06/02/18

Berenberg confident bet on Mifid II "opportunity" in London office will pay off

(City A.M.) -- Private bank Berenberg today said it is confident its expanded UK equities research house will be able to grab market share as the Mifid II regulatory upheaval bites.

David Mortlock, global head of investment banking and head of the bank’s London office, told City A.M.: “Everything we’re seeing [...] suggests that we can continue to take share.”

Equities revenue at the German bank rose by 69 per cent to €240m, while commission income of €343m up 35.3 per cent, the company announced today.

The bank, the second-oldest functioning lender in the world, earned net profits of €90.2m, an underlying increase of around 35 per cent year-on-year, although the one-off sale of a stake in Universal Investment in 2016 meant that headline net profits fell by €71m.

Mifid II, the Markets in Financial Instruments Directive II, has already prompted some banks to cut back their presence in research, which is heavily affected by new rules around fee transparency, but Mortlock said Berenberg’s growing scale gives it an advantage. "Our opportunity in UK equities is significant," he said.

During the last year the bank upped its London-based equity analyst count by 22 per cent, increasing its coverage of companies for equity analysis by 136 to reach almost 800.

Mortlock is also sanguine about the risks posed by Brexit, as the German headquarters will allow the bank to continue functioning almost as before. It currently appears the London branch will not have to establish a subsidiary, Mortlock said.

“My personal view is that London will stay a very attractive investment destination,” he said, adding that the research business will remain in the City.

Berenberg will also invest more in its London equity capital markets team, which will double in size over the next four years from eight employees to around 20, Mortlock said. The team was involved in 51 transactions in 2017, over double the number seen in 2016.

However, the main area of expansion targeted by Berenberg remains the US, where there is a “very deliberate plan” to grow aggressively, Mortlock said. The bank is currently moving into new offices in New York which will allow it to triple its US headcount to 150.