52 million in the third quarter.

Expenses have been reduced from $375 million in the third quarter of 2016 to $302 million in the third quarter of 2017. We've also seen a pick-up in equity sales and trading activities where we benefited from the higher volatility in Asian markets and some improvement in client activity, primarily in equity derivatives.

But the difficult markets for fixed income sales and trading continued in the third quarter, with revenues declining by 20% quarter-on-quarter with a lower level of activity in emerging market rates. And we'd still remain cautious for the final portion of the year, given the normal seasonal patents.

With that, I'd now turn to Investment Banking & Capital Markets please on slide 47. We continue to execute on our strategy in IBCM.

Revenues for the first nine months improved by 12% year-on-year with a market share that was high in both EMEA and in the Americas compared to the same period last year. Pre-tax income for the third quarter stood at $54 million, taking the total for the first nine months to $297 million, an increase of 92% compared to the first nine months of 2016.

If we look at the individual businesses, we saw the strongest performance in advisory with revenues of $187 million in the third quarter, up by 13% year-on-year and outperforming the decline in industry fee pools. In equity underwriting, IBCM achieved the number one rank in IPOs in the third quarter, the highest ranking since 2008.

Revenues of $68 million in the third quarter was down by 11% year-on-year driven by muted convertible bond issues and follow-on activity, but up by 28% in the first three quarters. In debt underwriting, revenues of $242 million was down 2% year-on-year, driven by a decrease in Leveraged Finance revenues.

We saw lower loan activity in the Americas as well as lower investment grade acquisition financing revenues compared to the comparable period last year. And if you look at the first nine months, revenues are up by 10% compared to 2016.

Since turning to the fourth quarter, we continue our strong backlog of deals to close this year. And subject to markets remaining constructive, we'd expect similar formats in the fourth quarter this year that we saw in the fourth quarter of 2016.

Let me now turn to Global Markets please on slide 48. In Global Markets, we maintained a conservative approach to risk, and this delivered resilient results amid muted market conditions and seasonally lower client activity.

For the third quarter, we achieved a pre-tax income of $101 million or net revenues of $1.3 billion. And as I noted in July, you can see we've now moved back to reporting under a fixed income and equity structure.

In equities, we saw a consistent improvement across the franchise with a 5% increase in revenues year-on-year. Prime service results improved, reflecting higher client financing and lifted derivatives performance.

Cash equity revenues increased, reflecting higher revenues in Latin America, which offset a reduced volume environment in the United States. We did, however, see a slowdown in issuance activity year-on-year.

Now, if we turn to fixed income, our trading results were resilient compared to a strong performance in the third quarter of last year. We saw continued outperformance in securitized products, particularly in our asset finance business.

This was offset by lower Leveraged Finance activity and reduced investment-grade issuance. Emerging market revenues declined by year-on-year, reflecting the strong comparative performance in the third quarter of 2016.

We also saw further declines in our residual macro businesses due to the persistently low levels of volatility. And I'd remind you that the third quarter of last year did benefit from higher volatility and increased client activity relating to the combination of U.S.

elections, Brexit and the impact of money market reforms a year ago. We've remained disciplined on costs with operating expenses down by 4% year-on-year, bringing costs for the first nine months of the year down by 8%.

And we remain on track to deliver our goal to be a bit less than $4.8 billion in expenses in 2018. You'll note that there was an uptick in risk-weighted assets and this largely reflects the expiry of a credit risk hedged in the third quarter given that Global Markets continues to operate well below its RWA cap of $60 billion.

Now, if we turn to revenues. we've continued to execute on the strategy outlined for this business, and we remain on track to achieve our 2018 goal for revenues to be in excess of $6 billion.

We've invested in the business and you'll have noted a significant number of new and senior hires, particularly in the equities. As we mentioned last quarter, we formalized the relationship with IWM and the Swiss Universal Bank, which will substantially increase the depth and the diversity of the product offerings for clients, improving the integration between our trading businesses and our Private Banking flows, and delivering significant upside potential as a result of this increase in collaboration.

We'll further discuss this partnership at our Investor Day at the end of this month. So let me now conclude with a few words on the Strategic Resolution Unit, please, on slide 49.

