Saxo’s profit up 13-fold, 30% may be for sale

Saxo Bank published its report for investors for the first half of 2010 yesterday and the results are excellent. Net profit increased 13-fold from DKK 41 million (~$7 million) to DKK 551 million (~$95million). In fact, the income rose so much that the first half year of 2010 was better than any other full year […]

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Saxo Bank published its report for investors for the first half of 2010 yesterday and the results are excellent. Net profit increased 13-fold from DKK 41 million (~$7 million) to DKK 551 million (~$95million). In fact, the income rose so much that the first half year of 2010 was better than any other full year in Saxo’s history.

It seems that Saxo is far more aggressive in its expansion plans than what I had anticipated as it revealed that it completed ten (!) acquisitions during the six months period.

Another report that surfaced today is that Saxo’s major shareholder, American private equity fund General Atlantic, is looking to sell its 22% stake which it acquired 5 years ago. This also means that Saxo’s employees can cash in on further %8.1 meaning that more than %30 of Saxo are now up for grabs. Drew are you interested?

Saxo’s price based on these results has increased significantly, if in 2009 the bank was valued at around DKK 8 billion (~$1.37 billion) now it is valued between DKK 10 and 14 billion (~$1.7-$2.4 billion) which is about x9-12 earnings ration.

Another report however compares Saxo with online casinos therefore increasing the comparable value and multiples. According to that report Saxo may be valued at 14 to 20 times earning meaning it may be worth as much as $4 billion. This puts Saxo’s value almost at three times the FXCM value which was estimated at $1.5 billion following the acquisition of ODL. Saxo however is not just a retail forex broker like FXCM and deals with large number of banking activities such as asset management and more.

Summary of the first half of 2010 report:

The results achieved in the first six months of 2010 are rooted in the decisions and actions taken over the preceding years. Notably, since shortly before the onset of the financial crisis in the autumn of 2008 the Bank has:

  • increased its efficiency. Means of achieving this have been IT investments, work process rationalisation, outsourcing and business focus
  • reduced its headcount by approximately 40% from the peak level in September 2008
  • completed 10 acquisitions, all of which have lived up to expectations
  • launched significant new products within FX, Equities and Commodities
  • expanded the business to include asset management, which has proven very successful
  • increased its geographical footprint with offices in nine new countries
  • increased its deposits and funds under management significantly
  • established IT development centres in India and Ukraine in addition to its Danish IT centre

The above initiatives together with increased market activity have created the foundation for the best first half results ever. The results once again confirm the viability of Saxo Bank’s business model. Being an online trading and investment bank that is not dependent on the traditional loan financing business, Saxo Bank is somewhat resilient to the financial environment. This is also evidenced in Saxo Bank’s solvency ratio, which was 19.2% as at 30 June 2010. The base capital buffer was more than DKK 1.1 billion. During the first six months of 2010 the Bank saw positive developments in key drivers such as the number of clients, number of trades and trading volumes. Assets under management and clients’ collateral deposits increased from a total of DKK 36 billion at 31 December 2009 to DKK 51 billion at 30 June 2010. Net profit of DKK 551 million for the first six months of 2010 was up from DKK 41 million in the same period of 2009 and DKK 121 million in 2008. This half-year performance exceeds all previous full-year results in Saxo Bank history.

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