Berenberg continues expansion
• Record net commission income: up 15.8% to €206.4 million
• Net profit for the year up 7.3% to €60.2 million
• Assets under management up 8.3% to €28.2 billion
• No. 3 for IPOs and capital increases in Germany/Austria/Switzerland
• Office opened in New York
Hamburg. “The banking sector faces a multitude of challenges in 2013,” says Dr. Hans-Walter Peters, spokesman of the managing partners at Berenberg. “More than ever, it is essential for banks to offer their customers visible benefits. This is the objective of our mission as a competent, responsible service provider: we aim to support our customers.”
As in previous years, this was achieved again in 2012. Berenberg recorded a further rise in demand for its services and generated very good results throughout the global financial crisis.
Germany’s oldest private bank has rapidly expanded its presence in international financial centres in recent years. Berenberg now employs 152 people in London (up 9), 79 in Zurich (up 5) and 59 in Frankfurt (up 3). Again in 2012, Berenberg can report a slight increase in its headcount (from 1,110 in 2011 to 1,116 in 2012) in marked contrast to the general trend for job cuts across the banking industry.
“The Berenberg Capital Markets LLC subsidiary that we set up 18 months ago in Boston has marketed our equity research product to U.S. institutional investors so successfully that we decided to open a further office in New York in mid-2012. We see this as a good opportunity for providing access to U.S. investors for German and European companies,” explains Hendrik Riehmer, the managing partner responsible for Investment Banking. Together with a larger Equity Research unit, the U.S. facilities and the sales offices located in the European financial centres have helped to expand the client-driven equity trading volume rapidly, meaning that client commissions rose by 55% in 2012.
Operating results (provisional figures)
Despite a difficult market environment, the 2012 financial year closed with a net profit for the year of €60.2 million (2011: €56.1 million; up 7.3%), the fourth-best result in the 423-year history of the Bank. At 76.5%, the cost-income ratio is at around the same level as last year (75.9%).
This positive operating result was driven primarily by net commission income, which rose by 15.8% to a historical high of €206.4 million (€178.2 million). “This reflects our successful growth and our focus on service activities,” comments Peters. At €31.2 million, current net interest income remained at the same level as last year (€31.8 million), despite low interest rates; net trading income rose from €32.0 million to €35.1 million. The ratio of current net interest income to net commission income is now 13:87 (15:85), demonstrating the importance of commission-earning operations, and hence service activities, for the Bank’s business model.
Assets under management grew strongly, from €26.0 billion to €28.2 billion (up 8.3%). Total assets rose by 8.2% to €4.3 billion (€4.0 billion) on account of higher client deposits. The Bank’s liable equity increased to €220.9 million (€216.9 million). At 14.4% (14.1%), the core capital ratio of the Berenberg Group was above the targets required under Basel III in the future. Furthermore, the Bank plans to increase its core capital by building retained earnings of a further €2.5 million, after the net income for the year has been approved, so as to reinforce the capital base.
“The positive development in our earnings enabled us again to invest in strengthening and expanding our institution in 2012,” says Peters. In particular, investments were made in highly qualified staff and existing structures enhanced under qualitative considerations. As a result of this, personnel expenses rose from €128.8 million to €140.0 million, while total general administrative expenses (personnel, IT and marketing expenses plus cost of materials) increased to €214.9 million (€195.7 million).
“We can justifiably claim to have a very good setup across all lines of business and claim a strong demand for our services on the market,” says Peters.
It was again a very challenging year for the private banking industry in 2012. Low interest rates joined forces with rising regulatory requirements, and at times politically-driven capital markets, to put pressure on profitability across the whole sector. “Nevertheless, Berenberg invested further in the quality and professionalism of its advisory offering in 2012,” comments Peters.
Berenberg offers its wealthy private clients a broad service package, ranging from asset structuring advice and conventional asset management to investments in real assets and specialist fields like art investment and succession planning. The focal point of our service, however, remains our asset management, for which we have permanently refined the investment processes. We offer our clients value added in the current environment of low interest rates by concentrating on performance-oriented diversification across various asset classes and risks. Alongside various promising investment fields, we are putting more emphasis on the fast-expanding emerging markets where we have amply demonstrated our expertise in the broad investment setting.
