Privately owned bank Berenberg continued to expand in 2014, with large-scale investments bearing fruit during the year, helping the bank enjoy a strong start to 2015 as well.
“Our business model has impressively demonstrated its capabilities over recent years. We’ve turned a private bank focused on northern Germany into a recognised international advisory firm,” says Dr Hans-Walter Peters, Spokesman for the Managing Partners. “In 2014, we invested very heavily in the expansion of the business model, in our international activities, in our IT support and in our control functions.”
In Private Banking, the units in Germany, Switzerland and the UK were consolidated in order to allow this core business activity to offer uniform services at an even higher level going forward. Setting up centres of competency designed to support various groups of clients makes it possible to provide specific expertise that goes beyond simple capital investment and enables all-round care for clients. In addition, further investment was made in the new 35-strong Chief Investment Office, which encompasses investment strategy.
“In Investment Banking, we’ll leverage our business model of marketing first-class research on European firms in order to acquire trading mandates to boost our activities in the United States, as major US institutional investors are showing great interest in investing in Europe,” explains Managing Partner Hendrik Riehmer. Operations centring on IPOs and capital increases were given a stronger international orientation by setting up and expanding various offices. Share trading will commence in New York in 2015 as a complement to the Trading Desk in Hamburg. “This move enables us to enhance the service we provide to our European clients in US share trading, as well as enabling American clients to trade in US stocks with us.”
In terms of the number of equity capital markets transactions, Berenberg had already made it to first place in 2014 in German-speaking countries. Against a total of five IPOs through the whole of 2014, Berenberg was involved in four IPOs in the first quarter of 2015 alone, plus several other fundraisings. “We’re delighted to have succeeded in extending our good market position in Germany, Austria and Switzerland to non-German-speaking areas as well. Berenberg was involved in the UK-IPOs of DFS, HSS and Market-Tech as well as Sunrise in Switzerland and Telecolumbus in Germany.
Asset Management now also offers its services from new offices in New York and Chicago as well as London. The internationalisation is reflected in the structure of clients as well as in assets under management. The proportion of foreign money in this business division has grown from 20% to 50% over the last five years. The demand for currency hedging strategies in particular is rising. Today, Berenberg is one of the biggest active currency managers in the world. While the distribution of asset management services takes place internationally, portfolio management is concentrated in Hamburg.
Corporate Banking advises large midcaps on the selection and implementation of optimum financing structures. Its activities are now largely transaction-driven, meaning that most of its earnings are derived from commission income. Berenberg maintains expertise in specialist segments like shipping, real estate, structured finance and, starting in 2014, also infrastructure and energy.
Berenberg added offices in San Francisco and Chicago in 2014, taking the total number up to 19. In terms of number of employees, London (213), Zurich (84) and Frankfurt (83) are the biggest offices after Hamburg (737). All in all, the total workforce has increased by 103 to 1,250 in 2014.
Assets under management increased by EUR6.0 billion, or 20%, to EUR36.1 billion in 2014. Alongside an enhanced performance, the ability to attract new assets by both acquiring new clients and building up existing mandates proved very satisfactory.
“We have every confidence in our business model and are continuing to invest in the expansion of the Bank. These investments in the future of Berenberg are an expression of our long-term philosophy; our goal is not to generate short-run gains,” says Peters. The net profit for 2014 declined from EUR66.1 million to EUR40.4 million on account of these large-scale investments. Peters adds: “We, again, achieved a very good result in 2014 with a return on equity of 28.8%. This certainly puts us in a strong position compared with our peers.”
The postponement of several IPOs in autumn 2014 led to weaker growth in net commission income than expected (from EUR234.4 million to EUR243.9 million). This did, however, provide for an outstanding first quarter of 2015 – the best in the Bank’s history.
There was a further increase in the Bank’s core capital, taking the total to EUR181.1 million at year-end (year-end 2013: EUR168.1 million).