Yesterday, Saxo Bank issued its 2014 financial report. Highlighting the filing was the doubling of net profts to $51 million (DKK381 million) as well as achieving record levels of client deposits. However, much has changed since the end of 2014 due to the January 15th ‘Black Thursday’ event of the Swiss National Bank (SNB) removing its price floor on the EUR/CHF exchange rate from 1.20 which sent franc volatility shooting higher. Among effected brokers, Saxo Bank was one of the hardest hit. Additional disclosure on this event, as well as further operational details were provided in their longer 2014 Annual Report which accompanied yesterday’s news. Below we review some of the findings disclosed by Saxo Bank.
Client deposits – Client deposits increased by $2.5 billion in 2014 to end the year at a record in Danish krone of DKK 68.2 billion ($9.7 billion). In addition to the client deposit level, Saxo Bank revealed that Assets under Management at Saxo Wealth Management reached DKK 14.1 ($2.02 billion). Part of Saxo Privatbank (Retailbank), deposits amounts are reported separately as they are managed by the bank but include assets being held at external financial institutions.
Leverate divestment – Over the last three years, Saxo Bank has been streamlining its business model which has included divestment of non-core assets. Simultaneously, the firm has focused on improving its core products, including the evolvement of TradingFloor to become a social trading site as well as adding more institutional services. Among divestments in 2014 was Israeli broker financial technology firm, Leverate, which Saxo Bank acquired a 25% stake in for a believed $12.5 million in 2011. Since that time, they twice took goodwill impairment charges, with the most recent being DKK 11 million in 2014, and totaling near DKK 40 million since 2013. The stake was divested and sold back to Leverate in December 2014. Based on the impairment charges, the divestment would have been valued around $5 million.
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Swiss franc – Saxo Bank estimated that the maximum loss from the franc volatility which triggered negative balances from their clients is $100 million (DKK 0.7 billion). The currently reported figure is lower than the $107 million maximum stated by the bank in January. Further updates are expected when the firm issues its H1 2015 results later in the year.
CFD losses – One of the findings from Saxo Bank’s 2013 financial report were special charges of $46 million in relation to trading of the firm’s white labels where losses were above customer collateral levels. During 2014, the broker revealed another $16.5 million charge related to potential losses in CFDs. In an interview with Saxo Bank Co-CEO and Co-Founder Kim Fournais, he refrained from providing details of the potential loss.
White labels – Clients from white label partners who use Saxo Bank’s technology and liquidity represented 40% of the broker’s overall customer base onboarded during 2014. This was a decline from as recently as 2012 when white labels represented 50% of onboarded customers.