The largest private bank in the world says we may be at the beginning of a Trump rebound. What's holding it back? Well, Donald Trump actually.
Switzerland's UBS, the largest manager of wealthy people's money in the world, said it sees renewed optimism (read: appetite) for investing after Donald Trump was elected president.
Why is UBS so concerned about how comfortable the wealthy feel investing? Because it earns juicy fees from every transaction its clients make, and virtually nothing when investors are gun shy, holding big cash piles instead.
«It is clear post-election that President Trump's supporters have increased their confidence. What’s quite remarkable to see is Mrs. Clinton’s supporters are also becoming more optimistic, and that’s good news,» UBS head Sergio Ermotti said in Zurich today.
Good News, Bad News
The good news, which are based on a quarterly finding of investor appetite conducted by UBS, is that more than half of those polled have a concrete plan of how to invest. Tantalizingly for UBS, one-third of those projects are pegged for equity or other investments with a higher degree of risk.
This is exactly what private banks have been longing for, some of them for years now: for clients to return to investing in a big way, and start earning their banks fees again.
But there is a caveat to the Trump optimism, and it has to do with Trump himself: «The bad news is that those are plans, it’s sentiment,» Ermotti said.
«Before they translate those plans into to action, they want to see the outcome of the first 100 days of the new administration, so its going to be very important to keep the momentum for them to be more constructive about taking on risks.»
U.S. Private Bank Pickup?
Put more simply, clients want to make sure Trump is going to be a pro-business president who will back up his tough talk with actions, and not a reality-show wrecking ball.
Where would the bank feel the Trump effect first? At its U.S.-based brokerage, run by Tom Naratil, as well as perhaps its investment bank, if the upswing comes against the backdrop of a broader economic pickup.
«If that were to occur in our business, we would see an improvement in transaction as well as non-recurring fee revenue. So you would see a flow-through quite directly in the results of our U.S. wealth management business,» finance chief Kirt Gardiner said.
UBS Benefits Either Way
«I think it would also show up in our investment banking business, because that would imply there is more institutional activity as well, and our equities franchise in the U.S. which has seen a fair bit of improvement as we have been investing to build our equities franchise in a market where we traditionally been under-represented, you would also see the benefit flow through to our equities business.»
Thus UBS, traditionally a Democratic supporter, is poised to benefit from Trump's surprise election.
Ermotti said he wouldn't take a side, but said he hoped Trump would change some «unintended consequences» of post-crisis financial regulation, though he said it wasn't clear whether any loosening would apply to foreign banks like UBS anyway.
