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Edited Transcript of EFGN.S earnings conference call or presentation 24-Jul-19 7:30am GMT

Half Year 2019 EFG International AG Earnings Call

Zürich Jul 26, 2019 (Thomson StreetEvents) -- Edited Transcript of EFG International AG earnings conference call or presentation Wednesday, July 24, 2019 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Dimitris Ch. Politis

EFG International AG - CFO

* Jens Brueckner

EFG International AG - Head of IR

* Piergiorgio Pradelli

EFG International AG - CEO

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Conference Call Participants

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* Andreas Venditti

Bank Vontobel AG, Research Division - Head of Banks & Senior Analyst

* Claude Baumann

* Daniel Regli

* Daniele Brupbacher

UBS Investment Bank, Research Division - MD, Banking Analyst and Head of Equities Research Switzerland

* Michael Kunz

Zürcher Kantonalbank, Research Division - Research Analyst

* Nicholas Herman

Citigroup Inc, Research Division - Assistant VP and Analyst

* Patrick Winters

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Presentation

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Jens Brueckner, EFG International AG - Head of IR [1]

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We're going to start. Good morning, ladies and gentlemen. Another very warm welcome to our First Half 2019 Results Presentation on a very warm day, as probably everywhere in Europe, in Zurich this morning. Thank you very much for attending in person, also for the people who joined us via webcast and the conference call.

We will, as usual, start the presentation with the statements of Giorgio Pradelli, our CEO, who's present today; and Dimitris Politis, our CFO. And then afterwards, we have enough time to answer all your questions.

As usual, I'll point out to disclaimer on the second page of the slides. And with no further delay, I hand over to Giorgio for his introduction. Thank you.

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Piergiorgio Pradelli, EFG International AG - CEO [2]

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Thank you, Jens. Good morning. And also from my side, I'd like to welcome you here in Zurich and who is on the phone and via webcast. As Jens already anticipated, I will have a short overview in the next few pages about the key highlights of the first half results for EFG, and I'll give you an update of the progress of the execution, delivering of our strategy following the announcement back in March of our 2022 strategic plan. Thereafter, Dimitris will give a detailed overview of the financial results for our first half 2019, and I will close with a brief outlook and overview of the strategic priorities going forward.

Now in terms of our key highlights regarding the first half results for EFG, clearly, we are focusing on executing our growth strategy, and we are investing in growth. We are very pleased that our assets under management reached CHF 147.6 billion. This is over a 12% increase. This increase is clearly due to the acquisition of Shaw and Partners, which we announced back in March and closed in April. It is due to positive market effects; and last, but absolutely not least, to positive net new asset developments.

Regarding the new assets, we are very pleased with the rebound in the second quarter. Actually, in the second quarter, the growth of NNA was in -- within our target range, which is between 4% and 6%. We have seen positive inflows in particular in the U.K. and a very good performance in Continental Europe. On the other hand, we have seen in Latin America, and in particular in Asia Pacific, deleveraging. This is following the geopolitical tensions that we have seen in the region, and this has led many clients to deleverage their portfolios.

In terms of underlying net profit, we have recorded CHF 75.6 million, while the IFRS net profit has been impacted by legacy issues. Dimitris will go in detail in the figures later on.

Let us now give an update of our strategy. Clearly complementing the acquisition of Shaw and Partners, which obviously was external growth, the focus has been, in the last months, mainly on executing our organic growth strategy.

The organic growth strategy has 2 main pillars. One is the hiring of CROs. To date, we already hired more than 100 new CROs. They were 94 at the end of June. This is a record for EFG, how many new CROs we have attracted in half a year. And the second pillar of our organic strategy is the regional -- the expansion in international markets. We call them the regional initiatives. I'll go in more detail later on. Suffice to say here that we are on track with these initiatives.

Clearly, we have seen also some headwinds. In particular, I mentioned already the deleveraging in particular in Latin America and Asia, but we see also headwinds in terms of margins. Overall, this is, I would say, a trend that is affecting our industry. And for this reason, it is obvious that we need to continue to be very disciplined in managing our costs and increase the efficiencies. We are on track in achieving our cost synergies of CHF 240 million by the end of this year.

On the next page, I'm on Page 5, we give an update of the various initiatives that we have already presented back in March when we announced the 2022 plan.

I already mentioned that in terms of hiring new CROs, we are very well on track. Actually, we are ahead of plan. We are not only ahead of last year. In the full year 2018, we hired 39 CROs. In half year, we are around 100 million. So clearly, it shows the shift from integration to growth.

Also I would say, we are ahead of our plan. In March, we announced that our target of new CROs would be between 70 to 100 per annum, and we achieved, as I said, already 100 in the 6 months. Our pipeline remains very strong. We are also pleased because this hiring is not concentrated, it is across regions.

And also we are pleased, I will come back to that later, but it shows that the EFG growth story resonates well, and we are able to attract among the best professionals in our industry.

Clearly, we want to improve also the productivity of our existing CROs. We have raised the bar, I would say. And we see that the average size of the portfolios are increasing. Also we are improving our penetration in terms of advisory and discretionary mandates. This is now at 47%, including Shaw and Partners. Excluding Shaw and Partners, it would be at 42%, but the trend is quite positive.

Clearly, Switzerland is the largest region. We announced that this is a strategic priority to get back on track. For sure, compared to a year ago, we've made tremendous progress. On the other hand, we still have to do the last mile to bring Switzerland back to growth trajectory in all its locations.

Already anticipated, but we are very pleased with the rollout of our international expansion, our new business initiatives. We have relaunched our Italian business. In March, we have launched our advisory branch in Lisbon. We are ahead of schedule in setting up a presence in the Middle East, and we are strengthening our global coverage of independent asset managers. We have announced that we have signed a partnership with Expersoft in order to roll out from September onwards a multicustody platform that will increase the connectivity between the independent asset managers and EFG. And this, for sure, will increase the client experience and also the independent asset manager experience and productivity when they work with EFG.

I already mentioned about external growth and again the business that the transaction has been closed in April, and the business is fully consolidated.

So to close, I would say a very intense half year. We have shifted seamlessly from integration to growth. And you can see that all the business initiatives, growth initiatives that we have announced back in March, they are all -- they've been all in -- rolled out, and we are very pleased with the beginning of this new phase of the EFG story.

With this, I will pass the floor to Dimitris for a detailed overview of the financial results for the first half 2019. Thank you. Dimitris?

