Pessimists fear Brexit will turn the modern financial district into an ancient ruin.
Deutsche Bank’s takeover of independent UK investment bank Numis is seen as further evidence of the dilapidation.
Some pessimists express concern that modern financial districts will be left in tatters by Brexit. Deutsche Bank’s recent acquisition of Numis, an independent UK investment bank, is seen as further evidence of this phenomenon. The £410m deal represents a significant amount of foreign capital flowing into the city, bucking the recent trend of capital outflows. The deal represents a whopping premium of 60 percent over the average share price over the past three months.
Numis has had a tough year but is exiting at a fair price.
It is worth noting that Numis had a challenging year through September 2022 due to a lack of corporate financing deals. Operating profit fell 77 per cent to £17m. However, the company is being acquired at a price in line with its average in 2021, which has been a much stronger year for the company.
Pessimists would rather see the money being spent on payouts than expand investment banking.
Some pessimists would prefer to see the money spent on withdrawals than expand investment banking in an unfashionable sector. Still, the offer document makes it clear that this deal is not about cutting the costs of Numis’ 344 employees to cover the £157million premium, but rather an expansion that some will benefit well from. Savings would be irrelevant for a billionaire bank. Numis wage costs have averaged just over 54 per cent of revenue, or £83m, over the past five years.
Numis has a strong franchise in the UK, beating out JPMorgan Cazenove.
Numis has a decent UK franchise with around 166 corporate customers in the UK. This is an improvement over the 145 Lex counted for JPMorgan Cazenove, although Numis customers are typically smaller. In 2010, JPMorgan’s purchase of blue-blooded Cazenove aimed to fill a gap in its European earnings. The German is confident that Numis, whose executives thrive on underdog status, will be a good fit.
German relies on Numis,
Over the past eight years, London has generated a quarter of Europe’s corporate finance revenue. The question of the Germans is whether Numis can do as well as the bank for the shareholders of Numis.
What do you think of the deal?
We’d love to hear your thoughts on this deal in the comments section below.
FAQ
Why are some pessimists worried about Brexit’s impact on modern financial districts?
Some pessimists believe that Brexit will reduce modern financial districts to rubble, and Deutsche Bank’s recent acquisition of Numis is seen as further evidence of this.
How was Numis performing before it was taken over by Deutsche Bank?
Numis had a challenging 2022 through September due to a lack of corporate financing deals, with operating profits falling 77% to £17m. However, the company is being acquired at a price in line with its average in 2021, which has been a much stronger year for the company.
What do some pessimists prefer to see the money for than expanding investment banking?
Some naysayers would rather see the money spent on withdrawals than expand investment banking in an unfashionable sector.
How does Numis’ franchise compare to JPMorgan Cazenove’s?
Numis has a decent UK franchise with around 166 corporate clients in the UK, an improvement on JPMorgan Cazenove’s 145. However, Numis clients are usually smaller.
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