Takeaways From Saxo Bank Half Year Financials

Following a weak 2012, Saxo Bank released encouraging first half 2013 financials last week. Today we take a look a

saxobankSaxo Bank released its first half financials last week. The headline number was net income reaching $48 million (DKK267M), compared to only $14.18 million for all of 2012. The profits came as revenues rose 23% from the same period last year on increased trading volumes as well as a decline in employment and administrative expenses. The company also reported the divestment of non-core businesses that it had made during the first half of the year.

Important takeaways from the report:

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Employment expenses down: One of the themes of 2012 was the reaction of forex brokers to a contraction of industry volumes. Overall, this meant a reduction of head count and non-performing marketing campaigns. While we saw that FXCM and GAIN Capital focused their expense cuts on marketing, Saxo Bank was trimming its work force last year. This included the reduction of staff as well as closing underperforming global offices. The bottom line results were employment and administrative costs dropping 8.2% to $201.3 million from $219.4 million during the same period in 2012. With volumes back again in 2013, it is worth keeping an eye on these figures and whether Saxo Bank accelerates hiring again during the second half of the year.

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Subsidiary profit increases: Saxo Bank reported that income from subsidiaries rose to $26.36 million from $5.15 million in 2012. As Saxo Bank doesn’t itemize subsidiary income in its half year results, exact understanding of what led to the rebound, will need to wait until the 2013 annual report is released next year. Speculating, we believe that the income growth was due to the firm’s Privatbank subsidiary rebounding, as well as an increase in profits from Japan. The 2012 Annual Report showed that Saxo Privatbank had lost $16.7 million that year. In addition, during the first half of 2013, the broker launched its Turkey subsidiary in January which is expected to boost overall income for the year.

Focus on TradingFloor.com: One of the more interesting developments of the report was the revelation of Saxo Bank selling its majority ownership in Euroinvestor.com. The multi-language investment site was mentioned by Lars Seier Christensen, Co-Founder & Co-CEO of Saxo Bank during last year’s Forex Magnates London Summit M&A Panel. Speaking on acquisitions, Christensen highlighted that in addition to analyzing brokers, the bank was interested in online media portals where it believed that an ownership stake could help it decrease its client conversion costs. In this regard, the 2011 deal to purchase a majority stake in Euroinvestor was brought up as an example.

With Euroinvestor gone, Saxo Bank is focusing on growing its wholly owned TradingFloor.com site. According to Saxo, the trading analysis site currently has 15,000 members and 60,000 unique visitors a month, with the firm expecting to reach 100,000 uniques by the end of the year. At 100,000 uniques, TradingFloor would crack the top 10 among retail focused forex sites that are covered by Forex Magnates. Among the features of the site, there has been a greater integration of it within Saxo Bank’s website. In addition, the site added a Saxo TV product as well as more analysis tools. Overall, similar to the direction of Daily FX becoming an important part of FXCM’s offering of research to clients, as well as a platform to reach new customers, TradingFloor is taking that same role for Saxo Bank. As such, we can expect Saxo Bank to continue to bulk up the trading portal as it becomes a featured part of the company’s future marketing and client retention campaigns.

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