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Dimitris Ch. Politis, EFG International AG - CFO [3]

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Thank you, and good morning. We'll start with Page 7, which is more housekeeping today for you to understand and be able to probably read the first half results. As we also mentioned during our presentation in March, we have discontinued reporting certain elements relating to the BSI transaction. So AUM attrition, underlying NNA and BSI integration costs will not appear any longer in any of our communication.

Obviously, we still continue reporting certain things as a nonunderlying, like the life insurance, BSI and acquisition-related intangible amortization, and some legal legacy costs and provisions.

For the first time, we have Shaw and Partners integrated in our results for the -- for 2 months of the year, so for May and June. And you also get a full reconciliation between underlying profitability and reported IFRS profitability at the back of this presentation on Slide 30.

Moving on to Page 8. These are the highlights of the results for the first half of 2019. As Giorgio said, AUM now stands at CHF 147.6 billion following the acquisition of Shaw and Partners. We have NNA of CHF 0.3 billion for the first 6 months. This is an annualized growth of 0.5%, which reflects stabilization in Switzerland, strong performance in the U.K. But we also have seen deleveraging, which is a substantial amount of CHF 0.8 billion, hitting mostly Asia and Latin America.

We are investing in growth. We have accelerated CRO hiring with more than 94 CROs being -- which have joined, have signed or have been approved by us to join in the first 6 months. And we are on track with new initiatives, and these include Italy, Portugal and the Middle East.

Our underlying net profit came in at CHF 17.6 million versus CHF 62.6 million in the second half of 2018. This equates to our underlying return on tangible equity of close to 11%. Our IFRS net profit, which has been impacted by life insurance, came in at CHF 31.5 million.

As you will see, and I'll expand further later on, there is a continuous effort to streamline the organization. The FTEs at the end of the first half of 2019 were 3,095, excluding Shaw and Partners, so on a like-for-like basis with about 60 FTEs down versus the end of 2018. And we have managed to deliver an additional CHF 20 million of synergies from the BSI integration, which means that we are on track to deliver our target for the end of 2019.

Just to remind you, the total target for BSI synergies came at CHF 240 million by the end of 2019. As mentioned before, we had the negative impact from life insurance at CHF 27.7 million. And to conclude the highlights, core Tier 1 at 17% and total capital ratio at 21%. This follows the acquisition of Shaw and Partners, which obviously had an impact on our overall capital ratio because of the goodwill that we paid to acquire the entity. Finally, we renewed the share repurchase program for 8 million shares. This started in Q2 of this year, and these 8 million shares are going to be acquired to offset any dilution coming up from RSU incentive programs that we have for our employees.

Page 9 includes all the highlight figures. I will not spend time on this page. This is a summary of all the figures that you'll find also in the press release and obviously in the full accounts -- full financial statements that have already been published.

Page 10 gives you the 4 main points of today's presentation. One is our NNA growth is going again positive versus a negative figure in the second half of 2018. We had CHF 0.3 billion of NNA the way we counted.

Just to remind you, we also include loans in our AUM. If you were to exclude the impact of deleveraging or NNM, net new money, the way most other competitors report, would be at CHF 1.1 billion. This is equivalent to 1.7% annualized growth for the first 6 months. Second point is the strong hiring momentum. You'll see the breakdown of the 94 that have been -- have either entered, signed or have been approved for the first 6 months.

And Giorgio has highlighted that this has been one of the strongest, if not the strongest hiring semester in the recent history of EFG. On the right-hand side, you'll see that we are delivering on the cost synergies. This is from the BSI transaction. And you'll see also that now we have managed to achieve cumulative synergies of CHF 207 million versus CHF 210 million, which was the run rate that one would estimate, given the target of CHF 240 million.

And finally, at the bottom right, underlying profitability is 21% up versus the second half of the year, CHF 75.6 million for the first half, which is close to 11% return on tangible equity.

I'll take you to the next slide, which is the bridge between reported and underlying profitability. We reported CHF 31.5 million versus a CHF 17.6 million underlying. This is on the back of a challenging revenue environment. I think that if you listen to all our peers, who have actually gone public with their performance in the first half, you will get the same comments.

We have managed to partly compensate by recovery in our global markets division and also through a strong performance of our treasury division in the first half.

We will discuss a bit later, we are continuously working on cost management. You'll see, and you have seen, that we've managed to reduce FTEs during the first half of the year by net about 60%. This came with some one-off redundancy costs, and I'll come back to those later.

As Giorgio highlighted, we are investing in growth. We are hiring quite a few CROs, and we are looking forward to these CROs coming into play as soon as possible and adding to the momentum of our growth going forward.

You'll also notice that we have the volatility in our life insurance. The reason for the volatility this semester is that although we had the expected number of maturities during the course of the 6 months, on average, the maturities that we experienced came in at about CHF 5 million per policy versus an average that we have in our book of CHF 10 million. And obviously, that makes a difference when it comes to fair-valuing our position in life insurance that led to a loss of CHF 27.7 million for the half year.

Just to remind you, in the first half of 2018, the loss from life insurance was CHF 36 million, and, in the second half of 2018, we recorded a profit of about CHF 10 million. And there is more information about life insurance on Pages 36 and 37 of the presentation, where we describe all our exposures in life insurance and the performance for the first 6 months.

Finally, we have consolidated for the first time Shaw and Partners. Overall, the contribution of Shaw and Partners in the first half of the year for the 2 months has been negative. The reason it has been negative is because under IFRS rules, we need to expense all our acquisition costs. And obviously, that leads to a one-off hit in your P&L because we take all that cost out immediately on the date of the acquisition.

I'll move on to Page 12. On Page 12, you see the evolution of our AUM. AUMs are up 12.4% versus the end of the year 2018. They now stand at CHF 147.6 billion. You'll see that there is obviously a positive contribution from Shaw and Partners. There's a positive contribution from markets.

What I would like to highlight a bit more is that the CHF 0.3 billion NNA that you see for the 6 months masks 2 very different trends between Q1 and Q2. Q1, to be blunt, was negative. Q2 was within our 4% to 6% range, which is our average target between 2019 and 2022. So we had a significant recovery in the second quarter of the year in 2019.

On the next page, on Page 13, you'll see a bit of a breakdown between our levers of growth.

What you see on the left-hand side is exactly the same chart that we've put forward during the Investor Day in March, which described how we expect to get this NNA growth in the next 4 years or 3.5 years now.

So just to remind you, we had the contribution from our existing CROs. We have growth from new CROs, and then we have also net new assets from our business initiatives, and these include Milan, Italy -- and Italy, Portugal, Middle East, and also the contribution that we're going to be getting from Shaw and Partners.

On the right, you see how we are executing on that. On existing CROs, the main feature to note is that these CROs have obviously been hit by the deleveraging element. On a net new money basis, they have been growing at CHF 0.7 billion NNA during the course of the 6 months.

