Metzler Bank reports on a successful year in 2008
- Commission income increased to EUR 148 million
- No write-downs of toxic assets
- Tier 1 ratio 15.1% at year-end 2008
- Clients showing increasing interest in Metzler’s services
Friedrich von Metzler reported on a successful performance in 2008 at the bank’s annual press conference in Frankfurt am Main, Germany, on May 25, 2009. “Thanks to our business model we had – and still have - a comfortable liquidity position,” he said. He also reported that equity was well above the higher regulatory requirements set by the German solvability ordinance and that the tier 1 capital ratio was 15.1% at year-end 2008.
2008 showed that Metzler is well-positioned as a result of its independence, prudent business philosophy and core business areas. Despite the challenging market conditions, commission income increased further to EUR 148 million (2007: EUR 142 million). Net interest income, comprising the balance of interest income, interest expense and current income from securities and investments in affiliates, was EUR 18 million and thus unchanged from 2007. Net financial income was EUR 3 million compared with EUR 7 million in the previous year. General administrative expenses declined from EUR 135 million to EUR 131 million while the headcount increased over the year from 732 to 770.Net expense for risk provisioning, which comprises the difference between additions to reserves in accordance with § 340f of the German Commercial Code and income from securities held in liquidity reserves, was EUR 10 million, roughly the same as in 2007. As in previous years, Metzler consistently utilised scope to allocate funds to reserves. The group’s balance sheet total and business volume both increased nearly 40% year-on-year to EUR 3.4 billion (2007: EUR 2.5 billion). However, as Friedrich von Metzler pointed out, neither of these figures provides any meaningful insight into Metzler’s business activities.
Although 2008 was the most turbulent year in the history of the German investment sector, Metzler’s Asset Management division continued to register an inflow of funds and an increase in the number of mandates entrusted to it. Owing to market conditions, total assets under management declined from EUR 33 billion in 2007 to EUR 29 billion at year-end 2008. Metzler registered an inflow of funds into discretionary portfolios and mutual funds. There was also an increase in the absolute number of institutional mandates for advisory and administration services and master funds. This was attributable to the high interest in the bank‘s asset management strategy in the light of the difficult market conditions: Metzler has always focused on active risk management and focused on clients’ overall investment position. For some years it has also offered asset-liability advice and risk-overlay management. Active risk management also proved successful for Metzler’s fund products. The strategy pursued by the bank in recent years of focusing a high proportion of development resources on absolute return concepts that meet clients’ requests to make optimum use of earnings opportunities while limiting risks has paid off. Overall, the product range is characterised by a good and above-average long-term performance. This probably also explains the fact that, despite the outflow of capital from segregated funds, there was a remarkable inflow of capital into mutual funds, including investment by institutional clients. Despite the difficult market conditions, the volume of assets administered via the Metzler Fund Xchange service platform remained stable in 2008, especially in the institutional sector, and was EUR 7.3 billion as of December 31, 2008. The volume had increased further to EUR 8.1 billion by end-April 2009.
In 2008 the Corporate Finance division’s activities were dominated by its traditional strength in providing advice to mid-sized family owned businesses and support for private equity companies and insolvency administrators in complex acquisitions and divestments. Transactions were mostly cross-border and focused on the automotive, consumer goods and real estate sectors. As an established investment bank with a long track record on the German M&A market and good contacts to key decisions-makers, especially among strategic and financial investors and public-sector institutions, Metzler’s corporate finance business developed well overall. Nevertheless, from the second half of the year strategic investors became increasingly reluctant to make investments and many private equity firms withdrew from the market. During 2008 Metzler Corporate Finance provided support, for example, for a private equity investor in the acquisition of a leading German provider of engineering services for the automobile industry and for the divestment of the assets and subsidiaries of the insolvent ISE Group, a leading automotive supplier, to the financial investor Nordwind Capital. Metzler Corporate Finance also led the privatisation of the LEG NRW housing company on behalf of the federal state of North Rhine-Westphalia. This successful transaction with a total volume of EUR 3.4 billion was one of the largest deals in 2008. 2008 also included a number of capital market projects: advising the ERGO insurance group, which is listed on the MDAX index, on its successful public takeover bid for the MediClin healthcare corporation, and shareholders of garment manufacturer gardeur in the sale of all shares in this company to HSH Private Equity GmbH. Metzler Corporate Finance also acted as consultant to the Belgian industrial group Umicore in its successful public bid to raise its stake in Allgemeine Gold- und Silberscheideanstalt Aktiengesellschaft.
Although the Equities division could not fully escape the turbulence on the equity markets, especially in the second half of the year, business with institutional clients was once again very satisfactory. Metzler’s tradition of refraining from all financial trading in equities and handling all stages in order processing for clients in-house helped to reinforce its market position as a safe, reliable and independent advisor and partner. As in the previous year, Metzler Equities also successfully conducted confidential transactions on behalf of clients, where discretion, proven independence and extensive capital markets expertise are crucial to the successful implementation of client-specific solutions.
Financial Markets again reported a very satisfactory result, with a further substantial improvement on the previous year’s good performance. The key factors in this business are close cooperation with the market and credit risk management units and back office departments. Through its individual support for clients in foreign exchange and bond market transactions and in tailor-made structuring and placement of investment, financing and hedging instruments, this division had to prove itself in an environment dominated by unprecedented uncertainty and erratic market movements. On some days, trading was virtually frozen in some areas of the markets. Several market makers exited the market, giving Metzler access to some new business contacts.
2008 clearly showed that proximity to clients and a personal relationship are particularly important in the Private Banking sector, especially in such difficult times, because it is important to ensure that collaboration with clients is based on trust and sustainability. Thanks to its deliberately restrictive investment policy, which focuses on equities, bonds and cash and specifically excludes derivative structures such as “certificates”, Metzler Private Banking again increased the number of accounts entrusted to it despite the extremely difficult business conditions. Transparency in both investment policy and fees are central success factors that differentiate Metzler in this market. The positive development of Private Banking was further evidence that Metzler’s business model is very well-accepted by clients and the market.
“Providing we continue to master the challenges facing us successfully, we see a realistic chance that Metzler will be one of the market players that genuinely emerges stronger from the present situation,” stressed Friedrich von Metzler in his outlook. In the ongoing crisis, Metzler is registering increasing interest in its services. The aim is therefore to continue the selective expansion of the bank’s client base and systematically utilise business opportunities as they arise. Despite the difficult market conditions, Friedrich von Metzler expects all business areas to report stable operating revenues. His confidence is underpinned by the bank’s performance so far this year.
Press contact:
Jörg-Matthias Butzlaff
Phone (+ 49 69) 21 04 - 49 75
E-mail MButzlaff@metzler.com
Please download Fiscal 2008 here.
