Berenberg expands market position
• Gross earnings up to €264 million
• Profit of €56 million, ROE at 40.1%
• Workforce expanded by 14% to 1,110
• Participated in all major German IPOs in 2011
• No.2 in mid-market capital market transactions
• Pan-European Private Banking services expanded
• Assets under management grown to €26 billion
• Group's strength underpinned by core capital ratio of 14.1%
Hamburg. “We succeeded in expanding our market position across all our activities in a very challenging environment,” Dr Hans-Walter Peters, spokesman for the personally liable partners of Berenberg Bank, summarised 2011. In particular, the Investment Banking division, which focuses on client and service operations, contributed strongly to the good results recorded again this year, with gross earnings increasing 34% year-on-year, from €103.6 million to €138.7 million.
In 2011, Berenberg Bank, which was established in 1590, continued to pursue its growth strategy that has proved so successful over the years. It greatly expanded its presence, notably in the key financial centres of London (hiring 43 more employees taking the total to 143) and Frankfurt (up 12 to 52) as well as in its Hamburg head office (up 43 to 726).
A subsidiary office was opened in Boston in mid-2011 to market research activities to US investors. Berenberg previously had a branch in this major port from 1828 to 1902. Another Private Banking office was opened in Geneva during 2011, meaning Berenberg now has a presence in nine German cities and nine foreign locations.
Total assets increased by 21.9% to €3.953 billion (2010: €3.242 billion) as a result of an increased number of client deposits. Gross earnings increased sharply from €237.2 million to €263.8 million (11.2%). Although net commission income increased by a significant 17.3% to €178.2 million (€152.0 million), current net interest income decreased on account of low interest rates (down 3.1% from €32.9 million to €31.8 million). General administrative expenses increased by 14.7% to €195.7 million (€170.7 million) in line with increased business. A highly satisfactory net profit for the year of €56.1 million was recorded, down only 8.9% from the impressive €61.5 million one year ago, despite the difficult year in capital markets. The Return on Equity (ROE) was 40.1 % (45.3 %). The number of employees increased from 977 to 1,110 (14%) in parallel with the business growth. The cost-income ratio remained at almost the same level as last year (76% in comparison to 74% the previous year). Despite market fluctuations, assets under management rose by €0.5 billion to €26.0 billion.
The conservative business policies of the Berenberg Group and its focus on service operations are reflected in a very comfortable core capital ratio. At 14.1%, this is significantly above the (the future) requirements of 9% applicable to the systemically important banks. The bank’s liable equity was enhanced by a core capital amount of €4 million at the end of 2011 to €217 million.
“The investments we’ve made over recent years are bearing fruit. We are in an excellent position in the business fields we have targeted and have always been able to report very good, solid results especially during the financial crises of recent years. Just as we had no investments in subprime structures on our books during the financial crisis in 2008, no bonds issued by crisis-ridden European states are in our portfolio today. Our policy of organic growth has also proven its worth,” comments Dr. Peters. Berenberg has always refused to acquire other banks in order to avoid diluting a corporate culture developed over the centuries.
“It’s really hard to predict how the economy will perform as a whole in 2012. Much depends on a solution being found to the sovereign debt crisis. Berenberg takes an optimistic view of the future. We’re standing right beside our clients with a proven business model and a highly motivated workforce, viewing ourselves as their service provider. We will continue to with our conservative business strategy moving forward.”
Berenberg Bank offers its clients individual, all-encompassing advice in all asset classes. The focus is on long-term value retention.
Berenberg again received numerous awards for its outstanding service approach in 2011, including first place in the “Die Elite der Vermögensverwalter” report (Handelsblatt), “Best Local Bank in Germany” (Euromoney) and “Best Private Bank in Germany” (Professional Wealth Management/Financial Times Group). “These accolades help us maintain our image and reputation at home and abroad, especially when we are expanding our international activities as we look to do when suitable opportunities arise. Our International Private Banking unit provides services to investors throughout the world from its base in Zurich. We also established a Private Banking presence in London and Geneva in 2011 and we are developing these markets,” says personally liable partner Andreas Brodtmann.
