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Trading & Investment Society workshops 2014
12 November 2014
Capital Markets Investment Banking at UBS
The University of Manchester
Helping clients to cope with new regulations
2
Introduction to UBS
Helping clients to cope with regulations
The analyst role at UBS
Why UBS?
Recruitment process
Today’s agenda
3
UBS—The bank of choice of the world’s most prominent businesses
“The clear definition of a radical strategy distinguishes UBS from most of its peers. The successful execution of that strategy makes it Euromoney’s Best global bank for 2014
”
4
How is perceived by clients and investors
“UBS acted as financial advisor in the largest M&A transaction globally in the last decade and the third largest of all time Financial TimesSeptember 2013 ”
“UBS AG was named leading pan-European brokerage house for equity research for the 12th year in a rowThomson Reuters Extel Pan-European SurveyJune 2012
”
“The financial crisis prompted wealth managers to focus more on investment advice. Such firms are winning back high net-worth clients. None more so than UBS Wealth ManagementEuromoneyJuly 2012 ”
“Asia Pacific Equity House of the Year and Australia and New Zealand Best Investment BankIFR Asia, FinanceAsia 2012
”M&A
Equity Research
Wealth Management
Asia PacificBest Global Bank 2014
“In ECM, its institutional solutions group has been generating significant orders from key wealth management clients, one element that has helped give it real distributional strengthEuroweekSeptember 2013 ”
ECM Bank of the year 2013
5
What is UBS?One of the world’s leading financial firms, with approximately 60,000 employees in more than 50 countries
Note:1 As of the quarter ended 30 June 2013
Investment Bank
Around 11,600 employees in more than 30 countries around the world
Advice and execution, including:
– M&A
– Sales & Trading
– Equity Research
Wealth Management & Swiss Retail Bank
Global Asset Management
Globally leading Wealth and Asset manager with more than USD 2 trillion of invested assets
One of the largest retail and corporate banks in Switzerland
6
Our objectives
Remain leading large-scale wealth manager in the world
Gain market share in established markets, and capture wealth creation in APAC and Emerging Markets
Achieve superior pre-tax profit growth vs. peers
Capital-light, client-focused with attractive risk-adjusted returns
InvestmentBank
Global Asset Management
Well diversified and strongly positioned in key growth areas
Retail & Corporate
Leading position across retail, corporate and institutional client segments in Switzerland
Wealth management businesses
World’s leader in HNW and UHNW banking with unrivaled scope and scale
Continue providing a full suite of banking products to clients
Maintain leading position and stable profit contribution
Fully factor in the costs of regulation in our pricing
Deliver attractive returns with allocated resources
Strengthen our position in our targeted businesses
Grow contribution to the rest of UBS's businesses
Strengthen investment performance culture
Focus product offering and strengthen distribution around growth areas
Achieve profit before tax target of CHF 1 billion
Our businesses
Leading franchise with compelling growth prospects
Focus on the "new" Investment Bank: the model clearly works
7
Our renewed client-focused strategy built around our human capital excellence and global connectivity is already delivering strong and sustainable value generation for all our stakeholders
Peer average
vs.
Adjusted PBT (CHFm)
+261%
RWA (CHFbn)
-CHF63bn
RoAE (%)
+21.4%
20121 LTM 1H141
Note:1 Based on operating income
8
UBS Investment Bank—a full service provider
Clients
Corporate Client Solutions (CCS)
Coverage and Advisory
M&A advice and execution, refinancings,
spinoffs, exchange offers, LBOs, JVs, takeover defence, corporate broking and other advisory services
Capital Markets Solutions
ECMIPOs, rights issues, block trades, equity-linked transactions and other strategic equity solutions
(e.g. derivatives)
DCMDebt-capital raising incl.
investment grade and emerging market bonds, high-yield bonds,
subordinated debt and hybrid capital
LCMEvent-driven loans, bonds and
mezzanine financingFinancing solutions
StructuringGlobal Research and Analytics
Emerging Markets
Equities
Cash equitiesSingle stock and portfolio, incl.
