0. Capital Markets Investment Banking at UBS
Helping clients to cope with new regulations
The University of Manchester
Trading & Investment Society workshops 2014
12 November 2014

1. Today’s agenda Introduction to UBS
Helping clients to cope with regulations
The analyst role at UBS
Why UBS?
Recruitment process

2. UBS—The bank of choice of the world’s most prominent businesses

3. How is perceived by clients and investors“
UBS AG was named leading pan-European brokerage house for equity research for the 12th year in a row
Thomson Reuters Extel Pan-European Survey June 2012 ” “
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 strength
Euroweek September 2013 ”
Equity Research
ECM Bank of the year 2013 “
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 ” “
Asia Pacific Equity House of the Year and Australia and New Zealand Best Investment Bank
IFR Asia, FinanceAsia ”
Best Global Bank 2014
Asia Pacific “
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 Management
Euromoney July 2012 ” “
UBS acted as financial advisor in the largest M&A transaction globally in the last decade and the third largest of all time
Financial Times September 2013 ”
Wealth Management
M&A

4. Wealth Management & Swiss Retail Bank Global Asset Management
What is UBS?
One of the world’s leading financial firms, with approximately 60,000 employees in more than 50 countries
Wealth Management & Swiss Retail Bank
Global Asset Management
Investment Bank
Around 11,600 employees in more than 30 countries around the world
Advice and execution, including:
M&A
Sales & Trading
Equity Research
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
Note:
1 As of the quarter ended 30 June 2013

5. Wealth management businesses Global Asset Management
Leading franchise with compelling growth prospects
Our businesses
Our objectives
Investment Bank
Capital-light, client-focused with attractive risk-adjusted returns
Deliver attractive returns with allocated resources
Strengthen our position in our targeted businesses
Grow contribution to the rest of UBS's businesses
Wealth management businesses
World’s leader in HNW and UHNW banking with unrivaled scope and scale
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
Global Asset Management
Well diversified and strongly positioned in key growth areas
Strengthen investment performance culture
Focus product offering and strengthen distribution around growth areas
Achieve profit before tax target of CHF 1 billion
Retail & Corporate
Leading position across retail, corporate and institutional client segments in Switzerland
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

6. Focus on the "new" Investment Bank: the model clearly works
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
20121
LTM 1H141
Peer average
vs.
Adjusted PBT (CHFm)
RWA (CHFbn)
RoAE (%)
-CHF63bn
+261%
+21.4%
Note:
1 Based on operating income

7. UBS Investment Bank—a full service provider
Corporate Client Solutions (CCS)
Investor Client Services (ICS)
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
ECM IPOs, rights issues, block trades, equity-linked transactions and other strategic equity solutions (e.g. derivatives)
DCM
Debt-capital raising incl. investment grade and emerging market bonds, high-yield bonds, subordinated debt and hybrid capital
LCM
Event-driven loans, bonds and mezzanine financing
Equities
Cash equities Single stock and portfolio, incl. capital commitment, block trading, advanced electronic products; broker and intermediary services
Equity derivatives
Flow and structured products, convertible bonds and strategic equity solutions
Prime Services Fully integrated platform for hedge funds
FX and Rates & Credit
FX Market-maker in the spot, forwards and options markets; trading, investment and hedging in precious metals markets
Rates & credit
Standardised rates-driven products, interest-rate swaps, medium-term notes, government and corporate bonds
E-trading
Financing solutions
Structuring
Global Research and Analytics
Emerging Markets
Client Focus
Technology
Value
creation
Superior execution
Talent & culture
Clients

8. Introduction to UBS
CCS—Coverage & Advisory

9. UBS CCS—seamless cooperation across specialist teams
Sector, Country and Product teams work together to serve in the best interest of each corporate client
EMEA Country teams
Sector teams
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
Corporate Clients
Leveraged Finance / Financial Sponsors / Restructuring
Private Funds Group
Equity Capital Markets
Strategic Equity Solutions Group
Debt Capital Markets
Leveraged Capital Markets
Product teams