2011 was a very difficult year for the private banking industry. Even conservative portfolios were placed under pressure by the considerable market movements. These also had an effect on margins, which declined throughout the sector. The increasing regulatory requirements resulted in further cost implications for Private Banking. Berenberg was able to mitigate these effects by acquiring new clients and increasing business with existing clients. We made investments to enhance the quality of the advice given and increase the number of our relationship managers. At year-end, we consolidated our asset management activities, previously provided by several units, in to one central division, enabling us to create a uniform platform and increase the effectiveness of our risk management. “Our clients are increasingly demanding investments in real assets. We have been able to provide a good range of investment opportunities in assets like property, renewables and also agricultural and forestry land. Wealthy private clients are also taking a greater interest in art investments. As such, Berenberg set up a subsidiary in 2011, Berenberg Art Advice, to provide advice in the international art market, building on our expertise and excellent relationships in this field,” explains Dr. Peters. The services offered range from advice on the acquisition of individual items to collection creation and management through to the purchase or disposal of entire collections.
Berenberg’s Investment Banking division focuses on providing our clients advice on equity and fixed-income securities, assisting with IPOs and capital raisings, and providing advice on mergers and acquisitions.
“We once again expanded our research activities in 2011, increasing the number of companies we analyse from 190 to 400. This makes us one of the most competitive research houses in Europe today, covering all relevant European companies in 24 sectors, from small caps to large caps,” says personally liable partner Hendrik Riehmer.
Berenberg has sales offices in Boston, Frankfurt, Hamburg, London, Paris and Zurich. “Despite stagnating equity turnover rates throughout Europe, we expanded our trading volume by 15% in 2011 and hence our market share. Moving forward, we are looking to exploit further opportunities arising from the withdrawal of other banks from this sector, among other things,” states Riehmer. Consequently, the intention is to increase the number of analysts from almost 70 to 100 over the next two years.
Equity Capital Markets
Berenberg was the only bank to be involved in all five of the biggest IPOs in Germany (including GSW, Norma and Prime Office) during 2011. According to Bloomberg, Berenberg ranked second after Deutsche Bank in the German mid-market issuance business (transactions of up to €500 million), taking a leading role in seven transactions (bookrunner for Gildemeister, IVG and Schuler, among others).
A fixed-income research function was set up at the Hamburg and Düsseldorf offices during 2011. The focus is on analysis of corporate bonds from the mid-cap segment in Germany and Austria, and on covered bonds, sovereigns, financials and bonds issued by government-related borrowers. The unit succeeded in acquiring many new clients and completing numerous primary market transactions.
With ten transactions concluded, Berenberg is ranked sixth for Germany-related M&A transactions measured by transaction volume. The biggest transaction was the €3.8 billion takeover of Tognum AG, for which Berenberg acted as the sole financial advisor to the target company.
Quantitative investment strategies for institutional investors are the main focus of Berenberg Asset Management. The range of products and services offered encompasses the implementation of optimal, market-neutral strategies to achieve additional earnings and alpha, risk management strategies for currency positions, overlay management for equity and interest rate risk, and active, quantitative selection strategies for equities and bonds. We launched 24-hour trading in 2011 and were awarded Currency Manager of the Year at the European Pensions Awards and first place in the Telos Asset Management Study.
In 2011, we consolidated our lending-related activities in this division, bringing corporate banking, shipping and property activities under one roof. Corporate Banking provides small and mid cap companies with traditional advice, financing structures, currency and investment strategies and payment services, including creating bespoke solutions for our shipping and property clients. The Structured Finance unit provides advice to large caps and financial investors on the most effective financing structures and has rapidly expanded its lending activities relating to corporate acquisitions, including taking an active role as lead arranger.
About Berenberg Bank
Established in 1590, Berenberg Bank is one of the oldest banks in the world and one of the leading independent private banks in Europe with 1,100 employees, total assets of €4 billion and assets under management of €26 billion. The owner-managed bank is based in Hamburg and has eight other offices in Germany and nine abroad. It operates in four business divisions: Private Banking, Investment Banking, Asset Management, and Corporate Banking.
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Director Corporate CommunicationKarsten Wehmeier
Phone +49 40 350 60-481 email@example.com