capital commitment, block trading, advanced electronic
products; broker and intermediary services
Equity derivativesFlow and structured products,
convertible bonds and strategic equity solutions
Prime ServicesFully integrated platform for
hedge funds
FX and Rates & Credit
FXMarket-maker in the spot,
forwards and options markets; trading, investment
and hedging in precious metals markets
Rates & creditStandardised rates-driven
products, interest-rate swaps, medium-term notes, government and corporate
bonds
Client Focus Valuecreation
Investor Client Services (ICS)
E-trading
Technology Superior execution Talent & culture
Introduction to UBS
CCS—Coverage & Advisory
10
UBS CCS—seamless cooperation across specialist teamsSector, Country and Product teams work together to serve in the best interest of each corporate client
CEE
MENA
France
Germany
Israel
Italy
Netherlands
Nordic
South Africa
Spain & Portugal
Switzerland
UK
Consumer Products & Retail
Healthcare
Natural Resources
Technology, Media & Telecoms
Financial Institutions Group
Global Industrials
Power, Utilities & Infrastructure
Business services
Real Estate & Leisure
Leveraged Finance / Financial Sponsors / Restructuring
Private Funds Group
Equity Capital Markets
Strategic Equity Solutions Group
Debt Capital Markets
Leveraged Capital Markets
Corporate Clients
EMEA Country teams
Sector teams
Product teams
11
Why work in Capital Markets Solutions?
#1 in Tier 1 capital issuance and European contingent capital in 2013-14YTDDealogic
#2 Bookrunner of EMEA ECM issuance in 2014YTDDealogic
UBS capabilities in capital market solutions are proven by its numerous awards
Capital Markets Solutions is uniquely positioned within the investment bank, giving you broad exposure to both the public and private side of
banking
Equity and debt capital markets recent awards
Unique position within the investment bank
Opportunity to develop client relationships
Execution, execution, execution
Market dynamics are never the same
Why work in Capital Markets Solutions
#1 Bookrunner of EMEA block trades in 2014YTDDealogic1
Generalist focus across sectors
#1 Bookrunner of Continental European IPOs and rights issues in 2014YTDDealogic
#1 Pan-European Equity House in 2003-14Extel Surveys
Note:1 Rank by number of deals
Introduction to UBS
DCM – A global facilitator for the real business world
Debt Capital Markets Product lines
Buying back debt (targeting wide credit spreads)
Consent solicitation to modify problematic or restrictive covenants
FX risk management
Primary and tailored financing solutions
Potential business includes financing M&A activity, raising debt for general corporate purposes, or refinancing bridge loans or existing debt via:– Medium/large public unsecured bond issuance– Private Placements– Covered Bonds– Structured Funding (for Banks)– CDS backed facilities
Interest rate risk management
Opportunities can arise from:– Exposure to rising interest rates:
– on existing floating rate debt– ahead of planned future fixed rate debt issuance
– Exposure to falling interest rates on floating rate asset/ investment returns
Solutions include swaps, options and transaction contingent
Opportunities can arise from:– Exposure on equity for cross border acquisitions– Exposure on conversion of exit or IPO proceeds– Debt draw downs and repayments in currencies
other than the base currency
Solutions include forwards, options and transaction contingent
Hybrid capital raising and securitisation
Assisting banks and insurance capital to raise regulatory capital through the debt capital markets
Transforming on balance-sheet assets into asset backed securities
Cash management
Enhance return on surplus liquidity or proceeds from asset sale prior to planned use
Products range from vanilla bank deposits to structured investments, covering tenors from 1 month to over 10years
Liability management (of existing debt/capital)
What function does DCM play in the business world?
14
1
2
All businesses, whether corps, banks or insurance companies as well as the public sector require debt financing
This financing is being provided by 2 main sources:
- banks' balance sheets in the form of lending
- the global bond-markets
The DCM bring together the wide investor base and the party which seeks debt financing. Thus capital can be allocated efficiently and funding can be obtained at much more attractive levels than through conventional bank loans.