New CROs, and these are CROs who have been with us for the last 24 months, have added CHF 0.5 billion of NNA in the first 6 months. And clearly, the business initiatives are too young to be able to deliver NNA, but we do look forward to deliver to our target. Just to remind you, the total combination of all our business initiatives over the next 4 years came at CHF 9 billion AUM over the next 4 years.

Page 14 is a breakdown of our performance across the regions, and what I'd like to do here is give you a little bit more color about what has been happening. I'll take them one by one, the way they're listed.

So in Switzerland, I think what you see as the big difference is the stabilization effect that we've had in the first 6 months. NNA, which now is in the middle of the page and is the darker bar, was CHF 0.3 billion negative. To compare it to past performance, we had CHF 2.5 billion negative for the full year 2018. So that is a positive trend, which we are looking forward to continue.

Continental Europe is growing. Asia Pacific has been hit significantly by deleveraging. You'll see that the NNA for the first 6 months is minus CHF 0.5 billion. But if you look at the right hand of the -- right-hand side of the page, where you see the NNM, which is excluding the deleveraging effect, you'll see that they are positive at CHF 0.2 billion. Same effect for Latin America. You see that excluding deleveraging, they're very close to 0.

And we have been having a very strong performance from the U.K., the U.K. now at -- bringing in CHF 0.9 billion of assets under management. This is a combination of the U.K. region not being involved in remediation exercises during 2018, which allowed them to position for -- themselves for growth in 2019 and also a strong push in performance management locally, which are also deploying in all other areas of the bank.

The following page, Page 15, gives you information on our penetration of mandates. These are advisory mandates and discretionary mandates. On a like-for-like basis, these are up to 42% from 40% at the end of 2018. The addition of Shaw and Partners resets that figure to 47%.

We've seen a lot of effort in that area. We have described that therefore during the Investor Day, and we have also described what we're trying to do to increase the penetration.

We've seen a solid performance from our discretionary offering during the course of the 6 months. What we've also seen is an increased utilization of the digital tools that we have to promote these services. This is what we call the investment advisory tool. This has been deployed to certain areas. And in the areas where it has been deployed, we are seeing increased utilization by our client officers.

At the same time, we are looking forward to fully launching and fully offering this tool across the bank. This further rollout will have a benefit -- will lead to a benefit to us in terms of penetration of this product.

At the same time, we all know that MiFID II is also a driver that will help us expand our penetration of these products, these high-value products, which will allow us to improve our revenue margin.

On Page 16, you'll see the figures for CRO performance. Overall, including Shaw and Partners, we are at 737 CROs. We have another 56, which we have approved or signed that we expect to join during the course of 2019.

At the bottom left, you also see the hiring pattern. Obviously, the previous -- the figures for previous years is on a full year basis, whereas the figures that we have for 2019 only evolve for the first 6 months of the year.

We've had strong hiring activity. At the same time, we have continuously performance-managed our existing CRO base. This is part of the effort to increase the productivity of our existing CROs, which, to remind you, is one of the 3 levers for our future growth in order to achieve our 2022 financial targets.

Overall, at the bottom right, you will see that we have managed to increase our productivity of CROs by 29% versus 2015. What is also important is that over the course of these years, every single year, we have managed to improve this productivity, and we are looking forward to continue improving it in the future.

On Page 17, you will see the breakdown of our revenues for 2019 and the 2 semesters before that. Headline operating income came in at CHF 575.9 million. That is 83 basis points the way we measure it. So dividing by net new money and loans, what we call AUM. If you just divide by net new money -- by the AUM, excluding loans, then the margin comes at 96 basis points. That compares to 94 basis points in the previous semester and 99 basis points in the first half of 2018.

Overall, I would say that the trends on the revenue line is mixed. We've seen deleveraging and the overall interest rate environment affecting net interest income obviously negatively.

We have solid revenues from discretionary and advisory mandates. We are seeing an improving contribution from global markets, and global market is the fixed income side of our business and also includes the currency transaction part of our business. Treasury has had a strong performance. We've had a one-off gain from our participation in SIX. And finally, just, again, a bit of housekeeping. The Shaw and Partners acquisition leads to a structural impact of 1 basis point for the first half of 2019. That is because the way we account the revenues and what we net in the revenue lines, and we can take that offline with people that are interested in that calculation.

In terms of operating expenses, and I would like to spend some time with this one because there's been a lot of effort in terms of managing operating expenses during the first half of 2019, the headline figure is CHF 492 million. Excluding the contribution of Shaw and Partners, the figure is flat compared to the second half of 2018.

If you are also to exclude the redundancy -- the one-off redundancy costs that we had for rightsizing FTEs in June of 2019, the figure would be even lower. And the guidance I can provide is that because of the actions we have taken on rightsizing FTEs obviously the run rate going forward is going to be even lower. That is the reason that the headline for us is not really the appropriate way of looking at the business. We are now looking at it under run rate, and there is some information also on the following page that gives you a bit of a better feel of how you should think about run rate.

You've seen a marked improvement in the other operating income compared to the second half. We're down from CHF 141 million to CHF 134 million. That is despite certain one-off costs included in the first half of '19. There is more scope for work in the other operating income -- operating expense line, and we're working on it.

And the way we are looking at cost, and the reason we are not stopping here is because this continuous cost management is what is going to fund our growth initiatives. We obviously realize that adding -- just adding cost is not acceptable. We need to streamline our operation as much as possible to fund our growth initiatives.

The following page shows you part of what we're doing to fund our growth initiatives. You'll see that we've managed to deliver an additional CHF 20 million of cost synergies in the first half, brings the total to CHF 207 million with a target for the year of CHF 240 million. We feel confident that we will reach the target by year-end.

On the right-hand side, there's a bit more information of how we calculate synergies. Obviously, you need to adjust for the acquisition of Shaw and Partners and some one-off cost elements that we had in the first half of the year to show you the progress. But again, this is only part of what we are doing to optimize costs, and we're going to be streamlining the operationalization and the footprint further as we move through the second half of the year and 2020.

Page 20 gives you a glimpse of the snapshot of the balance sheet. Overall a very liquid balance sheet, as has been the case for the last years, loan-to-deposit ratio at 50%, liquidity coverage ratio of 171%, which allows us to continue growing without any restriction. And in terms of the life insurance exposures obviously these are the legacy positions. There is embedded value in these positions, and that's -- we expect to realize over time. And we have the short-term P&L volatility that has hit us in the first half.

