BAADER BANK AG Baader Bank
Group Semi-Annual Report as of June 30, 2021
All figures are preliminary and unaudited
www.baaderbank.de | Baader Bank 2.0 |
Overview of key figures - 1st half-year 2021 1
All figures are preliminary and unaudited
BAADER BANK GROUP | 1st half-year | 1st half-year | Change | |||
2021 | 2020 | |||||
Key P&L figures | ||||||
EUR'000 | EUR'000 | in % | ||||
Income | 135,582 | 112,025 | 21.0 | |||
Of which | ||||||
Net interest income and current income | -482 | -1,505 | 68.0 | |||
Net commission income | 9,656 | 22,175 | -56.5 | |||
Net trading income | 115,070 | 84,690 | 35.9 | |||
Revenue | 5,719 | 5,606 | 2.0 | |||
Other income | 5,619 | 1,036 | >100.0 | |||
Net income from interests in associates | 0 | 23 | -100.0 | |||
-91,825 | ||||||
Expenses | -87,988 | 4.4 | ||||
Of which | -42,337 | |||||
Personnel expenses | -33,346 | 27.0 | ||||
Other administrative expenses and other operating expenses | -25,540 | -22,691 | 12.6 | |||
Amortisation and depreciation on intangible assets and | -4,154 | -3,981 | 4.3 | |||
property, plant and equipment | ||||||
-1,405 | ||||||
Other amortisation and depreciation/Risk provision | -12,970 | -89.2 | ||||
of which write-downs/write-ups of loans and advances and certain | -1,405 | -12,970 | -89.2 | |||
securities as well as additions to provisions in lending business | ||||||
Additions to the fund for general banking risks² | -18,389 | -15,000 | 22.6 | |||
Earnings before tax (EBT) | 43,757 | 24,037 | 82.0 | |||
Operating result³ | 59,372 | 52,669 | 12.7 |
BAADER BANK GROUP | 30/06/2021 | 31/12/2020 | Change |
Key balance sheet figures | EUR'000 | EUR'000 | in % |
Total assets | 1,234,267 | 888,578 | 38.9 |
Balance sheet equity ratio | 12.7% | 13.6% | - |
Common Equity Tier 1 ratio (CET 1) | 15.9% | 14.6% | - |
- Financial figures of the Baader Bank Group; all figures preliminary and unaudited; reported in accordance with the provisions of the German Commercial Code (Handelsgesetzbuch - HGB).
- The transfer to the fund for general banking risks also takes into account the statutory transfer to the fund for general banking risks in accordance with Section 340e HGB at the end of the year.
- Gross profit (= net interest income + current income + net commission income and trading income + revenues) less personnel expenses and other administrative expenses as well as amortisation/depreciation on intangible assets and property, plant and equipment.
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FIRST HALF-YEAR 2021
The market
The first half-year of 2021 was characterised by the increasing progress made in vaccinating the population against coronavirus. After vaccines started to be rolled out in January, progress was initially slow in many European countries as regulatory authorisations for the developed vaccines were only granted very gradually and supply of the vaccines was scarce at first due to huge global demand and the centralised procurement strategy. At the end of the first quarter, only 12% of the German population had received their first dose of the vaccine. However, the rate of vaccination was considerably faster in several countries outside the EU (USA: 29%, United Kingdom: 46%). In the second quarter, the availability of vaccines improved significantly, which meant that by the middle of the year 55% of the German population had had their first vaccine (USA: 54%, United Kingdom: 66%).
Due to the very slow start to the vaccination programme at the beginning of the year, the lockdown measures implemented in many countries in the autumn of 2020 largely remained in place during the first quarter. It was not until the second quarter that falling case numbers led to a gradual reduction in social distancing measures and travel warnings. The resulting prospect of a return to normal life and economic activity was accompanied by a sharp rise in economic sentiment indicators. This development was also followed by a very expansive monetary and fiscal policy. For example, the new US President Biden announced the launch of extensive stimulus packages. Against this backdrop, global growth expectations were gradually revised upwards. While the consensus estimate for global real GDP growth in 2021 was still 5.2% at the beginning of the year, by mid-year it was already at 6.0%.
Growth in demand was consequently stronger than expected and, as such, led to shortages and supply bottlenecks for numerous primary and intermediate products. The resulting and somewhat massive price increases triggered a significant rise in inflationary pressure. In May, US inflation reached its highest rate in 13 years, at 5.0%. However, as this development was predominantly driven by factors that were considered temporary, the central banks did not signal a direct change in monetary policy at first.
This reflationary environment, characterised by increasing growth and inflation expectations, led to significantly opposing developments on the financial markets. The prices of commodities such as oil (rising from USD 52 to USD 75) and copper (rising from USD 7,750 to USD 9,350) increased sharply. Equities benefited from a significant and stronger-than-expected increase in corporate profits. The development of the euro against the US dollar and the price of gold largely showed sideways movement. By contrast, the prices of fixed-income securities suffered as a result of the marked rise in yields on government bonds. The yield on 10-year German federal bonds rose from -0.57% to -0.21%, while the yield on 10-year US Treasury bonds increased from 0.91% to 1.74% in the first quarter alone. It was not until the end of the second quarter that this trend reversed somewhat. Many equity indices, however, were posting close to their all-time high at mid-year and managed to defend the significant double-digit performance achieved in the first half of the year (DAX: +13.2%, EURO STOXX 50: +16.6%, S&P 500: +15.3%).