3 What is a bond?
•Debt investment in which investor lends money to an entity that borrows funds for a defined period of time for a fixed (or floating) interest rate
•Every bond has a specified maturity at the end of which the issuer repays the face value of the bond to the investor
•Proceeds from bonds are used to fund the projects and activities of companies, municipalities, states and governmental organisations
•Two features of a bond – credit quality and duration – are the principal determinants of a bond's interest rate
•The worse the credit quality and the longer the duration of a bond the higher the interest rate which investors demand for holding the bond
The bond market at a glanceBond Markets by Size1 Issuance by Currency across all Markets2
US Treasury Yield FIG and Corporate Spreads
Note:1 These figures include issuances in USD, EUR and GBP, but exclude EM issuers 2 These figures exclude EM issuers
CHF
UBS has a strong presence in the debt capital markets, executing a number of key transactions across markets
EUR – Active in the French market and with REITs
GBP
£382 million dual-tranche fixed and index-linked notes due 2022
February 2013
£800 million dual-tranche notes due 2028 and 2033
March 2013
£625 million dual-tranche notes due 2025 and 2018
June 2013
£250 million notes
due 2026
September 2013
£500 million 62.7NC7.7 hybrid offering
January 2014
£400 million 62NC7 hybrid offering
September 2013
UBS in the Bond Market
USD
€500 million
7-year 4.000%
March 2014
€900 million
12-years 2.798%
July 2014
€900 million
Perp NC6 4.250%
June 2014
€750 million
10-year 2.500% Green Bond
February 2014
$400,000,000 8.250%Notes due 2019
July 2014
$600,000,000 2.300%Notes due 2019
$600,000,000 3.700%Notes due 2024
$550,000,000 4.900%
Notes due 2044
August 2014
$250,000,000 4.850%Notes due 2054
August 2014
$800,000,000 3.875%Notes due 2024
August 2014
$400,000,000 1.300%Notes due 2017
$350,000,000 2.150%Notes due 2019
August 2014
$500,000,000 4.625%Notes due 2019
$700,000,000 6.000%Notes due 2024
July 2014
CHF 800 million
10-year 1.000%
August 2014
CHF 300 million
10-year 2.625%
July 2014
CHF 100 million
5-year 3.625%
July 2014
Citychamp
Watch & Jewellery
SwissCo AGCHF 120 million
5-year 2.750%
June 2014
CHF 150 million
8-year 1.750%
June 2014
CHF 300 million
10-year 1.750%
June 2014
€750 million
8-years 1.375%
October 2014
€300 million
7-years 1.500%
October 2014
Working example for FIG DCM clients
Helping clients to cope with new regulations
Financial institutions and Basel 3 regulations
18
1
2
The recent and ongoing Financial crisis had far reaching consequences
•Due to high leverage, unsustainable liquidity gaps in the balance sheets, too little and too weak capital positions and huge amounts of "toxic" assets, banks struggled since 2007/08
•From the collapse of Bear Stearns and more importantly Lehman Bros. in Sep. 2008, many banks "failed"
•This lead to billions of US$ required from public sector & private investors to "bail-out" the global financial industry• In the USA, almost all major banks received state-aid capital to stabilize the banking industry
• A lot of regional banks went into liquidation and others like Merrill Lynch (by Bank of America) and others were taken over
• In Europe, UK, Germany, Holland, Spain provided state-aid to again stabilize and safe their local banks
• Ireland guaranteed all bank senior debt, leading to a huge rise in debt burden on the public balance sheet
• Subsequently, Ireland as other already strongly indebted countries like Spain, Portugal and particularly Greece struggled to generate own new capital markets funding – "PIIGS" countries
• This lead to the sovereign debt crisis and quickly to the Basel 3 regulatory regime and G-SIB-concept3 What does Basel 3 and the new regulation try to achieve?
•Addressing the issue of "too big to fail" where banks, like UBS itself, is too big to be rescued (again) by the tax-payers
•Politicians and hence regulators are imposing a new, much more stringent capital regime on banks globally to make banks viable
•Higher amounts and better quality of capital required, leading to a wave of equity raises, hybrid capital issuance (AT1, T2)
•Next phase from 2015 onwards also involves the requirements of "bail-in" of bondholders – losses beyond the (shareholder-) capital shall be borne by private investors to prevent further public money being required to safe banks
•In this context, AQR & Stress-test were conducted and "TLAC" concept is being created
Working example: Corporate vs. Bank
Intangibles,
Property,
Plant,
Equipment
Cash,
Assets Liabilities
Simple Corporate Balance Sheet
Receivables
Tangible Assets
Equity
Payables
Debt
FI Receivables
Cash
Assets Liabilities
Simple Bank Balance Sheet
Tradable Securities
Non-FI Receivables
Sub-Debt
Short-Term Debt
Long-Term Debt
Public Sector Receivables
Equity
5%
20%
40%
10%
25%
30%
54%
3%3%
15%
20%
65%
20%
15-35%
35-65%
FIG – Regulation and Capital Position
FI Receivables
Cash
Assets Liabilities
Simple Bank Balance Sheet
Tradable Securities
Non-FI Receivables
Sub-Debt
Short-Term Debt
Long-Term Debt
Public Sector Receivables
Equity
Assets are "risk weighted"
Cash [0%] 5 x 0% = 0
Tradable Sec. [5%] 5 x 5% = 0.25
Non-Fi [50%] 40 x 50% = 20
FI [20%] 10x 20% = 2
Public [0%] 25 x 0% =0
RWA 22.25 (from 100)
Equity
Bail-in debt
T2
CET1
AT1
5%
20%
40%
10%
25%
30%
54%
3%3%
3%
3%
DCM and Basel 3
21
1
2
UBS and other investment banks advise their clients on how to address and implement these new regulations
•Analysis of the rules and requirements on a client by client level (see subsequent slides for working examples)
•We help clients to structure eligible products eligible to fill the required capital positions
•Investment banks organize the placement of these instruments to the capital markets• Basel 3 was implemented in Europe under the CRR and CRD IV rules in place, providing phase-in and
grandfathering periods – but still huge differences between political systems (EU, UK, US, Nordics, Switzerland – see overleaf)
• Additionally, new rules for TLAC are being discussed next weekend at the G20 Summit in Brisbaine and will lead to further capital requirements for banks to be fulfilled
• Estimates of required new instruments to be issued range from $500bln to $ 1 trn!