10. Why work in Capital Markets Solutions?
UBS capabilities in capital market solutions are proven by its numerous awards
Why work in Capital Markets Solutions
Equity and debt capital markets recent awards
#1 Pan-European Equity House in
Extel Surveys
Unique position within the investment bank
#1 Bookrunner of EMEA block trades in 2014YTD Dealogic1
Opportunity to develop client relationships
#1 Bookrunner of Continental European IPOs and rights issues in 2014YTD Dealogic
Market dynamics are never the same
#2 Bookrunner of EMEA ECM issuance in 2014YTD Dealogic
Generalist focus across sectors
#1 in Tier 1 capital issuance and European contingent capital in YTD Dealogic
Execution, execution, execution
Capital Markets Solutions is uniquely positioned within the investment bank, giving you broad exposure to both the public and private side of banking
Note: Rank by number of deals

11. Introduction to UBS
DCM – A global facilitator for the real business world

12. Debt Capital Markets Product lines
Primary and tailored financing solutions
Interest rate risk management
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
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
Cash management
Hybrid capital raising and securitisation
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
Assisting banks and insurance capital to raise regulatory capital through the debt capital markets
Transforming on balance-sheet assets into asset backed securities
Liability management (of existing debt/capital)
FX risk management
Buying back debt (targeting wide credit spreads)
Consent solicitation to modify problematic or restrictive covenants
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

13. What function does DCM play in the business world?1
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 2
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

14. The bond market at a glance
Bond Markets by Size1
Issuance by Currency across all Markets2
USD (bn)
USD (bn)
US Treasury Yield
FIG and Corporate Spreads
(%)
(bp)
Note: These figures include issuances in USD, EUR and GBP, but exclude EM issuers
2 These figures exclude EM issuers

15. Watch & Jewellery SwissCo AG
UBS in the Bond Market
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
€300 million
7-years 1.500%
October 2014
€750 million
8-years 1.375%
October 2014
€900 million
12-years 2.798%
July 2014
€900 million
Perp NC %
June 2014
€500 million
7-year 4.000%
March 2014
€750 million
10-year 2.500% Green Bond
February 2014
USD
$400,000, % Notes due $350,000, % Notes due 2019
August 2014
$600,000, % Notes due 2019
$600,000, % Notes due 2024
$550,000, %
Notes due 2044
August 2014
$250,000, % Notes due 2054
August 2014
$800,000, % Notes due 2024
August 2014
$400,000, % Notes due 2019
July 2014
$500,000, % Notes due 2019
$700,000, % Notes due 2024
July 2014
GBP
£500 million 62.7NC7.7 hybrid offering
January 2014
£250 million notes due 2026
September 2013
£400 million 62NC7 hybrid offering
September 2013
£625 million dual-tranche notes due 2025 and 2018
June 2013
£800 million dual-tranche notes due 2028 and 2033
March 2013
£382 million dual-tranche fixed and index-linked notes due 2022
February 2013
CHF
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
CHF 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
Citychamp
Watch & Jewellery SwissCo AG 15

16. Working example for FIG DCM clients
Helping clients to cope with new regulations

17. Financial institutions and Basel 3 regulations1
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 2
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-concept 3
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

18. Working example: Corporate vs. Bank
Simple Corporate Balance Sheet
Simple Bank Balance Sheet
Assets
Liabilities
Assets
Liabilities
Cash,
Payables 5%
Cash
Short-Term Debt
15%
Receivables
20%
Tradable Securities
20%
30%
Tangible Assets
Debt
20%
Non-FI Receivables
15-35%
Intangibles,
Property,
Plant,
Equipment
40%
Long-Term Debt
Equity
FI Receivables
10%
65%
35-65%
Public Sector Receivables
54%
25% 3%
Sub-Debt 3%
Equity

19. FIG – Regulation and Capital Position
Simple Bank Balance Sheet
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  (from 100)
Assets
Liabilities 5%
Cash
Short-Term Debt
Tradable Securities
20%
30%
Non-FI Receivables
40%
Long-Term Debt
10%
FI Receivables
Equity
Public Sector Receivables
54%
Bail-in debt
25% 3% 3%
Sub-Debt 3%
Equity T2
AT1
CET1 3%

20. DCM and Basel 3 1
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 2
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!
How 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 3