So, I'm pleased to say that the SRU has continued to make further substantial progress in the third quarter, with reductions running ahead of the run rate required to meet our end 2018 goals. And just as a reminder, we intend to reduce risk-weighted assets excluding op risk to $11 billion and leverage exposure to $40 billion by the end of 2018.

Now, if we look at the third quarter, the adjusted pre-tax loss was $484 million and that compares to $546 million last quarter and $527 million in the third quarter of 2016. Net revenues decreased by $95 million compared to the third quarter of 2016, and that primarily reflects, as we've said before, the lower fee-based revenues as a result of the business exits that have now been accomplished.

Exit costs stood at CHF 72 million in the third quarter, and that's equivalent to 2.8% of RWA and that compares to 1.3% in the third quarter of last year. Nonetheless, the lifetime exit costs of the SRU represent 1.2% of RWA, which is significantly lower than (52:23) our long-term guidance to be at less than 3% over the lifetime of the SRU.

Operating expenses of $228 million reduced by $123 million or 35% compared to the third quarter of 2016. And this reduction results from a number of initiatives, including the exit from our former U.S.

Private Banking business. Furthermore, as we've already disclosed, during the third quarter, the SRU took a pre-tax charge of approximately $80 million in relation to the settlement with MassMutual.

In terms of the progress towards our capital goals, compared to the end of the second quarter, we've reduced leverage exposure by $7 billion, 10%, and we've reduced RWA excluding operational risk by $3 billion or 13%. That takes the cumulative reduction in leverage exposure to $103 billion, 60%, and the reduction in risk-weighted assets excluding operational risk to $37 billion or 69% since the end of 2015.

And during this time, just to put this in context, the bilateral derivatives trade count has been reduced by approximately 229,000 transactions or 69% of the opening total. Reductions in the third quarter was driven by a combination of activities, including the sale of the majority of our remaining limited partnership fund interests.

These positions are clearly capital intensive from an RWA perspective. Furthermore, through a combination of unwinds, innovations and restructurings, we're able to reduce our interest rate and FX derivative exposures by another 16% in the quarter.

And we further reduced our loan exposures through a number of different avenues, including sales and unwinds. Now with that, I'd like to pass the presentation back to Tidjane, please.

Thank you very much, David. So, let me leave you with our key messages for today.

We believe these results demonstrate, one, that we are delivering profitable growth across Wealth Management; two, that we will exceed our 2017 cost target; and three, that we are working hard to maintain a strong capital position. So, with that, we look forward to taking your questions, and we should open the call to questions.

Yes. Good morning.

I've got three questions. First one is on the Corporate & Institutional Clients business within SUB where we're actually seeing some quite negative operating jaws in Q3 on a year-on-year basis.

And I guess if I think about SUB as a whole, the last two quarters are indicating a run rate of CHF 1.8 billion, CHF 1.9 billion pre-tax compared to your CHF 2.3 billion target for next year. So, question being, is the negative operating jaws in C&IC challenging the target for next year for the SUB division?

Second question on capital where I see your LCR ratio has gone to 181% compared to, I think, your previous guidance that you should be able to bring this to circa 150%. If you did, then it feels like the CET1 leverage ratio could head up pretty close to 4%, which I think is your kind of stated goal and clearly change the story in terms of capital return.

So, question is, why is the LCR ratio going the wrong way, and do you still see it heading towards 150%? And final question, if I may, is on MiFID.

We're two months away. I just wondered if you could give us some guidance as to how we should think about it impacting our forecast for next year and beyond.

Okay. Again, good morning to all.

Thank you. Thank you, Kinner.

I think you're correct on C&IC. The main thing you are seeing there is the exit of the EAMs.

That's where you're going to find it. We talked a lot about the fact that we are exiting EAMs and that's been impacting our numbers negatively for quite a while.

I mean, the rest of it is really various business ventures but that's the main thing you're seeing there. And we expect really this to be not at all structural and we expect a rebound in 4Q, so – as the drag from the EAM exit is almost done, over.

So, that's the number one factor. On the target, I think CHF 1.8 billion, CHF 1.9 billion, I hate to make profit forecasts, that's why I let you (57:38) for that.

But we think that we have plans to get to that level in 2018. So, we are not reconsidering this at this point.

Capital, LCR, David?

On the LCR ratio, I'd probably just refer you to page 54 of the MD&A. So, what you see there is that you saw two things.

