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CNBC Transcript: Interview with Sergio Ermotti, CEO of UBS


Following are excerpts from a CNBC interview with Carolin Roth and Sergio Ermotti, CEO of UBS, from Zurich.

SE: I'm very pleased with the strong results in a very challenging environment but also I'm pleased with the comparison to the second quarter of 2015 and we had an uptick and that's a very strong performance.

CR: Your primary business is that of being a wealth manager. What we're seeing is that there still is no client confidence. How difficult is it to push your clients into making any sort of trades into buying products?

SE: Well we're not really pushing clients to do trades because their risk aversion is very high. We saw a high level of cash positions, 28 percent in our wealth management business. If you go to the Americas the clear cash level is 25 percent, which for the U.S. market is very, very high. So we manage through staying close to clients, advising them how to navigate this environment, but clearly transaction activities is down.

CR: Is there any silver lining? Do you have anything in your sort of visibility where you could say things are probably going to get better or is it that things will stay cautious for now? Like you've told me for the last 20 quarters probably.

SE: I hope I would be wrong. To be honest. I think that the reality is that there is very very little visibility about the future and on every front to macro and also geo political and the two factors are more and more converging and affecting one to each other, and so I think that I don't see any relief in the foreseeable future.

CR: Let's talk about the investment banking business. We saw that equities revenues went actually down 22 percent in part I guess because it's skewed toward Asia. But actually FX held up pretty well. Was that Brexit related? Was there any other effect?

SE: No I think that yes there is this sentiment of Asia, year on year comparison, which the first half of last year you remember was pretty strong in Asia. We were pleased with the good activity in our US equity business. In FRC effects and rates the uptick was across the board during the quarter but clearly a few days before the Brexit vote and the days after the Brexit vote was a very very high level of volume and activity in the FX market and we were benefiting from that.

CR: Let's stick with Brexit for a moment. Is that materially going to change your business outlook. Will that change your presence in London?

SE: It's way too early to make statements about that. The process are started in terms of negotiations or actually officially not started and therefore we have a rolling 24 months time to outline our plans. We are prepared for any kind of scenario. We have a very material presence in Europe in terms of locations where we could ship some of our businesses but it could well be that the UK has a passport into Europe and nothing changes, so we are flexible and ready to respond once the rules are determined.

CR: The banking sector in Europe clearly is in trouble right now if we take a look at the slide in the share prices. Your stock too has suffered, it's down some 30 percent since the start of the year. How frustrating is it to you to see that happening when actually your bank has no capital concerns? Operationally you've got a sound business and you're being dragged down by some of the Italian lenders. Maybe a German lender for example.

SE: But in general if I look around, first of all I'm pleased that the market do recognize our strategic clarity, our capital position is very strong.

CR: But still your stock is down.

SE: It's down but as you mentioned it's a relative game and we are one of the few stocks that is trading about a tangible book and this is a pretty good performance and, look you know, we have to focus on executing on our plans and when there is a rerating and normalization of this environment we will benefit, but clearly it's very difficult on an absolute basis to outperform such an environment.

CR: One of the lenders that's been in trouble is BMPS in Italy and I woke up to an interesting news report saying that you had offered an alternative proposal to save the bank. Is there any truth to that?

SE: Well the bank has issued a press release yesterday and we do not comment on clients' transactions or activities so I have to stop here.


Sarah Whiteacre


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