On Page 21, there is more information about the capital position. You see that the capital position went down from 21.6% total capital ratio to 21%. Again, this is a very strong capital position. Both the 21% total capital and the 70% are very strong capital positions. These now include the full impact from the acquisition of Shaw and Partners. The impact is 40 basis points.

The way the acquisition is accounted means that as we release deferred compensations, which is going to be in EFGI shares in future years, we will actually get a benefit from that. So the net impact from the acquisition over time should be between 25 to 30 basis points.

Otherwise some slight reduction in risk-weighted assets, leverage ratio at 4.1%. And we have bought approximately 2.2 million treasury shares during the course of the year. This is a combination of the purchases between 2 programs. So the program we launched a year ago and the program we launched this year in Q2 for a total amount of CHF 13.5 million for the first half of 2019.

Finally, on Page 22, this is the bridge for our capital position for the first half. You'll see that overall, we have generated underlying capital through our underlying P&L risk-weighted assets net of dividend. And in terms of the nonunderlying capital generation, you see the share buyback, the nonunderlying P&L and the acquisition of Shaw and Partners.

I think there are 2 key points to note here. If you take the combination of the dividend and the share buyback, this means that through those 2 actions, we are providing a yield, which is in excess of 5% to our shareholders through dividend and the share buyback. And obviously, at 17% core Tier 1 ratio, we are very far away from the minimum that we set ourselves during the Investor Day and the regulatory minimum of 8%. And this substantial available capital allows for an expansion, be it organic or through acquisition going forward.

On that note, thank you very much, and I'll pass the floor to Giorgio again.

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Piergiorgio Pradelli, EFG International AG - CEO [4]

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Thank you, Dimitris, and let us now focus on the strategic priorities going forward.

Clearly, we need to put the strategic priorities for the next quarters in the context of the strategic plan, the 2022 strategic plan that we have announced back in March.

As you recall, the strategic plan called for a shift -- a similar shift from integration to growth, to profitable growth, and also to effectively deploying capital in order to accelerate growth or to improve the returns to our shareholders.

The premise of our strategic plan was that our business model is distinctive and competitive in the current private banking environment. And the fact that we were able today to hire more than 100 new CROs is a sign, is an indication that actually our model -- our CRO model, as we call it, is indeed attractive and very competitive.

The other premise of our strategic plan was that the shifting of our execution engine between integration towards growth would happen seamlessly in a very short period of time. And again, we are very pleased that we have put in motion a lot of actions that already are bearing fruits and others that will bring results very, very quickly.

Now on the right-hand side, you see the financial targets that we have announced in March and that we confirm.

Clearly, as Dimitris indicated, external growth is always an option. We have enough capital resources to take advantage of the consolidation of the industry if and when suitable targets present themselves.

Going forward, what are the strategic priorities? Clearly, we will focus on organic growth. We will focus on driving further the growth of our new CROs and to improve the productivity of our existing CROs.

For sure, to do that, we will need to leverage more our investment solutions in our global markets platform. We will need to become more innovative and more effective in deploying the high-margin products, advisory, discretionary, structured products, lending. This year, we will also focus on private equity and private markets.

In general, it is -- as I mentioned earlier, we see some headwinds in terms of the margin compression, and it is important that we focus on high-margin products for the clients and obviously for EFG.

Making Switzerland back on growth is a strategic imperative. We continue to develop our onshore strategy in Switzerland. We will continue to focus on our offshore markets. And as we mentioned earlier, we believe that the development of the independent asset manager segment globally, but in particular for Switzerland, will be a very important development that can bring results in a very short period of time, and we will leverage the partnership with Expersoft as mentioned.

Clearly, we will continue, this is the second pillar of our organic growth strategy, on expanding internationally. We have now rolled out these initiatives. We need to make sure that they will start generating net new assets very quickly, and we will see the results materializing in the next quarter.

We believe that it is important to be able to expand internationally because there are certain markets that are for us strategic and where we feel that we can increase our critical mass. On the other hand, we need also to look overall at our efficiency and our operational efficiency and cost base. And therefore, we believe that we can be more radical in reviewing our processes, automating and centralizing the processes and rationalizing our footprint.

Now in conclusion, I would say that we have a very clear strategy. We have a very clear plan. For us, it was very important in these first 6 months not to stall the engine, but immediately to roll out business development initiative, organic growth initiatives and an acquisition to immediately go over the transition. We are convinced that all our initiative will bring results in the next quarter.

What is critical for the next half year and for the quarters to come is that we accelerate the momentum, and that all the regions will be involved in these strong developments.

With this, I would like to close today's presentation, and I will hand back to Jens to open the Q&A session of today's event. Thank you.

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Questions and Answers

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Jens Brueckner, EFG International AG - Head of IR [1]

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Great. Thank you very much, Giorgio. And obviously, we will now continue with the Q&A. As usual, we'll start with the people in the room, and then we go to the telephone calls. So if you have a question in the room, please raise your hand, and we have somebody with the mic. Can you take -- gentleman here, please.

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Michael Kunz, Zürcher Kantonalbank, Research Division - Research Analyst [2]

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It's Michael Kunz from Zürcher Kantonalbank. 3 questions, please. First, regarding the new CRO hires, we've seen on Monday Julius Baer announcing actually a decline in the number of CROs, and there are many other banks running around looking for CROs. Can you give some flavor on where do you find these people? Are they coming from big banks, where they're frustrated of restructuring? Or is it across geographies? Or is there a certain bias?

Then the second question is a bit more number crunching. Would you be willing to quantify the SIX special dividend?

And the third question refers to Page 30 in the presentation, the reconciliation of underlying results to IFRS. The loss allowance expense is a positive contribution in the underlying result and then flips to completely negative for the IFRS. What is behind this expense?

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Piergiorgio Pradelli, EFG International AG - CEO [3]

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I will take the first question about the CROs, where do they come from. Actually, they come from basically all, as I said, they come -- we are hiring across all regions, and they are coming from all possible houses, from peers, from larger universal banks, from small boutiques. As you know, and as you have seen in the last days or so the private banking market, the wealth management market is quite fluid. There are many situations of transition, and we are in a phase of growth. Our strategy is very clear, and the story resonates very well.

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Dimitris Ch. Politis, EFG International AG - CFO [4]

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In response to your other 2 questions on the SIX special dividend and the loss allowance. The one-off gain that we had in this half year from 6% is CHF 15 million. This is a combination of the special dividend which was paid by SIX, plus added valuation. We carry the position at our share of NAV of the company. So whenever the NAV of the company moves, we adjust our holding. So -- but the CHF 15 million is the one-off element, which is we had this half year. It's a combination of these 2 is not just the special dividend. The extraordinary dividend paid by SIX.

