MIG Bank M&A Details Public as Swissquote Reports Q3 2013 Results

Swissquote has today announced its financial results for the first nine months of 2013, which demonstrate a steady increase in

Swissquote has today announced its financial results for the first nine months of 2013 and the third quarter of the year.  The broker reported a 3.9% increase in total income and a higher pre-tax profit than the same period one year previous, demonstrating an upward movement of 4.5%.

According to the company, the increase in net income takes into account the one-off cost and subsequent business activity resulting from the firm’s acquisition of MIG Bank in September this year, subsequent to an increase in profit by 19% in the first six months of 2013, with the firm having reported a 3.7% increase in overall expenses compared with the same period last year.

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MIG Bank/Swissquote M&A Details

Today’s report also provided financials of September’s deal for the first time (see page 12, note 10 in the PDF below).  The deal was structured similar to GAIN Capital’s acquisition of GFT, where a small equity premium above the broker’s total cash was paid.  Similarly, MIG Bank owners received CHF 40.6 million in cash and CHF 23.1 million in Swissquote stock and options.  Backing out MIG Bank net assets of CHF 44.7 million, premium over net assets of the deal was CHF 19 million.

The final details were similar to speculative figures that Forex Magnates presented in October when we wrote “Forex Magnates believes that MIG Bank was acquired with a similar structure (to the GFT/GAIN deal); owners withdrawing the broker’s excess equity (around $40-50 million), while receiving a small premium in Swissquote shares. Using the GFT deal as an example, where the broker also reported a 2012 loss, it is reasonable to believe that the equity portion in the MIG Bank deal was in the $15-25 million range.”

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MIG Bank was sold in its entirety to Swissquote, the company’s rationale having been to utilize this to greatly expand its FX operations, which was an important strategic move for the firm with FX volumes of CHF 158 billion accounting for 26.2 percent of total net revenues in the first half of 2013.

On this basis, the results for the first nine months of this year detail an increase in the number of accounts by 6.9 percent to 215,237.

The total deposit for this period weighed in at CHF 9,582 million, 11.8 percent higher than that of the same period one year previous. Furthermore, Swissquote has stated that the results for the fourth quarter show FX earnings generated by MIG Bank, which is the first time the company has included this since the acquisition, and has contributed to the positive cumulative return.

Commission Income Shows Positive Total Yield

The total net revenues in the first nine months of 2013, CHF 88.6 million compared with CHF 85.3 million for the first nine months of 2012, which equates to a percentage increment of 3.9% over the prior-year period, bearing in mind an unrealized fair value of CHF 0.46 million.

Commission income increased when compared to the previous year, with net fee and commission income standing at CHF 43.9 million over last year’s first nine months’ CHF 38.8 million. Net interest income decreased as a result of prudent investment policy, standing at CHF 11.5 million .

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Stellar Q3 of 2012 Outshines Q3 2013

Whilst comparison on a year-on-year basis paints a picture of overall revenue growth for Swissquote, the most poignant being the company’s 92% increase in its number of eFX accounts over last year’s first nine months, examining the figures on a quarterly basis displays a decrement.

Despite 2012’s industry-wide downturn in volumes, Swissquote’s results for the third quarter of 2012 outperform those of the third quarter of this year, a dynamic that is becoming somewhat omnipresent, with firms having reaped the rewards of in some cases, a record-setting start to this year with volumes tailing off  as the year has progressed.

Whilst still turning a profit, the company registered a 16% decrease in FX and trading income for the third quarter of this year, standing at CHF 10.3 million compared with 12.3 million of the same quarter in 2012, despite the number of trading accounts having risen by 5.1% when compared with the same quarter a year previous.

The company holds a higher value of client assets under custody when viewed on a year-on-year and quarter-on-quarter basis, with at the end of the first nine months of 2013 a total of CHF 9.581 million under its responsibility, compared with 8.571 million at at the end of the first nine months of last year, representing an increase of 11.8% year-on-year, and 3.4% compared to quarter 3 of 2012.

Integration of MIG Bank Client Base

Swissquote has confirmed within the reporting of its results that customer relationships at MIG Bank will be open until the end of 2013, at which point they will be trasnferred to Swissquote Bank. The designation of MIG will be shelved at that time and the company’s product range will be integrated into the product range of Swissquote Bank.

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The entire report can be viewed here:

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