• Every bank is different – hence, individual approach required
• Current market environment due to historic low interest rates allows for good investor demand for these instruments – but investors also need education!
3How do we in UBS FIG DCM work on this?
•Cooperation between Investment Bankers (Advisory, ECM and M&A experts) and DCM to assess required amount and quality on a client-by-client basis
•Close coverage of theses issuer to "qualify" for mandates in the future
•Growth in demand for specialists understanding regulations and doing the issuer/investor-work
22
The capital stack―comparison by jurisdictionBasel III requirements seem to act as country "minima" with most jurisdictions opting for more conservative capital requirements
Basel III
2% T2
1.5% AT1
2.5% Cap. Cons. buffer
4.5% Basel III CET1
Up to 10.5%(CET1: 7.0%)
0-2.5% counter cyclical buffer
Denmark
Individual Pillar II
4.5% minimum
CET1
1.0-3.0% SIFI
surcharge
Up to 16.0% + individual
Pillar II(CET1: 12.5% + Individual Pillar
II)
CRD IV
0-2.5% counter cyclical buffer
2.0% T2
4.5% Basel III CET1
1.5% AT1
G-SII / O-SII /
Systemic Risk
1.0-5.0%
Combined Risk Buffer
Up to 18.0%(CET1: 14.5%)
2.5% Cap. Cons. buffer
Norway
3.0% systemic
risk buffer
4.5% Basel III CET1
1.5% AT1
Up to 16.5%(CET1: 13.0%)
2.5% Cap. Cons. buffer
2.0% T2
2.0% SIFI surcharge
1.0% count cyclical buffer
Sweden
1.5% count cyclical buffer
4.5% Basel III CET1
12% CET1,excl. mortgage RW, CcyB and "other" pillar 2
5.0% Systemic
risk surcharge
(3% in pillar 1, 2% in pillar 2)
1.5% AT1
25% risk weight floor on Swedish mortgages (varies per
bank)
Up to ~25%(CET1: ~19%)
2.5% Cap. Cons. buffer
2.0% T2
2.5% Cap. Cons. buffer
0-2.5% count
cyclical buffer
2.0% "other" pillar 2
9% Contingent capital including charge for systemic importance
Swiss Finish
4.5% Basel III CET1
5.5% CET1 capital buffer
3.0% high trigger CC
6.0% low trigger CC
19.0%(CET1: 10.0%)
10% CET1
Up to 10% CET1
Up to 13.5% CET1
UK
(ICB recomGroup Level.)
4.5% Basel III CET1
2.0% T2
4.0% Additional
PLAC
2.5% Cap. Cons. buffer
2.5% G-SIB Buffer
Up to 17.0% PLAC
(CET1: 13.5%)
1.5% AT1
UK
(PRA recom.)