21. The capital stack―comparison by jurisdiction
Basel III requirements seem to act as country "minima" with most jurisdictions opting for more conservative capital requirements
Up to 13.5% CET1 UK
(ICB recom Group 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% CET1
4.5% CET1
0-2.5% count
cyclical buffer
1.5% AT1
2.5% Cap. Cons. buffer
G-SIB %
2.0% T2
G-SII / O-SII / Systemic Risk %
Up to 5% Systemic Risk Buffer (Macroprudential charge)
Com- bined Risk Buffer
Pillar 2A (o/w 56% CET1)
PRA Buffer (CET1)
Min Req
Denmark
Individual Pillar II
4.5% minimum CET1
% SIFI surcharge
Up to 16.0% + individual Pillar II (CET1: 12.5% + Individual Pillar II)
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
0-2.5% count cyclical buffer
2.0% "other" pillar 2
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
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
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
CRD IV
Netherlands
Up to 18.0% (CET1: 14.5%)
2.0% T2
Up to 16.0% (CET1: 12.5%)
1.5% AT1
2.0% T2
Combined Risk Buffer
0-2.5% counter cyclical buffer
1.5% AT1
0-2.5% counter cyclical buffer
G-SII / O-SII / Systemic Risk %
% SIFI surcharge
2.5% Cap. Cons. buffer
2.5% Cap. Cons. buffer
4.5% Basel III CET1
4.5% Basel III CET1 21

22. Reaching FSB's TLAC requirements today: high level analysis
If 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 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
16% RWA
20% RWA
6% Leverage ratio
EUR bn
FSB SIFI charge (%)
CBR charge (%)
CET1
AT11,2
Tier 21,2
Eligible Capital Funds1
RWA
Capital Funds / RWA
Nominal 16% RWA + CBR Requirement
Nominal 16% RWA + CBR Shortfall
Nominal 20% RWA + CBR Requirement
Nominal 20% RWA + CBR Shortfall
Nominal 6% Leverage + CBR Requirement
Nominal 6% Leverage + CBR Shortfall
Maximum shortfall
Europe
BBVA
1.0%
3.5%
39.0
0.0
10.4
49.4
337
14.7%
65.6
16.2
79.1
29.7
46.6 -
BNP Paribas
2.0%
4.5%
63.3
6.5
5.2
75.0
620
12.1%
127.1
52.1
151.9
76.9
145.3
70.3
BPCE
45.0
4.2
9.3
58.5
404
14.5%
78.8
20.2
94.9
36.4
83.3
24.7
CA Group
1.5%
4.0%
61.6
9.4
17.0
88.0
501
17.6%
100.2
12.2
120.3
32.3
124.8
36.8
Deutsche Bank
58.8
3.5
5.0
67.3
401
16.8%
82.2
14.9
98.3
31.0
104.9
37.5
ING Bank
5.5%
31.6
2.4
8.9
43.0
293
14.6%
63.1
20.1
74.8
31.9
70.0
27.0
Nordea
6.0%
23.2
2.7
4.1
30.0
152
19.7%
33.5
39.6
9.5
41.5
11.4
Santander
61.0
1.5
69.0
559
12.3%
109.0
40.0
131.3
62.4
100.9
Société Générale
35.7
8.0
6.4
50.1
351
14.3%
68.4
18.3
82.4
85.0
34.9
UniCredit
42.2
3.8
14.7
60.7
399
15.2%
77.8
17.1
93.8
33.0
66.8
6.0
Swiss
Credit Suisse
32.5
8.3
45.8
235
19.5%
47.0
1.2
56.4
10.6
52.6
6.8
UBS
34.5
45.1
189
23.8%
37.9
45.5
0.3
52.7
7.6 UK
Barclays
50.3
18.1
83.1
514
16.2%
105.3
22.2
125.8
42.7
126.5
43.3
HSBC
2.5%
5.0%
102.3
14.5
28.5
912
15.9%
191.6
46.3
228.1
82.8
198.2
52.9
RBS Group
49.7
17.4
76.5
490
15.6%
98.0
21.5
117.6
41.1
101.4
24.8
Stan Chartered
3.2
14.1
44.3
257
17.3%
5.7
60.4
16.0
45.6 US
Bank of America
112.2
26.5
143.9
939
15.3%
187.8
43.8
225.3
81.4
129.2
Bank of NY Mellon
13.9
0.4
15.5
122
12.8%
23.7
8.2
28.6
13.0
19.7
Citi
120.0
13.3
133.3
924
14.4%
189.3
56.0
226.3
93.0
122.6
Goldman Sachs
6.3
65.1
433
15.1%
86.5
21.4
103.9
38.7
57.0
JPMorgan
117.0
16.9
148.4
1,188
12.5%
249.5
101.2
297.1
148.7
163.5
15.1
Morgan Stanley
42.5
4.7
53.2
305
17.4%
61.1
7.9
73.3
48.4
State Street
10.3
1.1
1.6
13.1 81
16.1%
15.8
19.1
12.8
Wells Fargo
98.5
12.3
27.6
138.4
871
169.9
31.5
204.7
66.3
97.9
15.0%
2,281
584
1,553
2,733
1,036
2,044
429
1,052
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

