Metzler is investing and strengthening its capital base

“Our experience in the pandemic has shown that we are well-positioned even in such times thanks to our prudent business philosophy and our segments,” says Emmerich Müller, personally liable partner at B. Metzler seel. Sohn & Co. KGaA, Frankfurt/Main, Germany. He also reports that Metzler made a successful start to the new year and that new business is picking up dynamically in all segments.

Metzler Asset Management has acquired very attractive mandates, especially for pension management. In the Capital Markets segment, the new “Corporate Solutions” business area, in particular, got off to a flying start: as well as increasing the number of staff, it started out with a well-stocked pipeline and has already concluded its first mandates. The situation is similar in Corporate Finance: demand for high-quality M&A advice has picked up considerably, starting in the fourth quarter of 2020, and order books are healthy. In Private Banking, Metzler’s long-term focus on equity investments has more than paid off, with clients show their appreciation through their loyalty and a pleasing inflow of funds according to Müller.

Müller reports that 2020 was a successful year for Metzler. As usual, its net profit was EUR 2.3 m. Commission income declined from EUR 191 m to EUR 187 m. Net interest income was EUR 9 m in the reporting period, above the previous year’s level of EUR 7 m. General administrative expenses, which include depreciation of property, plant and equipment, were EUR 185 m, nearly 3% below the previous year’s level of EUR 190 m. Personnel expense was almost EUR 2 m lower as the headcount decreased by 5%. Metzler had 830 employees at year-end. The other administrative expenses and depreciation of property, plant and equipment were a good EUR 3 m lower, not least due to pandemic-driven cost savings. Net expense for risk provisioning was once again around EUR 3 m in the reporting period. Other operating income and expense resulted in net expense of EUR 10 m compared with net expense of EUR 6 m in 2019. That includes investment of over EUR 10 m in one new and one existing office location, which was only partly offset by lower expenses as a result of the transfer of pension provisions to the Metzler pension fund.

The group’s balance sheet total and business volume were both EUR 6.3 bn, significantly above than the previous year’s level of EUR 3.6 bn. This was principally attributable to a considerable rise in fiduciary assets as a consequence of the success of Metzler Pension Management. In the reporting period, fiduciary assets totalled EUR 4,288 m, another very sharp rise compared with the previous year’s figure of EUR 1,215 m. This item is made up exclusively of managed pension fund mandates, which increased considerably.

In line with Metzler’s long-standing practice, further allocations were made to taxed reserves in 2020. A further EUR 20 m was allocated to the reserve for general banking risks in 2020, bringing it to a total of EUR 70 m. The bank will continue to refrain from including the reserves established under § 340f of the German Commercial Code (HGB) in its regulatory capital base. Reported equity was on a par with the previous year at EUR 201 m. Overall, the equity components shown on the balance sheet totalled EUR 271 m at year-end 2020. The regulatory capital base has therefore more than doubled since 2010. The regulatory equity of the bank and the Metzler financial holding group remains well above the minimum requirements and is comprised entirely of tier one core capital. With a core capital ratio of over 20%, Metzler considers that it is still in a good position to meet present and future regulatory requirements.

The Asset Management segment continued its very positive development in 2020. The steady improvement in its performance in recent years and the higher quality of asset management services once again led to a pleasing inflow of funds from institutional investors and in the pension management business. Metzler’s strong sustainability (ESG) expertise plays an important role in ensuring that it can provide efficient and professional support for clients’ rapidly rising demands in this field. Total assets amounted to EUR 73 bn at year-end. Asset Management’s high sustainability standards have been acknowledged and confirmed by external rating agencies. In the UN PRI (Principles for Responsible Investment) assessment, Metzler was awarded five A+ scores for ESG strategy, ESG integration, active dialogue and proxy voting, confirming its leadership among German asset managers. TELOS GmbH gave Metzler top scores in an extensive ESG rating process and awarded it the highest rating of AAA for the integration of ESG into the investment process across all portfolio management activities.

The development of pension management in the reporting period once again deserves special mention according to Müller. For more than 20 years, Metzler Pension Management has offered customer-tailored solutions for occupational pension provision, lifetime work accounts and phased retirement. At year-end 2020, it served more than 200 companies with almost 100,000 beneficiaries. The associated investments totalled nearly EUR 9 bn (previous year: EUR 5 bn).

In the Capital Markets segment, Metzler can look back on a good year in 2020. The conventional equity brokerage business developed very well in 2020 and commission income increased considerably. Established clients were more active than in the previous year and further clients were acquired in Germany and abroad. In addition, small and mid-sized enterprises increasingly use Metzler as a trusted broker for special transactions. Metzler started to establish a Corporate Solutions unit just over two years ago to offer services for new issues, capital increases and placements. Now, Corporate Solutions has posted its first successes. For example, it supported ABO Wind AG, a project developer for energy supply installations, in a capital increase. Metzler expects to do good business with such services in the future.

In the FX business, many institutional investors have increased the proportion of FX in their asset allocations in the past few years. In this environment, clients value long-term trading experience. Here, Currency Management was able to score with its systematic approach and Metzler was once again increased the number of client mandates. The bank’s performance in currency management was rewarded: as in 2017, Metzler was awarded the accolade “Currency Manager of the Year”.

Müller reports that 2020 was a very mixed year for Corporate Finance. In the early part of the year, in particular, the mergers & acquisitions (M&A) business was hampered by the severe impact on the Covid-19 pandemic. However, the M&A market recovered successively during the year. Metzler reports that it is working on many acquisition and divestment mandates. Transactions on behalf of family businesses were completed with very good results and the bank provided successful support for financial investors and international corporations undertaking transactions in Germany.

According to Müller, Private Banking managed to raise revenues year-on-year despite the very challenging economic and capital market situation. Private Banking is dedicated to portfolio management, and to structuring and controlling substantial assets for enterprises, entrepreneurial families, foundations and private individuals. Metzler’s independence in private banking is shown by the fact that it refrains from product placements in order to concentrate entirely on clients’ interests. Investment decisions are based on a structured and systematic investment process that is both transparent and readily understandable. In addition, the bank specifically concentrates on the asset classes equities, bonds and liquidity. Long-term preservation of assets and appropriate handling of the elementary risks involved in the investment of assets always have priority.