Now on the loss allowance, if I understood your question correctly, what you're saying is that we are positive on the underlying, but we have a hit in the nonunderlying, giving us pretty much close to 0 for the half. The reason for the positive in the underlying is that we had -- we've managed to settle or resolve some cases where we had credit provisions or expected credit losses, the way they are calculated now, and that led to the positive element in underlying results. And the negative element comes from exceptional legal costs on provisions, which is part of the case we have in Taiwan. This is the case we disclosed 2 years ago. And as you know, the way the credit loss is calculated for that one is a weighted average of value scenarios we recalculate every 6 months we publish. And this is the impact we had now from this recalculation of our exposure.

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Jens Brueckner, EFG International AG - Head of IR [5]

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Thank you. If we have a further question from the room. The gentlemen here in the front.

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Unidentified Analyst, [6]

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Just a follow-up on the CROs. Couldn't you maybe say in what regions did you hire these CROs and -- for the second half if -- with the slowdown, now the space -- this first space.

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Piergiorgio Pradelli, EFG International AG - CEO [7]

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In terms of the regions, as I mentioned, this is across the board. I would say the region, Continental Europe and Middle East is the region probably where we had the highest number, given that, as you know, we are rolling out the setup of a business in the Middle East and the Emirates. I would say that, on the other hand, in all regions, we have seen very, very strong developments.

In terms of the pipeline, the pipeline, I already mentioned, is strong. Again, we don't have targets. We try to identify the best professionals that, on one hand, can fit in our organization with our culture that find the CRO model attractive and competitive, and on the other hand, can deliver returns very, very quickly. So for the moment, we don't see a slowdown in the country. I think July has been, again, another very positive month. And again, for the moment, Q3 looks very promising. I mentioned it in other times, for us, the recruitment of CROs, which obviously slowed down during the integration period is not an activity that HR, that's obviously HR is involved, and they support us is, for us, is one of the main business activities that all the regional heads, heads of private banking and top management are involved. So we are all on the front in hiring new CROs.

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Jens Brueckner, EFG International AG - Head of IR [8]

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Andreas first and then we go further to the other side.

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Andreas Venditti, Bank Vontobel AG, Research Division - Head of Banks & Senior Analyst [9]

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Andreas Venditti, Vontobel. Maybe first a question on the revenue side, followed by one on the expense side. On revenues, you mentioned a very strong performance from Treasury. Can you maybe explain how strong or what should we look at, plus an improving contribution from global markets? In your statements, Dimitris, I think you mentioned FX. What I hear in the market is that FX was maybe a difficult period. So how come you did better there? And then maybe on the cost side, the CRO increase of more than 100, obviously is a gross number. And in the past, obviously the net number was lower than that. What should we see in terms of net number? And then just to see whether I got it correctly. The run rate on the cost side, is the one you show on the slide, so the 463, that -- would you see as the run rate going forward?

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Dimitris Ch. Politis, EFG International AG - CFO [10]

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So let me take them one by one. In terms of the revenues, in terms of the treasury performance, what we saw is that treasury had a very good month, both in Q1 and Q2. Historically, we've seen our treasury do well in Q1 and in Q4. Don't ask me why this is, but historically, if you look at the -- where we managed to make good money on our position has been Q1 and Q4. So I think that I'm not going to give you exact numbers because these will also vary. But I think that the fact that we had both our Q1 -- good Q1 and good Q2, it makes it a strong performance in my mind. The good thing is that looking at their positions, we are in a good territory already. So if things do not change dramatically, we should have -- continue to have a strong year for Treasury.

On the global markets, and maybe I wasn't very clear. The FX revenues in our Global Markets division were not strong as everybody else, where the reduced volatility on the currencies have led to lower performance on that desk. Where we've seen a better performance in global markets is the fixed income desk. And that is why we see an improving performance of global markets. Again, we are looking forward to even further improving that performance. If you compare the overall unit performance versus what it was doing 2, 3 years ago, we still have room to grow. And we are taking action to try to improve the penetration of some of these higher-value trading products to our clients so that we can capture those revenues once more. On the cost side, when it goes to the CROs...

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Piergiorgio Pradelli, EFG International AG - CEO [11]

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I can take the CROs. Again, we don't have targets in terms of a net number or a gross number. Clearly, we ensure that we apply stringent performance management criteria. And as you know, in our model, basically, we expect new CROs to be profitable between 12 and 24 months. Usually, in the past, we have seen that if there is, I would say, out of 10 CROs, usually 6 to 7 make it and get profitable actually very quickly. But there is a high likelihood that 3% to 4% do not make it. Obviously, we announced that we have set up a strategic unit to recruit CRO. So we are trying to improve the quality and the scrutiny and the due diligence that we do on new CROs. Obviously, they do the same with our platform. Going forward, what I expect is that this would be more or less what we will see. We are still in the final phase of the integration. So in the short term, we might raise the bar a bit in terms of performance management. So we will not see huge net numbers going up. But again these are more or less the trends in the market.

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Dimitris Ch. Politis, EFG International AG - CFO [12]

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To come back to your last question on the run rate. What you see on Page '19 can guide you towards the run rate, but it's not exactly the run rate. This is some information we have put together in order to explain how we achieve the synergies rather than try to give you an exact estimate of the run rate. But if you look at the elements that we have excluded, it gives you an indication. For instance, like Shaw and Partners, we just included, just to make it like-for-like. Obviously, going forward, we will have Shaw and Partners costs.

The redundancy cost is a one-off. To give you an idea, order of magnitude is CHF 10 million in the first half. So that is going to go off. The -- and that will -- net will improve the run rate. What you don't see in this figure is the impact of the redundancies in the second half because we're carrying that personnel cost for these people in the first half. So now it's not just the redundancy, it's also the fact that you are reducing your head count. New CRO costs obviously will continue. And we have also some small BSI liquidation costs, which hope -- we hope to -- that we will manage to drop them as quickly as possible. So it is a mixed bag in terms of trying to figure out what the run rate is.

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Jens Brueckner, EFG International AG - Head of IR [13]

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Let me take the gentlemen over here. First him and then we go back to you.

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Claude Baumann, [14]

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Claude Baumann from Finews. You mentioned the deleveraging in Asia due to the trade war between the U.S. and China. What exactly happened in such a case? Do the clients reduce their mandate? Or what do they actually do? And where do they put their money instead of into your bank?