Basel III 4.5% CET14.5% CET1
0-2.5% count cyclical buffer
1.5% AT1
2.5% Cap. Cons. buffer
G-SIB 1-2.5%
1.5% AT1
2.0% T2
2.5% Cap. Cons. buffer
G-SII / O-SII / Systemic Risk
1-3.0%
Up to 5% Systemic Risk
Buffer (Macroprudenti
al charge) Com-bined Risk Buffer
2.5% Cap. Cons. buffer
Pillar 2A(o/w 56%
CET1)
PRA Buffer (CET1)
1.5% AT1
2.0% T2
MinReq
Netherlands
2.0% T2
2.5% Cap. Cons. buffer
4.5% Basel III CET1
1.0-3.0% SIFI surcharge
Up to 16.0%(CET1: 12.5%)
1.5% AT1
0-2.5% counter cyclical buffer
23
Reaching FSB's TLAC requirements today: high level analysisIf the FSB's proposed 16 – 20% RWA + CBR and 6% leverage ratio TLAC requirement were to be implemented, this would lead to a shortfall of c.€1.1trn for European and US G-SIFIs (net of outstanding subordinated instruments)
The FSB has proposed that banks' Total Loss Absorption Capacity (TLAC) requirement should be between 16 and 20% of RWA and at least twice the B3 Tier 1 leverage ratio requirement – to be met by January 2019. Additionally, banks will have to fill their CBR with CET1
In our analysis we have assumed outstanding subordinated instruments will qualify as TLAC instruments– leading to a shortfall of €1.1trn
Our analysis assumes banks wish to protect their senior bondholders and hence does NOT take into account outstanding senior debt – which we expect will be TLAC eligible as well
Source: SNL, company reports (Q2 2014)Notes:1. Eligible Capital Funds: Reported CET1 Capital and Additional Tier 1 and Tier 2 capital (post
deductions)2. Pro forma announced AT1 and Tier 2 issuance for European / Swiss / UK banks (as of 23 September
2014). 3 European / Swiss / UK: Backsolved from disclosed leverage ratio. USA: Leverage ratio denominator
as disclosed
24
European Tier 1 capital market timeline
June 28th 2013
Draft Bank Recovery and Resolution Directive published
October 15th 2013
2014 European Comprehensive Assessment announced to the market
June 20th 2013
UK PRA announce Capital Shortfall in major UK Banks and Building Societies
January 1st 2014
CRD IV / CRR introduced in Europe
April 29th 2014
Release of methodology and capital shortfall measures on the European Comprehensive Assessments
The European Tier 1 market continues to grow, while new regulation continues to influence Financial Institution's motivation for issuance
Leverage Ratio? Bail in Capital? High Trigger AT1?Grandfathering
?Asset Quality and
RWAs
25
Regulatory timeline for TLAC, AQR, BRRD & leverage ratio
1-Jan-19earliest TLAC implementation deadline
1-Jan-16Bail-in tool comes
into force
1-Jan-16Single Resolution
Fund takes legal effect
4 NovemberECB assumes regulatory authority
3-Jul-15Deadline for the EBA to provide technical guidance on BRRD provisions, including rules on how parts of a bank can come to the aid of a failing unit.
The EBA also will give guidance on trigger events for interventions by regulators, minimum levels of capital that can be bailed in, and organizing the sale of a crisis-hit bank
31-Jan-16 Deadline for transfer to Single Resolution Fund of contributions previously held in national funds
30-Jun-16Deadline for first direct payment of bank contributions to Single Resolution Fund. Can be pushed back if intergovernmental accord on the fund isn’t yet fully ratified
31-Oct-2016Deadline for EBA to submit guidance on an appropriate target level for national resolution funds
H1 2017Final adjustments to definition and calibration of leverage ratio (based on results of the ’parallel run’ period for leverage ratios of 1 January 2013–1 January 2017)
1-Jan-18full implementation of leverage ratio requirement
FSB / TLACECB / AQR / BRRD CRR / leverage ratio
2014 2015 2016 2017 2018 2019
24 October (UBSe)Banks receive individual results for AQR
26 October 12:00 CETAQR results announced
1-Jan-24Deadline for Single Resolution Fund to have resources equivalent to 1% of covered deposits. It is possible to extend this for up to four extra years if fund has made significant disbursements
31-Dec-24Deadline for all national resolution funds outside of the banking union to have pre-financing equivalent to 1% of covered deposits.
Mid OctoberFSB holds conference call to finalise TLAC document
Mid November("shortly before" the G20 summit on 15/16 Nov)FSB releases doc on TLAC requirements
During 2015Comprehensive FSB QIS study on TLAC
1-Jan-15BRRD comes into force, except for bail-in rules on creditor writedowns
1-Jan-15Single Resolution Mechanism begins; banks start paying levies into national resolution funds
1-Jan-15Required disclosureof leverage ratio
31-Dec-16Deadline for European Commission to report on whether the EU should have a common rule on the minimum amount of bail-inable liabilities banksmust have
Working example for FIG DCM clients
And what to look at for each client – it is a lot of work!
