Deutsche Börse (ETR: DB1) - German exchange. Expectations, that the company will be able to skim the cream of the capital outflow from the UK, did not justify themselves: the main money went to the stock exchanges of other countries. However, DB1 has another trump card up its sleeve - the potential entry of millions of Germans into the stock exchange, exhausted by low deposit rates.
What's going on here
Readers have long asked us to start analyzing the reporting and the foundation of the business of foreign issuers.. Suggest in the company's comments, analysis of which you would like to read.
London calling
We already had a very detailed breakdown of the DB1 business, in which we talked about all segments, - we recommend reading it. And here we go straight to the point..
Last quarter, the company's revenue fell by 7% compared to the same period a year earlier, and profits are down 13%. Basically, there is nothing terrible here, as we compare DB1 performance with an exceptionally active first half of 2020. Then the volume of trading on the stock exchange just went through the roof due to quarantine. And this season, activity has fallen in almost all segments, except for services for investment funds: there has been an increase in 49%.
At the same time, this result is still disappointing., if you look at the situation in the context of the completion of the UK exit procedure from the European Union. Let me remind you, what we expected, that the completion of Brexit will lead to an exodus of capital from the islands and an increase in the volume of trading and financial transactions on all European exchanges, including the German.
According to a number of direct signs: decrease in the share of the UK in the structure of trading in interest rate swaps, an increase in the number of financial jobs in Germany - and indirect, such as skyrocketing real estate prices in Frankfurt compared to London, Seemed, that the German stock exchange will certainly be the beneficiary of the exodus of investors from the UK to the continent. Did it work out?? Partly.
The lion's share of trading from the UK went to Amsterdam. There is a great deal of historical irony in this.: the current royal family came to the UK from the Netherlands - some movement in the opposite direction is quite logical.
For some transactions - like clearing with euro derivatives - London, thanks to special agreements with the EU, staked out the position of the main clearing center in Europe until June 2022.
And in some areas - like IPOs - London still looks like the most attractive platform for companies even in the current circumstances - after Brexit and a little in international isolation.. Many startups go public there, bypassing the exchanges of the continent. Some, as a semiconductor company Alphawave, even prefer IPOs in London to American sites.
All in all, unclear, when will DB1 be able to reap the rewards of capital exodus from the UK to the continent. At this rate, the new financial center of Europe will be the Netherlands, not Germany. I must say, there were prerequisites: back in 2018, the homeland of tulip fever was flooded with businesses, sailed from the UK, and its railroads were filled with transit freight. The country has gradually replaced the UK as a hub for business and logistics in Europe. So that, seems to be, DB1 will not be able to replace the City of London - this place is already taken by Amsterdam.
But shareholders of the company should not be upset., because there are other growth drivers for the business of the German stock exchange.
The money, received during the IPO on various European exchanges, as of 24 Martha 2021, billion dollars
| Germany | 5,4 |
| Netherlands | 4,2 |
| France | 0,1 |
| United Kingdom | 7,2 |
Germany
5,4
Netherlands
4,2
France
0,1
United Kingdom
7,2
Weil geld funktionieren muss
Germany has sunk to deposits with negative rates. Germans save enough and put aside a decent percentage of their income. Therefore, it would be logical to expect, that they will carry money to the stock exchange not so much for the sake of, to make millions, how much simply for reasons of saving your savings not even from inflation, but from bank fees. Actually, already suffered - and there is room to grow.
The active growth of the interest of ordinary Germans in the stock market will be a consolation prize for DB1: if the volume of trading does not grow due to the exodus of capital from the UK, so let it grow at least at the expense of German investors.
Resume
DB1 is still a margin business, which the, despite the seasonal downturn, looks very interesting for investing in the medium term. And although hope, that the company will be able to get a big piece of the English financial pie, failed, the exchange can still hope for an increase in trading volume and, respectively, profitability of business due to the influx of German investors.