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Piergiorgio Pradelli, EFG International AG - CEO [15]

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Yes. No, clearly the tensions that we have seen, in particular in Asia, have not helped our business. What typically happens are 2 things. Well, first of all, the overarching concept is that clients go a bit risk off. So this means that basically, they tend to trade less. And if they have leveraged portfolios, leveraged positions, they tend to offset those and close the lending. That's why if you look -- in the presentation, if you exclude deleveraging, actually, Asia was positive. So they -- there was a growth in terms of net new money. If you consider the net new money, including the lending, it was negative. This is on Page 14.

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Jens Brueckner, EFG International AG - Head of IR [16]

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Let me move to...

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Unidentified Analyst, [17]

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(inaudible) Zürcher Kantonalbank. My question is related to your loan book. So CHF 18.1 billion of loans outstanding, CHF 12.2 billion of them are Lombard loans, CHF 5.9 billion are real estate loans. What kind of net interest margin do you earn on these loans? That's the first part of the question. And the second part of the question is, why on -- when you disclose return on assets under management, excluding loans, you mentioned a margin of 96 basis points. And these loans, probably the Lombard loans, it goes down to 83 basis points. Can you explain me the makeup there?

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Piergiorgio Pradelli, EFG International AG - CEO [18]

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Let me start with the second part first, which is the simpler part. The way we do the calculation of net interest margin, we take -- of return on AUM, we take our reported revenues, and we divide by the average asset management for the period. The way we define assets under management, and there is also a note at the back of the press release and in the accounts, includes both assets under and -- and loans. So on the balance, we have both assets and loans that we manage. That makes the denominator higher. This is not the same way some of our peers report. Usually, what they do is they take all their revenues and divide, not -- they do not include the loans in the denominator. What we show always, and we've done it in -- for the last, I don't know how many years consistently, is that we -- the 83 basis points is the way we view things. So we include all the revenue-generating assets in the denominator. The 96 basis points is just to make it comparable to what everybody else is reporting.

Now in terms of the -- what we earn in different loan categories, the portfolios, especially the mortgage portfolio includes 2 broad categories of loans. One is the loans we have in the U.K. and the rest is mostly Swiss loans and some -- and other European jurisdictions. I'm not going to tell you about the spreads on Swiss loans. You know better than I do what the spreads are and the rates are, and it's not that we are out of market, this is the way we operate. Where we have been very successful over the past years has been in terms of the penetration of mortgages in the U.K. The spreads in the U.K. are substantially better than what you have in Switzerland. When I say substantially, they could easily be double what you earn in Switzerland. And we continue growing the business. We have the benefit of being a bank with a banking presence, of full banking license in the U.K. That means you can do regulated mortgages in the U.K. This is different from some of the other Swiss competitors who do not have a banking license in the U.K., and that helps us also do that business more and more effectively.

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Unidentified Analyst, [19]

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And the Lombard loans?

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Dimitris Ch. Politis, EFG International AG - CFO [20]

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On the Lombard loans, it also depends -- you may have Lombard Loans where you earn more than 100 basis points as a spread. You may have a dual currency note where it's also leveraged, and then the spread might be lower. I wouldn't tell you, it depends on the collateral. It depends on the loan-to-value. It depends on the counterparty. It depends on the overall relationship we have with the client because in some cases you might wish to subsidize a better loan to get a very nice and nicely yielding discretionary mandate. So it is -- again, there is a range in that portfolio.

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Jens Brueckner, EFG International AG - Head of IR [21]

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Can we move to the other side, Daniele, please. Yes.

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Daniele Brupbacher, UBS Investment Bank, Research Division - MD, Banking Analyst and Head of Equities Research Switzerland [22]

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Daniele Brupbacher from UBS. On Slide 14, can you just give us a little bit more of an idea of how you think about some of the -- like Switzerland, Italy still looks rather -- probably below your expectations in terms of flows than the other regions as well? What is exactly -- what is the issue there, and how should we think about that over the next 6 to 12 months? If you could just be a bit more specific. And then I'm still struggling to get my arms around cost -- cost trends. So we have Shaw and Partners. We have the cost-cutting program, and I think that is, I guess, easily modelable. And -- but then on the hiring side, did I hear you right, Giorgio, you said, on the net basis, the CRO increase will still remain relatively small. So how should we think about costs ultimately, if we take the 492 underlying cost base? So will that stay flat or will it go up or down? How do you see?

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Piergiorgio Pradelli, EFG International AG - CEO [23]

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Okay. I think the question is very clear. Let me take the easy part of the question, and I'll go on Page 14 and give you a bit of a sense of the trends. I think your question is mainly about Switzerland. As I said, I think, Switzerland, we have made already tremendous progress in the last 12 months. If you -- I think where we were 12 months ago, not to talk about 24 months ago, when we were in the middle of the integration, we are pleased with the trajectory. Clearly, not all the locations in Switzerland are growing at the same rate. Overall, as you see, we are still going backwards. But I believe, we are close to going to the -- to do the last mile to bring all the location on a growth trajectory. You might always have some contingent situations, some outflows that are very specific. But overall, I see that all our teams, all our heads of private banking are very engaged, and we are focusing to improve their performance. So again, the initiatives on external asset managers, they will start to kick in, in Q4. And again, in the next quarters, I've been always very bullish on Switzerland over the last years, and I remain very bullish for the business here.

Regarding Italy, this is a different story. This is basically the factor, a new start-up. And there, we will see from a commercial standpoint, the first results in Q4. But clearly, all the commercial power will be delivered starting from next year. So again, I am optimistic for the second half. I'm very bullish for the next -- for 2020 and forward. For the other regions, I think we're very happy and pleased with the U.K. U.K. has been very consistent. Continental Europe, we mentioned. Asia Pacific, we need to see how the situation play out on that. For sure, there are a major shift. And LATAM is a business that, again, these outflows were mainly due to some, let's say, specific outflows. But on the other hand, we have not seen inflows in a systematic or widespread way. So this is a focus that we are going to have. On the cost trends. Just to close, on the CROs, I confirm what I said. Clearly, we will continue to hire. The trends are good, but also we will be, for us, this is the biggest investment that we do, and this investment needs to bring result in a short term. If not, we will need to act. And again, this is part of the discussions of the various business cases that we discuss with the new CROs and the existing CROs.

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Dimitris Ch. Politis, EFG International AG - CFO [24]

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On the cost projection, I think that -- let me describe a bit of the actions we're taking. Because you -- and I can answer your question in 2 ways. I'll try to answer it both ways and then you decide how you put it together. So in terms of what we've done, as I said, there are some one-off elements that inflate the cost side this half year, and the same actions that led to the redundancy costs, for instance, are the reasons why we should be even lower the following semester. So we -- just to give you an idea, we took action in about 100 FTEs in June. That meant that we were canning those 100 FTEs throughout the period. And only in -- starting July 2019, we'll see the benefit printing in our P&L. At the same time, there is even more action happening on the G&A side.