As was already the case in 2011, our clients increasingly turned to investments in real assets in 2012. We succeeded in providing access to profitable investment opportunities in real estate, forestry, agricultural land and art.
Trade magazines belonging to the Financial Times Group named us the “Best Private Bank in Germany” in 2012. For the ninth time in a row, we achieved the highest score possible in the “Die Elite der Vermögensverwalter” report published by Handelsblatt, and the German Institute for Service Quality bestowed upon us the title of “Best Asset Manager 2012”.
“In parallel to our German private banking activities, our Private Banking branch in London succeeded in expanding its operations in the UK, while Berenberg Bank (Schweiz) AG successfully manages private wealth throughout the world,” explains Andreas Brodtmann, the managing partner responsible for International Private Banking and Family Office Services.
Berenberg Investment Banking focuses on services and client activities in the field of equities and bonds, accompanies IPOs and capital increases, and advises on mergers and acquisitions.
“In 2012, we took the lead in arranging two of the five big IPOs in Europe – DKSH and Talanx – acting as book-runner or global coordinator and were involved in many others. According to Bloomberg, we are among the top three banks in Germany, Austria and Switzerland, with seven primary market transactions accompanied,” explains Riehmer. Berenberg generates additional demand for capital market activities by addressing further target groups including mid-sized institutional investors, family offices and wealthy private investors. The conventional equity brokerage activities for institutional clients also proved very successful. “Despite poor markets, we managed to increase our client commissions in this field by 55%, which enabled us to significantly expand our market share,” says Riehmer.
Berenberg has one of the most comprehensive research teams in Europe, with 70 equity analysts tracking almost 500 companies across eight sectors. As Riehmer explains: “Our research is characterised by independence. We do not maintain our own order book, and the research is geared totally to the needs of our clients.”
A hundred or so companies presented themselves to institutional investors at each of two investor conferences in London and Munich; 14 of the 20 world’s biggest asset managers were represented in Munich alone.
We started to accompany bond issue transactions in 2012, already acting as co-lead-manager twice for the Otto Group and for other issues. On the M&A side, we again succeeded in improving our reputation on the market – especially for complex corporate transactions.
Berenberg Asset Management focuses on quantitative investment strategies for institutional investors. The product and service offering covers the implementation of overlay strategies used to systematically hedge interest rate, stock market, currency and commodity risk together with volatility-based strategies serving to generate additional market-neutral earnings, and quantitative selection strategies for equities and bonds. Individual oversight coupled with new innovations and constant refinements have been rewarded by distinctions, such as the overall winner in the Telos Asset Management Satisfaction Study.
Assets under management rose significantly to €10.5 billion. Net inflows to the currency overlay strategies used in the dynamic hedging of currency risk were responsible in particular for this rise alongside capital gains. Established strategies also performed very well in a volatile market environment. Acquisition activity in the UK also yielded positive results, with two major pension funds commissioning us to act as asset manager in 2012.
We achieved considerable success in the field of retail funds in terms of both performance and cash inflows. The outperformance of our quantitative equity strategies and our total return strategies against the relevant market and total-return benchmarks averaged 2.30% and 3.50% respectively in 2012. The volume of retail fund assets managed by Asset Management rose by €350 million to reach €1.7 billion.
Corporate Banking offers the kind of advice traditionally provided by private banks to SMEs and
capital-market-oriented companies notably regarding financing structures, currency and investment concepts, and payments. In this context, special solutions have been devised for shipping and real estate clients. Through its Structured Finance business unit, moreover, Berenberg advises major companies and financial investors on suitable financing structure, sometimes including the use of capital market instruments. Among other things in 2012, we issued financing confirmations for the public acquisitions of CinemaxX AG and vwd Vereinigte Wirtschaftsdienste AG and advised Rhön-Klinikum AG on the arrangement of a syndicated loan.
Established in 1590, Berenberg is one of the leading private banks in Europe today, focussing on four operating divisions: Private Banking, Investment Banking, Asset Management and Corporate Banking. The Hamburg-based bank with a strong presence in London, Zurich and Frankfurt together with 12 other offices in Europe, the United States and Asia is managed by personally liable partners. With a firm grasp of our traditions, we have more than 1,100 staff driving our business into the future.
To find out more, visit www.berenberg.com.
Director Corporate CommunicationKarsten Wehmeier
Phone +49 40 350 60-481 email@example.com