27
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Tier 1 377 301 264 226 188 151 113 75 38 0 o/w B3 compliant na 0 0 0 0 0 0 0 0 0 o/w Derecognised Step T1 na 3 3 135 135 135 135 135 135 135 o/w Grandfathered T1 na 301 264 226 188 151 113 75 38 0
Excess grandfathered T1 over cap eligible for T2 na 72 110 16 54 91 129 167 204 242
Tier 2 4,035 3,536 3,353 3,000 2,803 2,420 1,881 1,326 812 292 o/w B3 compliant na 2,822 2,795 2,669 2,530 2,188 1,652 1,122 710 292 o/w Derecognised Step T2 na 273 182 91 0 0 0 0 0 24 o/w Grandfathered T2 (capped) na 641 448 315 219 141 100 72 46 – o/w excess T1 grandfathered as T2 (capped)
na 72 110 16 54 91 129 132 56 –
Excess grandfathered T2 over cap na 0 0 0 0 0 0 0 0 16Excess grandfathered T1 over cap na 0 0 0 0 0 0 35 148 242
Example: Looking at capital ratios dynamically—Existing HT1 and T2
1 Forecasted hybrid capital eligible for recognition (pre deductions) assuming no calls
2 3
We note that Bank's 2014E hybrid Tier 1 is limited at €301m or 0.3% of RWA, while Bank has significant 2014E amounts of Tier 2 (€2.9bn or 2.8% of RWA). Derecognition of T1/T2 is limited
Start of CRR grandfathering (80% cap applied retrospectively) Start of CRR grandfathering (80% cap applied retrospectively)
3.9 3.3 3.0 2.6
1.0 0.6 0.2
% R
WA
1
1.51.92.3
0.4 0.3 0.2 0.2 0.2 0.1 0.1 0.1 0.0 0.0
% R
WA
1
Forecast Grandfathered Tier 1 roll forward (pre deductions) assuming no calls
Forecast Grandfathered Tier 2 roll forward (pre deductions) assuming no calls
Source: Bloomberg as at 16 January 2014, UBS Research, UBS analysis1 RWA growth per UBS Research and fixed at 3% after 2017
28
Optimising Bank's capital base when solving for total capital requirements will ensure maximum efficiency. Pillar 1 AT1
bucket currently underutilised (at 0% versus 1.5% "bucket")
Bank is well in excess of 3% minimum leverage ratio requirement today – this may move in the future. Under the
current Basel 3 proposals, AT1 eligibility for the leverage ratio requirement is not "capped" and hence any AT1 issued could
qualify towards Bank's leverage ratio requirement
Worst case scenario, Bank may need to meet a 20% TLAC or 6% leverage ratio requirement. Combined buffer requirement
to sit on top. Bank AG expected to be the primary issuance entity (or "resolution entity") for capital in the future
All potential regulatory
requirements
Impact of TLAC (and MREL) unknown for Bank at present. Optimising the capital structure through fully utilising Pillar 1 buckets can maximise capital efficiency in the future
Example: Reaching Bank's optimal capital structure?