And when we're talking about general and admin expenses, we're talking about all these things that actually you need to revisit on a continuous basis. This is a new procurement policy, new travel policy, new policy and process on consulting expenses, managing data feeds. I'll give an example for the people who are in the room and know about it, Bloomberg terminals, which are extremely expensive. So there is a whole host of initiatives that are going on that we are managing on a continuous basis. And we've seen an improvement on many of these lines already between half 2 of 2018 and half 1 of 2019. That gives you maybe a bit of an idea of how things should be trending short term. I think that the -- our main path and our main objective here is how do we get to a 72% to 75% cost-to-income ratio by 2022. I think that trying to describe what's going to happen in Q3 or Q4 is slightly more difficult. The overall project that we have in front of us and what we're executing on is getting to that 72% to 75% cost-to-income ratio in 2022.

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Piergiorgio Pradelli, EFG International AG - CEO [25]

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Maybe to add. In terms of the business initiatives for us it was very important to bring them as quickly as possible forward. Because then you will have the results and the revenue-generating in the NNA as quickly as possible as well. This is why in our plan, we had 70 to 100 gross CROs. We already, this year, we're going to do probably double the low end of that range.

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Jens Brueckner, EFG International AG - Head of IR [26]

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Okay. Great. If we move now to the first question on telephone line.

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Operator [27]

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First question from the phone comes from the line of Nicholas Herman, Citigroup.

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Nicholas Herman, Citigroup Inc, Research Division - Assistant VP and Analyst [28]

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I have one follow-up, please. And then 4 questions afterwards. So just on the clarification. So there was a CHF 30 million difference between the underlying cost base reported and the underlying cost base, excluding on a like-for-like basis. And you've clearly flagged that, that was Shaw and Partners. So that leaves CHF 20 million for the other items. I'm not just trying to test my math here. But yes, first of all, the hiring portion and hiring part of that additional cost, does that correspond to the 38 CROs already brought in or to the 74 that have been brought in and signed? And then what I'm trying to understand as well if you can give us a sense of how that -- of that CHF 20 million, how much is apportion to -- how much is apportioned to hiring? And how much roughly is apportioned to severance? That would be helpful.

In terms of my other questions then, firstly, on Venezuela, you've been in the media on certain activities there. I mean could you update the market on your position on this, and whether you are conducting an investigation internally? Secondly, net new money. I'm probably wrong here, but it looks like you've hired about 90 or more CROs over the past 2 years, but clearly net money from these in the period is pretty low. Could you talk about what's going on there? Thirdly, on the -- on revenues, your mandate penetration seems to be picking up, which is good to see. But equally, it looks like there's a bit that B2B you're not seeing the revenue pickup that you would expect from that. Can you talk about the dynamic there? And then finally, just in terms of your net interest income outlook, could you provide an update? Could you provide a guidance for the market on what would be implied for your NII based on the forward curve, please?

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Piergiorgio Pradelli, EFG International AG - CEO [29]

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So let me take the first question, which is the CHF 30 million delta that you described. As I said, Shaw and Partners is about 10, the redundancy costs are also about 10 and all the other elements are also combined, which is the new recruitment and any other redundant -- any other liquidation costs that are lingering from BSI are about CHF 10 million. The costs that we include here for new CROs only refer to the CROs who have been hired in the last 12 months. And mostly, these have been hired in Q4 2018 and these first 2 quarters of 2019 because we're only stripping out the amount of costs that we are -- we have added when we decided to enter into this growth phase, as was described in our Investor Day in March.

On your second question on Venezuela. We -- obviously, we are aware that -- seeing the press clippings, we are aware that there is an investigation on Venezuela. As far as we are aware, we are not part of any investigation by any authority. As you realize, we are cooperating authorities under the standard ways that we cooperate with authorities in terms of providing information under the formal ways of providing information in such investigations by authorities.

I don't know the question, which...

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Nicholas Herman, Citigroup Inc, Research Division - Assistant VP and Analyst [30]

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Have you done an internal investigation into this as well?

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Piergiorgio Pradelli, EFG International AG - CEO [31]

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I'm sorry?

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Nicholas Herman, Citigroup Inc, Research Division - Assistant VP and Analyst [32]

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Presumably, you've conducted an internal investigation into this as well.

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Piergiorgio Pradelli, EFG International AG - CEO [33]

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I'm not going to comment more on the topic. As you understand, it is a legal matter, so I'm not going to comment more. It is -- what I can tell you is that we are not part of any investigation by any authority at this point in time as far as we're aware. The third question was what on NNM? Could you please repeat?

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Nicholas Herman, Citigroup Inc, Research Division - Assistant VP and Analyst [34]

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I was just making the point that -- so on Slide 13, you talk about CHF 0.5 billion of net new money from new CROs over the -- who've been hired over the past 24 months. Does that seem like a reasonable number? I guess because, to me, I estimate very crudely that you've hired around 90 CROs in the past 2 years. Is that -- so does that -- it seems a little bit low to me.

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Piergiorgio Pradelli, EFG International AG - CEO [35]

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The past 2 years include the figures that come -- starts from June 2017. So it's difficult to figure out exactly the amount. I think that the bulk of our hiring has been in the last, let's say, 9 months. And obviously, these CROs have not been able to produce up to the level. Usually, the patterns that we've seen in terms of our CROs is that it takes them between 12 and 24 to 30 months to bring in the bulk of the book that they can bring in Phase 1 when they are joined. So we are looking forward to these CROs adding more volumes in the next semesters as we move along and as they mature in this organization.

In terms of your question on the penetration, we've seen the penetration go from 40% to 42% in this semester. I don't agree with you that we don't see an increase in revenues from these mandates. We've actually seen an increase in revenues because of the increase in mandates. What we've also seen in this semester, which is a continuation of the end of 2018, we've seen lower transaction volumes on our execution only clients. So that combination, which is a negative on the commission income line, obviously. So what you see as a total revenue or commission revenue is the combination of these two elements. But overall, the performance of discretionary and advisory penetration and revenues has been very solid in this last semester.

