Wednesday, February 8, 2023

Stefan Kamp (Lombard Odier): “We are not going to discriminate against customers because they are Russian”

Lombard Odier is one of the oldest private banking firms in the world. Born in Switzerland 225 years ago, it is still in the hands of the founding families and other partners, and manages a legacy of 310 billion Swiss francs (the same amount in euros). Stefan Kamp (Florence, 54 years old) is responsible for the unit for Southern Europe and Latin America.

ask.I understand that your clients, even if they are high net worth, are also concerned about the current economic situation. Do you think we are heading towards a recession?

answer , The moment is complicated. Decades had passed since such high inflation. Central banks have acted to control prices and we expect major economic sectors to go into recession. However, it is too early to say what will be its intensity and duration. Of course, each region experiences an economic downturn differently.

P.Do you think Europe will suffer more than America?

R. The trigger for the inflationary spiral is different in Europe, as it has more to do with supply shocks, particularly from an energy perspective. Significant steps have been taken to reduce dependence on Russian gas and reserves have increased. So I think the solution should be more or less under control, at least during this winter. The second thing is to develop alternative energy sources, which takes more time. But it is true that the supply shock to prices is softening. Also, if we compare the current situation with the situation in 2008, the domestic savings are now higher and this helps in maintaining the consumer demand. So it is important to know how intense and how long the recession will be.

P.Do you think central banks have gone too fast with their rate hikes?

R.it’s hard to say. The situation required quick and forceful decision-making. If I put myself in their shoes, I understand that central bankers cannot sit quietly with these inflation rates, even if it results in an economic recession.

P.What is the impact of this change in monetary policy for the private bank?

R.It depends on the type of entity we are talking about as there are different private banking models. There are firms that rely heavily on liquidity management, trying to accumulate a lot of cash and then invest that money. For those who are within this profile, the rise in rates is beneficial because of the spread. [diferencial] There is a spread between what you pay to capture deposits and what you charge banks or individuals to lend them. We don’t do that, we specialize in client portfolio management and advice.

P.Which property do you like the most right now?

R.We are slightly underweight equity. If you have to be in the stock market, we recommend energy and health companies above all. With rates higher, fixed income becomes attractive again, and where we recommend increasing the weighting in a portfolio is in alternative assets like venture capital.

P.Do you think the stock markets haven’t factored in all the distress we are experiencing yet?

R.I think the market is in wait and watch mode right now. They have raised rates in excess, but do not yet know the magnitude of the recession.

P, Have you recommended your clients to enter crypto assets?

R.No, this is an area that we observe, but where we do not invest because it is an area that is not completely transparent, we cannot know what is behind it and for us it has a high reputation. There is risk.

P.Speaking of prestige effect, do you have Russian clients?

R.Yes, they are people we are not going to discriminate against just because they have a Russian passport. However, it has a low weighting in the total client portfolio.

P.Do you recommend your clients to invest in sectors like real estate or infrastructure?

R, We had a strategy meeting recently and we came to the conclusion that increasing exposure to these two areas was good. In particular, we believe that there are good opportunities in the European real estate business.

P.To what extent is Spain important to the Lombard Odier?

R.It is a very important market and not only in recent years. This relationship dates back to the 19th century, when we advised our clients to invest in the development of two railway projects, the Madrid-Zaragoza and the Madrid-Alicante lines. At the moment we have very important development plans in Spain and for this reason one of our objectives is to contract private bankers. I think this is the ideal time to do this for two reasons: first, because there are competitors who have left the Spanish market, and second, because, as happened in 2020, many people, from the strength of our balance are aware. From the sheet and our experience, they approach it out of fear of a systemic crisis and prefer to entrust their money to a boutique rather than a large global institution.

P.Will growth in Spain only be organic as more bankers sign up? Or even through acquisition?

R.It is not in our DNA to make acquisitions, but to grow organically.

P.The Spanish government finalizes its tax on the wealthy, called the Solidarity Tax. Are your customers scared?

R.I would not say that they are afraid, but in some cases there may be concern. However, you need to know the specifics of this tax, which will be temporary in any case. It is too early to know what the customer response will be, however we are in permanent contact with our local team to ascertain their needs.

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