UBS hopes Trump-led rally will help boost wealth management

By Joshua Franklin

ZURICH (Reuters) - UBS hopes a Donald Trump-inspired rally in the United States will help boost earnings at its struggling wealth management business after posting a 47 percent fall in full-year net profit.

With profit from its core wealth management business under pressure, the bank pointed to growing investor confidence in the United States towards the end of 2016 as a sign clients could be ready to get off the sidelines and back into the market.

"Although macroeconomic uncertainty, geopolitical tensions and divisive politics continue to affect client sentiment and transaction volumes, we have begun to observe improved investor confidence, primarily in the U.S., which may benefit our wealth management businesses," Switzerland's biggest bank and the world's biggest wealth manager said in a statement.

UBS saw its 2016 net profit fall to 3.3 billion Swiss francs ($3.3 billion) from 6.2 billion in 2015, yet this beat analysts' forecasts, in part thanks to a better-than-expected showing in its equities business.

UBS proposed an unchanged ordinary dividend of 0.60 francs, in line with market expectations.

"We see these results as mixed but remain 'Underperform' as wealth management margins remain under pressure and expect dividends to remain flat for the foreseeable future," analysts at Bank of America Merrill Lynch wrote in a note.

Shares were down more than 2 percent in early trading, lagging the European banking sector index.

In a sign of the challenges in UBS Wealth Management, which does not include North America, transaction-based income fell to the lowest on record in the fourth quarter.

The division's overall operating income also fell for the seventh straight quarter. It suffered net outflows of client assets totalling 4.1 billion francs, which UBS put down to tax amnesty programmes in emerging markets and Asia Pacific.

The ability to attract new money is seen as an important indicator of future earnings in wealth management.

Wealth Management Americas saw $1.3 billion in outflows but still posted a record adjusted pre-tax profit.

Fourth-quarter group net profit came in at 738 million francs, well ahead of the median estimate of 339 million in a Reuters poll of 15 analysts.

It was down from 949 million francs a year earlier, when results benefited from a net tax benefit of 715 million francs.

The bank said it netted 100 million francs in fourth-quarter savings, bringing total net cost cuts since 2013 to 1.6 billion francs. It is targeting net cuts of 2.1 billion francs by the end of 2017.

($1 = 1.0011 Swiss francs)

(Reporting by Joshua Franklin; editing by Michael Shields and Jason Neely)