Last question is guidance on NII. The -- obviously, the guidance we can give you is that it's -- the way rates are going, it's going to be going on the lower side. We haven't released some sensitivities on NII due to interest rates in our full year 2018 results. I wouldn't say that they are substantially different now. Obviously, we are exposed mostly to the dollar. If the euro and the Swiss move also lower, I think there's going to be an exposure there as well. And in general, we are monitoring the situation on the interest income. We are taking some actions to mitigate that. Hopefully, we'll see how much of that we can have print in the second half of the year. I think that in comparison to more the retail banks, we are fortunate that the majority of our revenues is in the commission income line and the actions on the advisory and discretionary penetration, plus the introduction of more high-value products should definitely mitigate part of that impact from lower interest rates --

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Operator [36]

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Next question from the phone comes from the line of Daniel Regli, Octavian.

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Daniel Regli, [37]

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This is Daniel from Octavian. I must admit I was quickly offline so I might be asking something you mentioned on the phone. But my first question is about a little bit the swing in net new money between Q2 and Q1. Obviously, you had negative Q1 and positive Q2 net new assets. First of all, if you say that you were within the target range, is this including Shaw and Partners or excluding Shaw and Partners? And then secondly, what was driving this swing? Was this partly driven by the CRO hiring in Q1 or at the beginning of the year? And if so would you expect this trend to continue into Q3 and maybe Q4?

And then the second question is, sorry, to come back on this topic again, but regarding this life insurance portfolio. I still struggle to understand what exactly drives the short term movements. And maybe I missed it as well in the call. But was this also driven by the change in rate expectations or is this purely about people, sorry to say, the people not dying as expected?

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Dimitris Ch. Politis, EFG International AG - CFO [38]

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So the first question regarding the swing in NNA between Q1 and Q2. I think the question was whether, in Q2, we are within the target range with or without Shaw and Partners? The answer is we are within the target with both. So with and without. So on that, I think, as I said, we have seen a positive Q2. I missed the second part of that

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Unidentified Company Representative, [39]

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The hiring trend.

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Dimitris Ch. Politis, EFG International AG - CFO [40]

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Okay. The CRO hiring trend, as I said, the pipeline remains very, very solid, very good. And we have seen also a very positive July, and we don't see this changing for the moment. On the life insurance portfolio, the reason for the volatility in this semester was that, although we had our expected number of maturities, the average size of the policies that matured was $5 million versus an average in our portfolio of 10. So the way you calculate -- because we fair valuate every time we report and we -- when you fair valuate, you need to do a discounted cash flow of your expectation in the future. Our expectation when we did that in December, was that we would get the maturities that we got this semester, but the dollar amount of the maturity in terms of the policy would be higher. It was lower, and this is what affected the valuation this semester. The interest rates also play a part when you value this position, but we actually hedge our interest rate exposure in this position. So net-net for the semester, there was no impact from changing interest rates because we have that hedged. So the only impact is because of this variation in size of policy that matured versus the average pool.

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Jens Brueckner, EFG International AG - Head of IR [41]

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Great. I think that was the question for telephone lines. Do we have any other -- there's another question in the room, please.

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Patrick Winters, [42]

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Patrick Winters from Bloomberg. So first question is on net new money in the U.K., so that was positive. I think you touched on it briefly before, but is that some kind of structural reason or just a blip that you got that much net new money from that particular region? And then on the growth, it just seems like you've given green light to everything in the last 6 months, loads of new relationship managers. Now you're saying you're looking at acquisitions. You made an acquisition in Australia. At what point would you say that you're big enough? What's the end? And a part of it is to gain critical mass, but how big do you need to be? What's the -- in terms of AUM, what kind of criteria are you setting for yourselves?

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Piergiorgio Pradelli, EFG International AG - CEO [43]

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Thank you. So regarding the NNA in the U.K., I would say that the U.K. has been a region that traditionally, in the last 5, 7 years, has been delivered very solid growth, always within our target range. This time, we are above our target range. As Dimitris mentioned earlier, I think this was a combination of preparing very well and positioning ourself very well at the end of last year and executing the plan this year. Also we have seen, and this we used in the past was more anemic, the hiring of new CROs. We have seen that accelerating also in the U.K., which, I believe, is very positive.

In terms of what you mentioned, I obviously agree. I think that in a short period of time of 6 months, we have deployed, let's say, all -- we have rolled out all possible growth initiatives from doing acquisition, international expansion, hiring new CROs across the regions, increasing the productivity of existing CROs, which is our target. Our target simply is to deliver the plan that we announced in March. I think you see the targets. I don't mention -- in the plan, we never mentioned an objective AUM. But clearly in this market environment to scale accounts, so if we can be CHF 200 million instead of CHF 150 million, this is better. But again, this will depend whether the strategy will be mainly organic growth or complemented with additional acquisition.

For us, I think, what is very encouraging and very positive is that shifting, what we call the execution engine from integration, which is very much inward looking to expansion. And again, being more focused on markets, on clients, on growing the business, we did not have a situation, a transition of stalling. And obviously, for us, the risk when we announced the strategy was that we would have like a year of somehow a stalled situation. This is not the case. As I mentioned earlier, not all the initiatives are already delivering results, some immediate results -- some immediate results are visible, others will take quite some time, but we are very confident for the next quarters and the next year.

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Jens Brueckner, EFG International AG - Head of IR [44]

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I think we have another question on the phone. Again, go back to the phone, please?

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Operator [45]

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We have a follow-up question from Daniel Regli, Octavian.

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Unidentified Analyst, [46]

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Sorry, to come back. But my second question was actually about the Q2 trend in net new money and how much of this was driven by the CRO hiring in the beginning of the year. Can you number this? Or was this any effect at all from the recently added CROs in Q2?

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Piergiorgio Pradelli, EFG International AG - CEO [47]

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In terms of the people who have been hired this year, if you turn to Page 13, you'll see some information on the performance of new CROs who have been added in the last 9 to 12 months, mostly 9 months. So this is a bigger group. I would say that in terms of the people who have been hired this year obviously they have not had the time to deliver net new assets. Because as they move in, they need to open all the new accounts, and usually it takes people between 12 and 24 or 30 months to bring in their entire book as they move through that process. So it's not an immediate impact action. You need to allow some time for the CROs -- the new CROs to come in and deliver.

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Jens Brueckner, EFG International AG - Head of IR [48]

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I believe there's no further questions, or I think. Thank you.

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Dimitris Ch. Politis, EFG International AG - CFO [49]

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In terms of closing remarks, I think that the last question gave me the opportunity to say what I wanted to emphasize in the closing remarks. It was, for us, very important to have this seamless shift from integration to profitable growth. We are rolling out all the initiatives that we have decided to start. And again, we are very confident that the initiatives will bring results. Some are already very visible, other will accelerating -- will accelerate. For us what is critical now is that the momentum picks up and -- in all the regions, not only in a few locations. Thank you.

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Unidentified Company Representative, [50]

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Thank you.