Total Capital Requirements The current FSB TLAC proposal will require G-SIFI banks
to hold 16-20% RWA in TLAC eligible capital Bank is not a G-SIFI; however, as a base case, we expect
Bank to be subject to similar requirements It is expected these requirements will be brought in
through the MREL framework, however how that will be implemented legally remains to be seen
Requirements may favour issuance from a Hold Co "resolution entity" following the UK direction of travel
Current volume of capital outstanding will need to be at least maintained for TLAC with potential RWA volatility in the future
Total Capital Requirements The current FSB TLAC proposal will require G-SIFI banks
to hold 16-20% RWA in TLAC eligible capital Bank is not a G-SIFI; however, as a base case, we expect
Bank to be subject to similar requirements It is expected these requirements will be brought in
through the MREL framework, however how that will be implemented legally remains to be seen
Requirements may favour issuance from a Hold Co "resolution entity" following the UK direction of travel
Current volume of capital outstanding will need to be at least maintained for TLAC with potential RWA volatility in the future
2
3
1
Erste 1H14(Fully Loaded)
Note:1. Final adjustments to definition and calibration on leverage ratio expected in H1 2017 – for now assuming 3% requirement2. Leverage ratio fully phased UBSe; calculated using Bank's disclosed 5.1% transitional leverage ratio
4.5% CET1
0-2.5% count cyclical buffer
(CET1)
1.5% AT1
2.0% Tier 2
2.5% Cap. Cons. Buffer (CET1|)
Up to 5% Systemic Risk Buffer (CET1)
including up to 3% SIFI buffer (CET1)
Management Buffer? (CET1)
Pillar 1Req
CRDCBRCET1
Lev Ratio Req
3.0%
11.8% CET1
2.2% AT1
3.8% T2
10.8% CET1
4.5% Tier 2
3.8% T2
Erste TLAC compliant capital structure
(assuming no Pillar 2 charge)
4.7%2
TLAC?up to 16-20% RWA
0.7% NCR19.5 – 23.5%
15.3%
3.0%?1
Management
4.5% CET1
1.5% AT1
2.0% Tier 2
2.5% Cap. Cons. buffer
TLAC?up to 16-20% RWA
…or 2x Basel 3 leverage ratio requirement (currently not binding constraint for Erste)
Existing Capital EfficiencyFully utilise CRR Pillar 1 buckets for capital efficiencyExisting Capital EfficiencyFully utilise CRR Pillar 1 buckets for capital efficiency
LeverageCurrent requirement of 3% in the Eurozone. However some jurisdictions (Netherlands, UK) are pushing towards 4-5%
LeverageCurrent requirement of 3% in the Eurozone. However some jurisdictions (Netherlands, UK) are pushing towards 4-5%
1.0% SIFI buffer
CET/AT1
6.0% + CBR including T2/TLAC
CET/AT1 CET/AT1
Bank reported
7.5%
CET/AT1/T2/TLAC
29
Preparing yourself for the important investor questions we experienced from recent roadshows
Why, if any, dual trigger? How do the dual triggers work? Is the trigger based off a transitional
ratio? Why (not) 5.125% / 5.5% / 7%
trigger?
Trigger risk
What is the buffer to MDAs in % and €bn? Is the MDA linked to Group / Bank / both? Will the CBR always be met with CET1? Are there any further buffer requirements you
may come under in the future? Is regulatory intervention expected above
CBR? What is your bondholder policy?
– when will you cancel coupons?– when will you switch off dividends?– when will you switch off management
bonuses? Can you LM when you cancel coupons?
Coupon risk
What is the rationale for issuing? Why issue AT1 now? What are your AT1 / T2 / total / MDA targets? Could they move
up? Is this issuance going to modify how you call Tier 1 instruments in
the future? How do you expect CET1 will grow organically? Could you elaborate on dividend plans? What is the expected size? Why did you (not) choose conversion? How does it work
numerically? Why USD / EUR?
Capital targets and issuance rationale
What is the F.P. leverage / CET1 ratio? How often will you publish CET1 ratios? Please explain the delta from B2.5 to CRR? What is the difference in Group vs Bank
ratios? Any RWA trends / growth? Risk weight
increases?
Disclosure on capital
What is your regulator's stance on single point of entry?
Have you had any discussions with your regulator about raising RWA charges?
At what time is your regulator likely to ask you to stop paying coupons?
Where might the leverage ratio go in your jurisdiction?
How do you see the outcome of the AQR/Stress Test?– how would you raise capital if you would fail
the AQR/Stress Tests?
Regulatory environment
Why is the (floor) conversion price set at [xx]?
Are the securities tax deductible? Why only 1/2 ratings? Why listed on the specific exchange?
Other
adds value through: investor education /
discussion throughout the year
Teach-in for sales force
Presence of Capital team members at roadshow
Preparation of Q&A
dry run
30
Introduction to UBS
The analyst role at UBS
Why UBS?
Recruitment process
Today’s agenda
International career path
Your ideas count
Interactions with highly talented people from different backgrounds
Dynamic and demanding
31
Why Investment Banking?
Continous learning
Extremely steep learning curve
Strategic thinking coupled with analytical work
High level of responsibility from the beginning
On-going training
Professional and personal development
Possibility to develop strong competencies in a sector or product
Exposure to senior managers both internally and externally
Rewards (personal, professional and financial) can be unparalleled
Stimulating environment
32
Search for information (company financials, market data…)
Management of internal databases
Presentations for client meetings
Company profiles
Sector analysis
Process management
Day-to-day client contacts
Drafting of documents (e.g. information memorandum, IPO prospectus…)
Day in the life of an Investment Banking analyst
Finish?