First, if we actually look at net cash outflows, the denomination of the LCR ratio has actually dropped from CHF 96.2 billion to CHF 92.5 billion, which is what you'd expect seasonally given the lower level of activities because LCR, the actual outflows are very closely correlated to level of business activity in any particular quarter. And I'd remind you it's the weighted average, not the end quarter.

That said, we did see a pickup in the HQLA from CHF 159 billion to CHF 167.8 billion. I think there's two points there.

Reality is the amount of HQLA we need is actually driven by a subsidiary structure and the requirements we see operate to in each regime for that. I think we could probably reduce this by, maybe, CHF 10 billion as we actually optimize the HQ at this point, which would be about 1% reduction in terms of our leverage.

I think I'd be reluctant about going beyond that. In terms of target ratio, yeah, I would expect it to be lower than 181%, but I would note, the actual ratio is inflated by the fact that the denominator in the third quarter is seasonally lower.

And, of course, that does tend to be something we see in the fourth quarter, which we will know is a seasonally quite quarter.

The last question on MiFID. Sorry, I think – can you repeat for us the third question?

Yeah. MiFID is two months away from implementation, so I'm just trying to get some commentary to help me understand what kind of impacts there will be, not just in 2018 but beyond as well.

That might influence your earnings profile?

Very fair question, Kinner. I'm afraid we may disappoint you on the answer.

I think at this point, Global Markets business in particular is obviously engaged in various discussions with our accounts particularly in Europe, but obviously it is a global trend, not just European reform. I think you're aware that in terms of provision to fixed income research, we regard that as trade inflows, so therefore it's not something we actually charge for and that's been widely commented on in the press and media.

But I'm not sure that's particularly changed for us from where we were before. On the equity research side, I think we've had a positive perception for many of our clients around that pricing proposal.

So, I think that's good. I think the content is well-received.

But I think clearly it's a substantial change in the landscape next year, and that will come through most in Europe, but I think it will be a global change there afterwards. But I think we've been positively impressed so far by the reaction so far from the core European clients, which is clearly the first wave.

Now, clearly MiFID II actually goes way beyond just being a research issue. It comes down to the reporting requirements that we have to our accounts.

That's a big investment process for us, a little work being into that. We'll be able to deliver that on time for our clients and I'm not particularly worried about that.

But that's clearly the other side of this.

But just to add, we think that overall we're well-positioned with HOLT, which as you know is a very, very popular product on the equity side and something that clients value. So I was opening saying we may disappoint you because frankly, it's quite uncertain how this is going to play out, we need to be open about that.

We don't know. I see Brian Chin nodding over there.

We don't know, we're well prepared for any eventuality, but I wouldn't want to be held to a given scenario here. But we think that the approach we've taken, no charging profits income resurge, possibly for charging for submitting on that side and building on HOLT on the equity side to defend our franchise, I think is probably the right answer for us.

But we'll have to continue this conversation I think quarter-after-quarter.

Great. Thanks for trying to clarify.

Yes, thank you.

Hi. Thank you very much for taking my questions.

I've got two. Now, the first one is on gross margins and refers particularly to the slide 57 in your presentation.

Now, could you help us understand the quarterly trends in the gross margin particularly, in kind of APAC and IWM? I understand there's of course seasonality per quarter, and also, you've talked particularly in IWM about lower revenues from trading activity.

But how should we think about that I suppose, pressure on the gross margin and at IWM and also the expansion in APAC and how is it likely to be delivered going forward? So, that's my first question.

And my second question, you have been kind of delivering on costs kind of quarter in, quarter out for the last pretty much straight four quarters. And of course, the delivery that we've talked about in your commentary over that period had quite a few kind of cost savings initiatives, be it the personnel policy, be it the IT infrastructure efficiencies.

Of course, a big part of the SRU rundown, legal entity programs and so forth. When you think about the cost savings into 2018, which one of those programs do you still kind of feel quite strongly and confident about?

Thank you.

Okay. Thanks a lot, Magdalena.

I think I'll let David start with the gross margins.

Thank you. I'll just start off by saying that the core metrics we look at for our Wealth Management business is clearly the pre-tax profits they make and return on capital.

So, I think, clearly seeing the step changes we see in the third quarter. 29% in International Wealth Management, I think, is a very strong result and very much a vindication of the strategy we working to.

