Deutsche Boerse AG set up a committee to consider opportunities as the operator of the Frankfurt stock exchange focuses on Asia to drive growth amid declining volumes.
“Continuing to develop the markets in Asia is of highest priority in the medium term,” Chief Executive Officer Reto Francioni said at a press conference in Frankfurt today. “In the foreseeable future, significant growth will take place not in Europe or North America, but primarily in Asia.”
The company late yesterday said fourth-quarter profit fell 20 percent as securities trading slowed. Earnings before interest and taxes declined to 185.2 million euros ($248 million) from 230.9 million euros a year earlier. That was lower than the 193.6 million-euro average estimate of six analysts compiled by Bloomberg. Deutsche Boerse shares added 0.4 percent to 47.86 euros at 4 p.m. in Frankfurt today.
The stock-exchange operator trimmed its dividend on Feb. 5 and said it would cut about 250 jobs to reduce costs. Deutsche Boerse and its rivals, including NYSE Euronext and London Stock Exchange Group Plc, have seen volumes drop following the global financial crisis of 2008. Traditional exchanges have also lost market share to new trading venues such as Bats Chi-X Europe.
Deutsche Boerse’s net revenue will remain broadly the same as in the second half of 2012 “if the market environment doesn’t improve,” Gregor Pottmeyer, the chief financial officer, said at a press conference in Frankfurt today. Net revenue will rise to more than 2 billion euros compared with 1.93 billion euros in 2012, he said, if markets rebound.
Cost savings will rise to 70 million euros per annum by 2016, with 40 million euros saved by reducing consulting and technology costs, Pottmeyer said. The other 30 million euros will come from the voluntary redundancy program for 200 employees and 50 managers. Deutsche Boerse expects to achieve 30 percent of the cost savings in 2013. The CFO said the company will spend as much as 120 million euros making the savings.
The European Commission blocked Deutsche Boerse’s acquisition of NYSE Euronext last year, citing concern over competition in the markets for derivatives and clearing. IntercontinentalExchange Inc. announced a $8.2 billion deal to buy NYSE on Dec. 20.
“We focus on organic growth in Asia and then on joint ventures,” Francioni said today. “We also have this opportunistic approach and should there be an opportunity in an area where we can add value, we will take it. We have no plans and nothing in the pipeline at the moment.”
Japan Exchange Group Inc., created by the merger of the nation’s two biggest bourses, may consider an alliance or merger with an overseas exchange, Chief Executive Officer Atsushi Saito said on Feb. 5. The company would consider talking with CME Group Inc., the world’s largest futures exchange, Deutsche Boerse, BM&FBovespa SA, the operator of Latin America’s biggest trading venue, or Korea Exchange Inc., Saito said.
Hong Kong Exchanges & Clearing Ltd., the world’s largest bourse by market value, completed the $2.2 billion takeover of the London Metal Exchange in December. Singapore Exchange Ltd., the operator of Southeast Asia’s biggest stock market, has held talks to join London Stock Exchange Group Plc by buying a stake in LCH.Clearnet Ltd., Europe’s largest clearinghouse, according to three people familiar with the negotiations.
Revenue from Asia may rise by 100 million euros by 2016, Pottmeyer said today.
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