23. European Tier 1 capital market timeline
The European Tier 1 market continues to grow, while new regulation continues to influence Financial Institution's motivation for issuance
June 20th 2013
UK PRA announce Capital Shortfall in major UK Banks and Building Societies
June 28th 2013
Draft Bank Recovery and Resolution Directive published
October 15th 2013
2014 European Comprehensive Assessment announced to the market
January 1st 2014
CRD IV / CRR introduced in Europe
April 29th 2014
Release of methodology and capital shortfall measures on the European Comprehensive Assessments
Leverage Ratio?
Bail in Capital?
Asset Quality and RWAs
Grandfathering?
High Trigger AT1?

24. Regulatory timeline for TLAC, AQR, BRRD & leverage ratio
Mid October FSB 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 2015 Comprehensive FSB QIS study on TLAC
1-Jan-19 earliest TLAC implementation deadline
1-Jan-15 Required disclosure of leverage ratio
H Final 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-18 full implementation of leverage ratio requirement
2014
2015
2016
2017
2018
2019
26 October 12:00 CET AQR results announced
1-Jan-16 Bail-in tool comes into force
1-Jan-16 Single Resolution Fund takes legal effect
30-Jun-16 Deadline 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-Dec-16 Deadline for European Commission to report on whether the EU should have a common rule on the minimum amount of bail-inable liabilities banks must have
1-Jan-24 Deadline 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
4 November ECB assumes regulatory authority
1-Jan-15 BRRD comes into force, except for bail-in rules on creditor writedowns
1-Jan-15 Single Resolution Mechanism begins; banks start paying levies into national resolution funds
31-Jan-16 Deadline for transfer to Single Resolution Fund of contributions previously held in national funds
31-Oct-2016 Deadline for EBA to submit guidance on an appropriate target level for national resolution funds
3-Jul-15 Deadline 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
24 October (UBSe) Banks receive individual results for AQR
31-Dec-24 Deadline for all national resolution funds outside of the banking union to have pre-financing equivalent to 1% of covered deposits.
FSB / TLAC
ECB / AQR / BRRD
CRR / leverage ratio

25. Working example for FIG DCM clients
And what to look at for each client – it is a lot of work!

26. Example: Looking at capital ratios dynamically—Existing HT1 and T2
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 1
Forecasted hybrid capital eligible for recognition (pre deductions) assuming no calls
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Tier 1
377
301
264
226
188
151
113 75 38
o/w B3 compliant na
o/w Derecognised Step T1 3
135
o/w Grandfathered T1
Excess grandfathered T1 over cap eligible for T2 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
2,822
2,795
2,669
2,530
2,188
1,652
1,122
710
o/w Derecognised Step T2
273
182 24
o/w Grandfathered T2 (capped)
641
448
315
219
141
100 46 –
o/w excess T1 grandfathered as T2 (capped)
132 56
Excess grandfathered T2 over cap
Excess grandfathered T1 over cap 35
148 2
Forecast Grandfathered Tier 1 roll forward (pre deductions) assuming no calls 3
Forecast Grandfathered Tier 2 roll forward (pre deductions) assuming no calls
2.3
1.9
1.5
1.0
0.6
% RWA1
3.9
3.3
0.2
3.0
% RWA1
0.4
0.3
0.2
0.2
0.2
0.1
0.1
0.1
0.0
0.0
2.6
Start of CRR grandfathering (80% cap applied retrospectively)
Start of CRR grandfathering (80% cap applied retrospectively)
Source: Bloomberg as at 16 January 2014, UBS Research, UBS analysis
1 RWA growth per UBS Research and fixed at 3% after 2017