So, I think that's one we should start on. That's clearly what is key for us in terms of value generation.

If we then look at page 57 just in terms of the details here, I think if you look at the gross margin, you can see that for the third quarter 2017, in APAC, the gross margin has actually doubled from 15 basis points to 31 basis points. It's lower than it was in the second quarter, but you'd expect that given that the summer is always a seasonally-lower period in terms of trading activity and we've remarked on that.

I think the key thing here is the actual – so the net margin has actually doubled from 15 basis points to 31 basis points. If you look at the gross margin for APAC, it's actually up from 84 basis points to 87 basis points which, I think, given the range of this business, the fact, essentially a lot of our business is clearly biased towards entrepreneur and ultra-high-net-worth clients, I think it's a very steady performance in the context and I think reflects the progress we talked about, and particularly some of the initiatives Tidjane mentioned in terms of what we can do actually improve the returns from some of our clients where we have excellent relationships that we haven't perhaps fully provided the range of services we can provide.

If you look at IWM, I'd make the same comparison. The net margin has actually increased from 25 basis points in the third quarter of 2016 to 31 basis points in the third quarter of 2017.

And yes, it's down basically both the net and the gross level from the second quarter. But I'd make the same point.

The summer is a seasonally low point in terms of client activity, and I think we've noted that we've seen some weakness in our trading service revenues as well, which did also impact the C&IC results in answer to Kinner's question before. But I think, frankly, if you look at this net margin for IWM, 31 basis points compared to 25 basis points in the third quarter; APAC, 31 basis points against 15 basis points and a step-up in return on capital, I think it's a pretty strong performance.

If I may add to that. As you know, we're not driving a revenue-focused strategy, but a value-focused strategy.

So, we're running it for return on capital, not for margin. So, we use a margin window consistent with the story.

But that's the on a quarter-to-quarter basis, I think, one can really read too much into margins. You have to look at it over a longer period of time, so I would go to page 53, which is a slide we've used before, just give you time to get there, but it's the return on capital per – return on regulatory capital per business.

And if you look at that, you see that APAC WMC goes from 20% to 28%. That's what we run the business for.

And that IWM goes from 23% to 28%. That's real value for our shareholder.

Margins are interesting, but they are so impacted by market effects, volume effects, et cetera, that we ultimately – how much capital do we use, what returns do we generate on that, and is the return the are return on capital going up, which I think is the case here. Well, that's for me the most pleasing part of that story, we're driving return on capital up in our most capital-efficient, least capital- consultative businesses.

And on cost, do you want to...

I mean, I think your second question, Magdalena, I mean, we have always talked about operating a very broad portfolio of measures to improve the efficiency and productivity of Credit Suisse. And as you said that includes some of the IT investments, the move to the cloud.

It includes the SRU rundown, and it includes the reduction in legal entity program. You asked me what I feel most strongly about.

The answer is I feel most strongly about all of these things because firstly, one, we are committed to reducing our total cost to below the CHF 18.5 billion number for this year and to below CHF 17 billion for next year. Secondly, it's not just for that the absolute cost number, it's actually about productivity, and it's about improving operational risk.

And all these measures are actually driving towards a fundamentally more sustainable, more efficient and lower-cost environment. So, I'm not sure I'd pick any of them out.

Certainly, we'll come back to this at our Investor Day at the end of this month. But I'm honestly very pleased that we're clearly very well on track, I'd say probably ahead of track in terms of our 2017 performance, and that positions us well for achieving our goals for 2018.

There's a lot of things driving this. A sort of a short-term aspect to this cost program, and the longer term things.

When you take something like a single client view, I think that's how we call it internally, which is the ability for us to have a single client view both internal and external. We have a compliance lab, we have 18 Phds there, 54 people with masters.

I went to see them the other day as well. There will be room for the team to develop a phenomenal system.

It's now covering 95% of the clients. As we roll that out the efficiencies out of that are huge.

If we kind of change that increases effectiveness and efficiency is cheaper because now instead of having paper floating all around the company and books is moving, it's all digitalized and electronic. And it's safer and more effective because you'd be amazed what the system will spit out if you put a client name in it whilst respecting the law and client confidentiality.

And the gains on that are almost exponential, you gain on every layer. So, as we roll things like that across the bank, we're going to get efficiencies, we've got the workforce strategies that transfers to Raleigh in North Carolina but we've talked about, which are also generating a lot of gains.

