Saxo bank released its interim results this week. The bank may have had a troubling six months in its relationship with the Danish FSA (FX comment: Was regulator pressured to act on Saxo by press reports?) but the business itself is booming.
Pre-tax profit was reported at DKK727 million ($126 million) for the half year and, according to the report, exceeded all previous full-year results in Saxo’s history. Operating income more than doubled to almost DKK2 billion ($344 million) and the increase was reportedly “mainly organic and driven by…business initiatives.”
Mining the data for a clue of FX trading income is an even more futile task than usual. However, there is a line regarding “Price and exchange rate adjustments – foreign exchange” which is up at DKK1541 million ($266 million) compared with DKK968 million for the first half of 2009.
With the record profits a welcome relief following the travails with the FSA, it isn’t a great shock that American private equity investment firm, General Atlantic LLC, is reported to be looking to sell its stake of 22% in Saxo Bank after five years of ownership. According to Danish daily Berlingske Tidende, JPMorgan and SEB Enskilda have been hired by General Atlantic to find a buyer. Saxo declined to comment on the article.
General Atlantic invested DKK728m in Saxo in June 2005. The Berlingske Tidende article suggests that the bank’s current value is somewhere between DKK10 and DKK14 billion; implying the investment has tripled or quadrupled in value over the five years.
It will be interesting to see who shows an interest in acquiring General Atlantic’s stake. The main shareholders, at 30% each, are two of the founders of the business, Lars Seier Christensen and Kim Fournais. Portugal’s Banco Espirito Santo owns 9.9% and the remaining 8% is owned by past and current employees. Apparently, the employees are allowed to sell their shares upon the sale of General Atlantic’s investment so it could be as much as 30% of the company will be available.
It is quite remarkable that the bank with the 20th largest share in non-swap FX business (according to Euromoney’s 2010 FX survey) is not a publicly quoted company. But then it isn’t a bank either, in the more restrictive definitions of the word, eschewing, as it does, traditional loan financing business and focusing instead on online trading, white labelling, and wealth management. Assets under management and clients’ collateral deposits increased from a total of DKK36 billion at December 31, 2009 to DKK 51 billion at June 30, 2010 although DKK9 billion of this increase was due to the acquisition of E*Trade’s Nordic business. But regardless of its size the asset management side of the business does make Saxo something more than a platform provider. Whether buyers see Saxo as an attractive proposition or an awkward fit we will see in due course.