27. Example: Reaching Bank's optimal capital structure?
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 1
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
Bank reported
Lev Ratio Req
3.0%?1
3.0%
4.7%2
CET/AT1
6.0% + CBR including T2/TLAC
CET/AT1
CET/AT1
7.5%
CET/AT1/T2/TLAC
Management Buffer? (CET1)
Management
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
0-2.5% count
cyclical buffer (CET1)
3.8% T2
…or 2x Basel 3 leverage ratio requirement (currently not binding constraint for Erste)
Up to 5% Systemic Risk Buffer (CET1) including up to 3% SIFI buffer (CET1)
0.7% NCR
CRD
CBR CET1
19.5 – 23.5%
2.2% AT1
1.0% SIFI buffer
3.8% T2 2
Existing Capital Efficiency
Fully utilise CRR Pillar 1 buckets for capital efficiency
2.5% Cap. Cons. Buffer (CET1|)
2.5% Cap. Cons. buffer
15.3%
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")
4.5% Tier 2
TLAC?
up to 16-20% RWA
TLAC?
up to 16-20% RWA
11.8% CET1
Pillar 1 Req
10.8% CET1 3
Leverage
Current requirement of 3% in the Eurozone. However some jurisdictions (Netherlands, UK) are pushing towards 4-5%
2.0% Tier 2
2.0% Tier 2
1.5% AT1
1.5% AT1
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
4.5% CET1
4.5% CET1
All potential regulatory requirements
Erste TLAC compliant capital structure
(assuming no Pillar 2 charge)
Erste 1H14
(Fully Loaded)
Note:
1. Final adjustments to definition and calibration on leverage ratio expected in H – for now assuming 3% requirement
2. Leverage ratio fully phased UBSe; calculated using Bank's disclosed 5.1% transitional leverage ratio

28. Preparing yourself for the important investor questions we experienced from recent roadshows
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
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
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
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
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 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
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

29. Today’s agenda The analyst role at UBS Introduction to UBS Why UBS?
Recruitment process

30. 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
Stimulating environment
International career path
Your ideas count
Interactions with highly talented people from different backgrounds
Dynamic and demanding
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

31. Day in the life of an Investment Banking analyst
Meetings, on-going training, business travelling and team events & drinks are also part of the equation!
Presentations
Information
Presentations for client meetings
Company profiles
Sector analysis
Search for information (company financials, market data…)
Management of internal databases
Finish?
Start
8:00
Involvement in mandates
Valuation
Process management
Day-to-day client contacts
Drafting of documents (e.g. information memorandum, IPO prospectus…)
Financial modelling
Discounted Cash Flow
Merger models
Multiple analysis

32. Career progression 0–3 3–6 6–9 9–12 12+ Analyst Associate Director
Years
0–3
3–6
6–9
9–12
12+
Analyst
Associate Director
Director
Executive Director
Managing Director
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
Tasks
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
Skills

33. 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

34. Today’s agenda Why UBS? Introduction to UBS The analyst role at UBS
Recruitment process

35. Why a career with UBS? Our strengths Implications for you
A global bank …
… with roots in European culture
Balanced mix of products and capabilities
Talented people
Open, inclusive culture
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

36. Today’s agenda Recruitment process Introduction to UBS
The analyst role at UBS
Why UBS?
Recruitment process

37. UBS selection process for Analyst and Intern positions
Online application at including online numerical and logical reasoning tests
Key Skills sought
Problem Analysis
Planning and Organising
Judgement & Decision Making
Innovation
Communication & Impact
Drive & Commitment
Teamwork
Commercial Awareness
Research on UBS
Application screening
Face-to-face / Telephone interview
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
Assessment centre
Case study presentation, competency-based and technical interviews
Analyst / Intern offer!
Candidates offered will go into a pool. We will allocate roles on business need and candidate preferences

38. Application deadlines
Internships: Wednesday 31st December 2014
First Year Programs: Sunday 18th January 2015
Contact information:

39. Short summary CV of Oliver Radeke
Born in Dec in Hamburg, Germany
Married, two children
1992 Abitur (German A-levels) May 1992
1993 – 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:

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