We're streamlining the legacy system, so generating a lot gains. We are becoming better thinking more carefully about our changed programs, we'll think more carefully about the make-or-buy tradeoff, and that has had huge impacts, positive impacts that we used to make most of what we do in IT, maybe 70%, 80% and we're fitting that.

We've gained great effects and products are delivered faster at a lower cost and more effectively. So, I could go on and on and on.

It's a way of running the bank more than numerical targets. And as we more and more run the bank like that, the cost comes through.

So, I'm really confident in the cost delivery. We have some benefits on the revenue line, too, as you do those things better.

One of the things that (70:29) has done in IWM, that is allowing to get these types of results there. If you improve, it's very basic, but if RMs spend less time on administrative tasks, but like increasing your RM population.

So, we get double benefit. You spend less, but as you free up their time, they can also bring in more flows.

If you had what Thomas has done in Switzerland. The number of RMs per advisor, the number of clients per advisor is down.

What we've done by creating centers where we have segmented the clientele, some clients go to a centers, the most profitable clients got to stay with their advisor, is that advisor are now fewer clients and is spending more time per client. And we've seen already in the numbers the progress generated by that.

So, it's a whole range of thing and really goes way beyond 2018.

Thank you very much.

Good morning. Thank you.

I'm resisting the temptation to ask about the Digipigi product, I think we'll save that for the Investor Day, actually. But two sort of...

Very grateful.

I don't want to steal your thunder. Two questions instead, I was going to ask about actually.

So number one, you mentioned regularization and you've obviously improved the guidance for this year. Are you done at year-end 2017?

Or is there a sort of any that's spilling over into 2018? That's my first question.

And then second question which is also a bit of a timing question, just on the FINMA model approval. Do you see any chance to get that done by the time of the 4Q numbers?

Or do we just need to sort of expect the further kind of 18 bps of op risk impact in 4Q? And then the FINMA model approval comes in 2018, do you have any view on that?

Okay. Thanks, Jeremy.

Maybe I'd say a few words about regularization. I mean, as you know, our former guidance on IWM was CHF 3 billion to CHF 5 billion.

Given that the actual at nine months is CHF 1.2 billion. We are now forecasting CHF 2 billion for the year instead of CHF 0.8 billion for Q4.

But there are some timing effects there. So, there will be some beyond 2017.

Do you want to...

I think at this point, I think – clearly, the amount of regularization remained to be done is getting to lower levels. So, I think I'd be reluctant to give explicit guidance for IWM for next year given it is getting to lower levels, I mean – but I guess at this point, there may be something but it seems very much likely to be less than a level we're guiding for 2017.

So, again, it's the end of that. I think I'd also just note that not quite on regularization but on the EAM outflows within the SUB business, SUB C&IC business.

Reality is we've got further CHF 0.7 billion that we took in the third quarter. We regard that program as complete now at the end of the third quarter, so I wouldn't expect anything particularly material in the fourth quarter, nor would I expect anything in 2018.

And for APAC, I think there is some potential for some regularization outflows over the next year or so, but it's going to be small, probably less than the IWM levels at this point. So, I think overall, not a big impact in the business.

But I did want to be very clear on the Swiss Universal Bank point, please.

Except for really unknown, unforeseeable events in the future, on the basis of what we know today, we expect it not to be material going forward. Not to rule out – we need to report on it explicitly as we've done in the past, it's the best we can say after 2017.

I think on the – Jeremy, on the second question really, which is around the op risk RWA and the SRU exits. I think we have continuous conversations over the course of the last quarter and we have made progress on that.

I think there is a general understanding for this. I mean I think we didn't say so in the meeting, but the SRU actually completed a transaction a month ago which actually removed nearly all of the remaining clients from the U.S.

exit, which just recall started 90,000, I think now it's less than 100 clients left. So, the businesses have actually exited, and I very much hope that we will see an offsetting credit in the fourth quarter.

But I think that's very much up to our final discussions with FINMA over the course of the next few months.

Okay. Thank you.

Okay. Thank you, Jeremy.

Next question?

Yeah. Thank you very much.

I just wanted to actually follow up on the op risk question, and I was wondering if this is on top of your targets of reduction and risk-weighted – operating risk-weighted assets in the SRU to $11 billion, or is the expected benefit basically part of the reduction to the $11 billion? And you've given us some impact about – some guidance about the Q4 risk-weighted assets inflation from regulation?