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Events and developments in the first half of 2021 in individual business lines
Manifesting stock exchange culture ensured sustainable trading activities and high sales volumes in Market Making at the beginning of the year
The start of 2021 saw the high level of trading volumes on the stock exchanges and the trading platforms of the international financial markets of the previous year continue. As a result, sales also developed noticeable positively on the whole, with a continued stable trend, particularly with regard to the trading venues where Baader Bank acts as a market maker.
Although volatilities stabilised at a lower level compared to the previous year, they were nevertheless higher by historical standards. In the first half of the year, the CBOE Volatility Index reached an all-time high at the end of January and the end of February. Accordingly, monthly securities trading turnover on the German stock exchanges was constant, or in some cases higher, compared to the same period in the previous year. Overall, the proportion of traded foreign equities on the German stock exchanges and trading platforms rose significantly, whereas the proportions of other asset classes, such as domestic equities, ETFs and funds, remained relatively constant or even decreased. Nevertheless, as a service provider in market making within the Equities, Funds and ETF segments, Baader Bank profited from gaining new clients in the form of neo- brokers via various trading platforms (in particular gettex) thanks to its strong positioning in retail trading. A correspondingly high trading volume - especially among retail clients - became apparent over the turn of the year, and markedly so in the first quarter. In addition, the onboarding of new clients to Baader Bank in the second quarter contributed to the continued positive development in Market Making.
In the context of volatile markets, it is worth highlighting, among other things, the phenomenon of short- squeeze equities, which occurred during the first half of the year. The associated investor behaviour and resulting order flows lifted trading and market making to a new level. Disproportionate equity-price developments, in some cases by more than 100% as with GameStop shares, for example, required maximum performance on the part of trading and technical settlement. As a result, Baader Bank was once again able to position itself as a reliable partner in the global capital market environment with its efficient IT and process infrastructure. Due to the solid capital and liquidity position, the consistently high trading volumes were handled reliably, even during particularly volatile market phases. In addition, the strong volatilities in individual stocks were reflected in significant increases in revenue from all Baader Bank trading divisions, including the Market Making ATF.
It appears that the strategic and procedural development from the recent past, combined with a stock exchange culture that is continuing to establish in Germany, is functioning very well. The strong trading setup in Baader Bank's Market Making is also able to be competitive in the exceptional conditions on the markets and provide the bank's clients with high-quality trading and quotation. In this context, sustainable cross- selling effects emerge in the Banking Services division through partnerships, in particular with neo-brokers and the best execution service on gettex, the Munich Stock Exchange trading platform. New providers are still coming onto the market; they represent competition for each other but not for Baader Bank. Instead, as potential cooperation partners, these market participants offer additional potential for Baader Bank's platform business.
In the context of the bond markets, the central banks' activities did not cease during the first half of 2021. Even if the Covid-19 pandemic ends, it is expected that the Federal Reserve will only minimally reduce its bond purchases in order to avoid damaging the financial markets and the real economy, and to avert irritation when it comes to interest rates. It remains to be seen whether the US monetary authorities will actually implement the first approximations of a cautious turnaround in interest rates, and appears not to have been decided for the first half of the year. The possibility of rising inflation, i.e. whether it will be temporary or lasting, is also on the minds of market participants. Uncertainty regarding the way in which monetary policy
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will progress on both sides of the Atlantic remains a determining factor for further development on the bond markets, even though interest rates deprived them of their actual function years ago. And the ECB's bond purchases did not attest to a real interest rate turnaround, only flexible bond purchases. In this manner, the bond market did not represent a serious alternative to investing in equities over the first half of the year.
Capital market business experiences more activity and solid development in the Special Execution and Corporate Brokerage Services divisions in the wake of Covid-19
After a difficult year for the capital market business in 2020, the first half of 2021 was a lot more lively again. In the Equity Capital Markets division, Baader Bank acted as co-manager of BAUER AG during this period following the capital increase. As a result of the capital increase with subscription rights, BAUER AG generated net issue proceeds of EUR 63.3 million. Furthermore, Baader Bank acted as a Financial Advisor for the IPOs of two US biotech companies, Sensei Biotherapeutics and ATAI Life Sciences.
In general, a positive development in ECM business became apparent over the turn of the year and continued throughout the year. Overall, the brightened sentiment in capital market business meant that delays to IPOs from 2020 could also be caught up on and other additional initial capital market measures could be put in place. In the first half of the year, 15 companies were already listed on the stock exchange. To date, plans are afoot for an IPO mandate and a mandate for a capital increase for the coming months. Furthermore, a mandate was acquired for a share repurchase programme of the Munich-based machine manufacturer, Wacker Neuson.
The revival of IPO activities also had a positive impact on Baader Bank's Special Execution services. A total of 44 transactions were carried out, around 50% more than in the same period in the previous year, giving rise to a continued increase in revenues. The largest transaction by volume was a bond issued by ETC Issuance GmbH. Within the growing segment of cryptocurrencies, there is also an increase in demand for technical support. For example, the listing of certain cryptocurrency products of CoinShares Digital Securities Limited on the Frankfurt Stock Exchange was accompanied as co-applicant.
As at the half-year reporting date, Baader Bank managed a total of 80 mandates in the Corporate Brokerage division. This represents an increase of around 30% compared to the same period in the previous year. Notably, larger mandates were also obtained, meaning that Baader Bank also provided capital market processing and designated sponsoring services to some MDAX stocks, such as Scout24, MTU Aero and Teamviewer. In keeping with an increase in commission income, which was another effect of the successful acquisition activities in 2020, this development is very positive given the persistently intense competitive environment.
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Baader Bank AG published this content on 29 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2021 05:46:08 UTC.
