Saxo Bank’s H1 2014 Operating Income Lower by 23% YoY, Higher by 20% over H2 2013

Saxo Bank's profits have been dropping in the first half of 2014 when compared to last year, however the firm

Saxo Bank LogoSaxo Bank has just released its Interim Annual Report for the first half of 2014, reporting its operating income at $240.6 million (1.35 billion Danish Krone (DKK)) for the first six months of 2014. The figure is lower by 23% when compared to the first half of 2013, an unsurprising outcome considering the extraordinary trading conditions which the FX and some equity markets participants were enjoying last year.

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The Saxo Bank Group reported a net profit of $27.8 million (DKK 156 million) for the first 6 months of 2014, which is lower by a touch more than 40% when compared to the first half of last year, with clients’ collateral deposits increasing by $1.7 billion (DKK 9.7 billion) to a record high of $10.75 billion (DKK 60.3 billion). The company remains well-positioned to benefit from a shift in the low volatility environment persisting throughout the first half of the year.

Operating costs decreased by 10% when compared to last year, coming out at $180 million (DKK 1.01 billion), underlining the continued implementation of a lower cost run rate.

A Saxo Bank spokesperson shared with Forex Magnates, “Despite the low volatility, we are proud of the record numbers of client assets under management we continued to gather this year, which may be deployed when volatility returns to the markets. According to JP Morgan’s global FX volatility index, FX volatility hasn’t been this low in 22 years, i.e. since co-CEO’s Kim Fournais and Lars Seier Christensen founded Saxo Bank in 1992.”

Outlook for the Remainder of 2014

The company’s report highlights expectations of the markets remaining uncertain until a solid economic recovery takes hold, as the outlook for the global economy remains unpredictable due to the incoming effects of the unwinding stimulative monetary policies by some major central banks.

Saxo Bank expects to continue developing its traditional trading business, “focusing on clients, efficiency, profitability and optimization of the entire value chain.”

The outlook concludes stating, “Cost control, capital and liquidity management are, as ever, ongoing themes for Saxo Bank in 2014. With a close eye on overall cost development, the Group will continue its investments in products and platforms. At the same time, system enhancements and knowledge upgrades are expected within the Bank’s core business areas.”

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Saxo Bank’s Risk Management of WLCs

Earlier this year, Saxo Bank released its Annual Report for 2013. Forex Magnates reported about an unfortunate event outlining some weaknesses in Saxo Bank’s risk management of White Label Clients (WLCs).

The issue surfaced in the aftermath of a very rapid drop in values of equities that led to unrealized losses on CFD contracts for a group of clients operating under one of Saxo Bank’s WLCs.

The company reported that the collateral issue arose from a delay in the bank’s stop-out procedures which was caused by the white label’s set-up and subsequently was postponed due to clients’ confirmation of obligations.

According to the text from Saxo Bank’s interim report for the first half of 2014, the Danish FSA conducted an inspection of Saxo Bank’s client risk management processes in February 2014. Focusing on the WLC’s margin trading in light of the accident mentioned above, “The FSA assessed that the incident was caused by weaknesses in the Bank’s manual risk management of WLC’s margin trading, including that the Bank’s risk management practices were insufficient at the time.”

The document states, “As a consequence the Danish FSA in May 2014 issued Executive Orders and Risk Information. The FSA further inspected and concluded that the Bank’s calculation of its own solvency capital requirements as of end March 2014 was sufficient in light of the Bank’s risk management of clients’ margin trading.”

TradingFloor.com

Following the re-launch of TradingFloor.com as an interactive community featuring a social trading platform, Saxo Bank has achieved what any player in the industry would want to – self-generating leads. And do those numbers look good? – According to data in the firm’s Interim Annual Report, over 26,000 members are now active on the website, with 300,000 unique visitors every month, which is up from 45,000 visitors per month last year.

The company also consolidated its Saxo TV offering, integrating it with TradingFloor.com and launching it in multiple language versions on the website, including Russian, French, German, Turkish and Greek, with Spanish and Latin versions of the “Sala De Inversión” website migrating to TradingFloor.com.

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