And if you – if there's anything you could directionally probably point us in 2018. And then on the private bank, you talked about allocating more capital to the private bank.

And I just wanted to understand if this is a – if there're initiatives or where you proactively sort of like push probably more lending, or is this just a result of your volume goals as well as reduction in other business areas? Thank you very much.

Thank you.

I think on the first point, so the last couple of quarters, at least I think, we have been quoting the RWA numbers ex-op risk for the SRU, because I think we just want to be clear. We reduced the RWA ex-op risk by $3 billion in the third quarter to $17 billion.

We have a goal to be at $11 billion which is the same as we actually said in the Investor Day last year by the end of 2018, so that's $6 billion to go. We're going to achieve that.

And that is entirely set from any release that we actually get from the regulators in terms op risk. So – and that's why we actually quote them separately just to be clear on that particularly point.

And we took it in corporate center.

The increase is in a quite...

(76:51)

The operation which is separate, this is in the CC.

Okay. Thank you.

I think the second question you ask was really around the reforms to Basel III. I think most people are aware that there clearly was a further – I mean several further BCBS meetings this year, and there was one just prior to the IMF Meeting in Washington a few weeks ago.

There was obviously also some speculation that that could lead to a final approval, but it doesn't seem to happen. There was obviously some pushback from certain European governments at that point.

I would expect, it seems likely, that there'll be at least one further BCBS meeting before the end of this year. Whether that's been approved by GHOS, I wouldn't want to speculate on.

But I think given the state of these negotiations, I think it's not really possible for us to provide any further guidance at this moment.

Okay. And on capital allocation.

This is – we have a regular internal capital allocation meeting and I'm looking at my team here in the room. It's the best attended meeting in the company.

They're all laughing because I'm quite tight-fisted with capital, and that's really the meeting where we go to fight, capital is a scarce resource. I believe you drive a company with capital allocation, and it has to go to the best destination.

And I try to be very fair. So, there's no predetermined allocation, so really we have to fight for capital.

And they only get it if they can use it profitably. That's the best I can say.

So, those macro numbers you saw, they are the aggregation of this micro-process, and if Wealth Management ends up with more, it's because they have better uses for capital on a risk adjusted basis and that's where we run the process. And so far we have good results.

Okay. Thank you.

But it's not that you're running any specific initiatives to push up the capital (78:51)?

No. It's not a bottom up and top down.

We knew where we actually want to go. Every quarter, they know what their pipeline is.

We look at that – I mean, that's ours line by line. And yeah, in the end, there's a capital allocation decision made, and it's all actually quite formal, signed off by everybody, and people run with that and they're held accountable on the capital that's been allocated and the returns on that capital.

And we follow that week by week.

Okay. Thank you.

Good morning from my side as well. Actually, I just have one question, I think, at this stage, and it relates to the workout of the SRU.

And I'm just referring here to – I think it is slide 49 of the presentation. And you point out that the exit losses were only CHF 72 million, which is very low.

I guess that it's correct to expect the workout losses to be low given that the portion of the portfolio that was worked out during the quarter was the lowest since the start of the SRU. So, if I have the right numbers, I think the risk-weighted assets are down broadly by CHF 2 billion on the quarter and the leverage exposure by CHF 6 billion, which is broadly half the pace of the previous quarters.

So, when the exit losses actually looked at in the context of the portion of the portfolio being worked out, we get to a quite high number. And I just wanted to ask you three things on this topic.

Now, so number one. What type of assets were worked out over the course of Q3?

And therefore, why is the loss relative to the scope of the assets worked out high. Number two, how should we think about this?

Also, at what point does the loss – the pre-tax loss for these units start declining meaningfully, let's say, by half? At what point do you say, okay, we worked out what we can.

And so we're now going to reflect that in cutting the operating costs as well. And finally, I wanted to ask, so in terms of longer-term guidance and I fear now that you're just going to repeat what was said before, that you're going to update us at the Investor Day.

But at what point is the SRU mission complete? Are we now talking next year, the year after that or even later?

Thanks a lot.

Great questions. So, David, that's yours.

Thank you very much. Actually you do need to look, as the SRU, RWA is now getting to quite low levels you do really need to look at them at one decimal place.