Presentations
Involvement in mandates
InformationMeetings, on-going training, business travelling and team events & drinks are also part of the equation!
Start
8:00
Financial modelling
Discounted Cash Flow
Merger models
Multiple analysis
Valuation
33
Career progression
AnalystAssociateDirector
DirectorExecutiveDirector
ManagingDirector
Tasks
Process
Analysis
Modelling
Presentations
Modelling
Presentations
Work leader
Quality control
Project director
Junior coverage officer
Work leader
Quality control
Project director
Coverage officer
Project sponsor
Senior coverage officer
Management
Years
0–3 3–6 6–9 9–12 12+
Skills
Accuracy
Speed
Stamina
Accuracy
Speed
Leadership
Multitasking
Leadership
Multitasking
Initiative
Client skills
Product skills
Leadership
Multitasking
Entrepreneurship
Client skills
Product skills
Leadership
Management skills
Entrepreneurship
Client skills
Product skills
34
Life in investment banking—fact or fiction
Impossible to get a job
It is true there is considerable competition for each position
However, we are always interested in excellent candidates
You are first tier candidates in line with other top schools in Europe
The hours are crazy
Great exposure, interesting and challenging tasks
The hours are long, but definitely not unmanageable
We hire and manage people with a long term view
Get “rich” in a hurry
Do not base your career choice on financial rewards alone
We offer very competitive remuneration from first year
Significant annual increase with performance and tenure
It’s a jungle out there
UBS is a competitive investment bank in a very large financial market
Fierce competitive environment
However, we focus on space for individuals and inclusiveness
35
Introduction to UBS
The analyst role at UBS
Why UBS?
Recruitment process
Today’s agenda
36
Why a career with UBS?
Opportunities and colleagues across the globe …
… in a “European” environment
Meritocratic and flexible working environment
Learn from the best
Extreme learning curve—you will feel challenged at all levels
Leverage your finance background
Few limits as to where you can end up—if you want
Good possibility of working in home market if you want
A global bank …
… with roots in European culture
Balanced mix of products and capabilities
Talented people
Open, inclusive culture
Our strengths Implications for you
37
Introduction to UBS
The analyst role at UBS
Why UBS?
Recruitment process
Today’s agenda
38
UBS selection process for Analyst and Intern positions
Application screening
Face-to-face / Telephone interview
Analyst / Intern offer!
Assessment centreCase study presentation, competency-based and
technical interviews
Candidates offered will go into a pool. We will allocate roles on business need and candidate preferences
Key Skills sought
Problem Analysis
Planning and Organising
Judgement & Decision Making
Innovation
Online application at www.ubs.com/graduates including online numerical and logical reasoning tests
Tips:
Use all the space provided
Answer all the questions
Tailor your responses
Sell yourself
Pay attention to details
Apply early as we work on a rolling basis
Communication & Impact
Drive & Commitment
Teamwork
Commercial Awareness
Research on UBS
39
Application deadlines
Internships: Wednesday 31st December 2014
First Year Programs: Sunday 18th January 2015
Contact information:
www.ubs.com/graduates
Short summary CV of Oliver Radeke
40
Born in Dec. 1972 in Hamburg, Germany
Married, two children
1992 Abitur (German A-levels) May 1992
1993 – 1995 Apprentice as "Bankkaufmann" (bank-clerk) at Hamburgische Landesbank "HLB", Hamburg
1995 – Oct.'98 Asset Swaps & Portfolio management credit investments, HLB
responsible for management of part of the bank's proprietary investments in bonds
Oct.'98 – May'99 Societe Generale, London – Credit sales
May'99 – Apr.'08 Deutsche Bank, Head of Structured Credit Trading Germany, Frankfurt
VP - MD, running a team of professionals trading and structuring illiquid credit positions, incl. public sector
corporates, infrastructure, SME
May'08 – Mar'09 Deutsche Bank, MD, co-Head European Structured Credit & Securitization, London
Mar.'09 – Oct.'12 Deutsche Bank, MD, Head of DCM FIG Germany & Austria, Frankfurt
Oct.'13 – today UBS Investment Bank, London, MD, Head of DCM FIG Germany & Austria
Contact:
41
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