UBS may have seen quarterly profits rise year-on-year, but chief executive Sergio Ermotti says the threat of trade wars and political unrest has dampened investor enthusiasm and continues to hold back financial markets.
In an interview with the Tages Anzeiger newspaper, Ermotti said fractious trade policies and Brexit in Europe are weighing on his bank’s performance. “All you have to do is browse through the media each day to see where uncertainties are manifesting themselves.”
Profits at Switzerland’s largest bank rose to CHF1.28 billion ($1.29 billion) in the second quarter, up from CHF1.17 billion during the same period last year.
“Things have still gone quite well for us, but we still find ourselves in anything but the ideal environment,” Ermotti told the Tages Anzeiger. “When you think of the rise of protectionism, which is dampening growth in China, and when you look at developments in Europe - with Brexit in mind - all this contributes to investors being cautious.”
Wealthy investors in the US appear to have taken fright at such geopolitical pressures. A UBS survey found the percentage of wealth they hoard in cash has risen from 19% last year to 24% now. In a low interest environment, particularly in Europe, this is costing the bank money, Ermotti said.
Rich clients in the US were mainly responsible for net outflows of CHF1.2 billion at the recently merged private banking operation.
However, Ermotti added that he is confident that UBS can continue to negotiate the current wave of unfavorable sentiment.