The actual exit run rate for RWA was actually higher in the third quarter than the second quarter and we'll send those numbers to you to one decimal place later. In terms of the percentage of losses, yes, I agree.

I think I did comment that the exit losses was actually at CHF 72 million, was actually 2.8% of exit losses.

1 point something. Yeah.

Yeah. Which I think is the highest level of exit losses we've actually seen over that period.

And if you actually look at the MD&A on page 43, you'll see there's a comment there, which relates to higher exit losses relating to the sale of legacy Asset Management positions. Essentially, we sold a portfolio of LP interests, which were actually sitting in the SRU.

And I think you understand the – you know as well as I do, that the liquidity of those assets is rather limited. As a consequence, we did have to take a reasonable discount to actually move those positions.

And that's what pushed up the exit loss to 2.8%. Clearly lifetime, it's 1.2%, and I think we've said before in last year's Investor Day actually, that as we get to the end of the portfolio, there will be trickier positions to shift and they may require to greater discounts to get there.

I think we're looking at, obviously, extremely comfortable against lifetime guidance of 3%, given we're at 1.2%. But I wouldn't be particularly surprised to see that rates step up as we move the final $6 billion of RWA, which we have to achieve over the next five quarters.

Clearly, just on the run rate basis by the way, in order to achieve that, we have to achieve CHF 1.4 billion per quarter. And so, clearly, where we were for the second, we're actually running well ahead of that in terms of the exit pace.

Right.

You then asked the question which was around when would we actually expect to see the actual losses drop. And I think we've been pretty clear about this before, which is the SRU actually bears the majority of a collection of very expensive funding cost instruments, which fall due for maturity in the third quarter of next year.

So, you will see a very sharp drop-off as those are actually redeemed because those instruments are paid back. There's nothing much we can do about that.

I mean there's limited ability to actually redeem these assets prior to that.

But that's a real material tailwind for this equity story.

Exactly.

We couldn't wait to get to 2018 because we get a big uplift there really.

And I think in terms of guidance for next year, we've always had a target that the loss to SRU next year would be CHF 1.4 billion or less and I think, we also have a target to be CHF 800 million for 2019. I'm not going to update those targets today, we'll come back to it at the Investor Day.

Right.

But I think that CHF 1.4 billion target is still very much our goal for the SRU next year in terms of those number. Aand that will be driven both by position reductions and also by operating expense reductions

Perfect. Can I just go back to one point, David, that you mentioned before.

So, you said, as you would expect the somewhat difficult positions to shift and the loss rate could go up from here. I think you actually used the word step-up from here.

So, the way to think about this is to forecast a rising exit loss in the coming quarters, yeah?

No, I'm merely cautioning that as a consequence of that, we have some residual positions left. And the focus of our effort is actually now on leverage reduction, to a greater extent than RWA reduction.

The percentage of RWA may more be in the sort of 1.5% to 2.5% level, than in the 1.2% level you're seeing for lifetime. I don't think you should construe more to it than that frankly.

All right.

It's a mix within the CHF 1.4 billion, one would say that the CHF 1.4 billion stays. That's highly confident, but we don't go above CHF 1.4 billion, but the mix within that quarter-by-quarter, may be different.

Because really, we're making those decisions, this private equity thing, David, we agonized over it. We knew it would increase the loss in this quarter.

But on the other hand we wanted it out because for gains. So, it's also kind of an art as much as it sounds quarter-by-quarter, transaction by transaction.

But I think we will be well within the guidance we gave which is, frankly, you come from CHF 2.9 billion, then you need CHF 2 billion, then you need CHF 1.4 billion. So I think the relative changes there, how much PTI you get is still very material.

All right. Perfect.

Thank you very much.

Okay. Thank you.

Yes. Hi.

First of all, just a few very quick ones, IWM. Can you give me the mandate penetration this quarter?

You gave it last quarter. Secondly, ultra-high-net-worth, can you tell me how much penetration or how much of your assets are ultra-high-net-worth in IWM and in APAC?

And then thirdly, on Global Markets, the clean cost income is CHF 92 million in the third quarter. If you achieved your target, you're running around CHF 80 million.

I'm just wondering how you're thinking around operating leverage, which clearly is still very high even achieving your targets in a more volatile environment? If you can just run me through your thinking and in that context, clearly, your cost flexibility.

And one more question regarding markets, Global Markets, in equities, as you mentioned, you have made some key hires. Can you just tell me what the strategy is in equities in terms of, I assume, growing revenues?

What is it that you're doing differently going forward?

Okay. Thank you.

Thank you, Kian. Mandate penetration for IWM I think is at 30%, yeah?

We have 30% in the third quarter.

So, unchanged, okay.

Yeah. And for high-net-worth, you wanted the percent of AuM?

Yes, if possible.

Yeah? Okay.

PB – IWM it's – 3Q, it's 61%, and PB APAC is 62%.

62%.

And from 59% – in 2Q, IWM was 59% and APAC 61%, so slightly up.

Perfect.

Okay. And just one number again, year-to-date, the net sales in mandate was CHF 7.2 billion in IWM, to give you another...

Yeah. That's very helpful.

Yeah? Okay.

So, we still believe that ultra is our key to strategy and (88:27) AuM and we drive the growth. This is why we talk about it so much and it takes us away from a lot of discussions of secular decrease in margin.

And we are not in the mass affluent market or in the – we have 100 strategic clients in IWM and we have 50 strategic clients in Asia and that's it. So, we're in a very different business from a lot of people who talk about Wealth Management.

Global Market cost income, look, it's a fair comment, but we're still at a high cost income. And I'm going to ramp this up with the equities.

One of the big opportunities for Global Market is to work better with the private bank and Wealth Management. It will not have escaped your attention, but the profile of a person we hired to run equities and where this person comes from and the track record this person has of driving collaboration between equities and Wealth Management.

And if you want the penetration, we won't give a number. But our own penetration of our own Wealth Management is very low, okay?

There is a big revenue upside in Global Markets there. That's not in the numbers we're giving you of kind of CHF 6 billion in 2018, et cetera.

And that's where a lot of tailwind is going to come from, plus the joint venture that we have announced between Global Markets and IWM that we've called ITS, getting them together to generate efficiencies, which we are capturing, but also more importantly revenue upside. So, really equities – strategically, it was taking up SMG but we're done.

And I think, by the way, we haven't had a question, but it increased the cost in IWM quite significantly. So, just keep that in mind also when you look at IWM cost evolution, we transfer the SMG to IWM.

And so, that was one strategic thing because the volatility of earnings is where we want to derisk again and stabilize GM. We've done that.

We've hired beyond Mike Stewart (90:35) himself, really a range of people to drive our equities business up in EMEA (90:41) from Barclays and others. And then we're really getting them to – I mean, actually if you look at cash and prime, they did okay this quarter.

They did okay in our number with better upside in equities. And look, it's not going to be overnight, but we are going to continue pushing that equity story.

I think it's a run of 18 to 24 months story. But you're going to see a lot of the upside come from collaboration and working better with our Wealth Management, and Mike Stewart (91:11) will tell you any day but he won't disclose.

He doesn't really understand why we don't use them today because it's going to make his equities business better to see all those flows that are clients from the Wealth Management bring. So, it's kind of a win-win really on both sides.

Just on equity. Is that more an issue of organization or is that more an issue of you just don't have the products?

Like you mentioned in APAC you had good sales of structured products, but you didn't mention it when you talked about Global Markets. Just trying to understand what the issue is?

It's a little bit of all of that. Okay.

So the first question I asked Mike (91:47) after a few months, was it diagnostic? And it's a combination of people issue.

Frankly, we've lost some people and that actually predates me, it's really some organizational changes we made, transferring some of those things out of equities. We lost some really good people.

We just haven't done enough in, if you wish, pushing the products in the Wealth Management and that we should look at with difference in performance with us and others and what we know of their numbers. A lot of it is there.

And there's also an issue around prime, where we are looking at our pricing. And from the intelligence we have, there is also an upside there where we can get better revenues with prime base we have by being even more disciplined.

We've done quite a bit already but there is an upside there. And finally, there is really equity derivatives, but that's more of volatility-dependent.

If there's any normalization in volatility, you're going to see a big improvement there. Yeah.

Thank you.

Okay. Thank you, Kian.

Okay. Well, thank you.

That brings us to the end of our third quarter 2017 results. I thank you all for attending, and we look forward to seeing you at our Investor Day on the November 30.

Thank you.