Saxo Bank and Gain Capital net profit collapses by 80% in 2012

Saxo Bank and Gain Capital have reported an 86% and 83% fall in net profit to Dkr80.9 million ($14 million) and $2.6 million in 2012, becoming the latest online trading companies to report a hit from the year's stagnant markets.

In its annual report, published on March 12, Saxo Bank said business conditions in the global retail trading market were difficult. It said low market volatility and negative macroeconomic outlooks in many markets led to low trading volumes and reduced risk appetite among investors and traders.

The statement mimics that of New York-based online trading company FXCM, which reported a 35% drop in net income to $38.4 million earlier this month. It also follows a decision to cut 266 positions, approximately 17.5% of the bank's workforce, in November, and a restructure of its leadership. This saw co-founders and co-chief executives Lars Seier Christensen and Kim Fournais assume direct responsibility for the bank's operations on a daily basis. Fournais now focuses primarily on head office-based operations, including markets, IT, client office and finance, and Christensen works primarily on international branches and subsidiaries responsible for local sales and marketing activities.

The chief executive director positions previously held by Eric Rylberg and Karsten Poulsen were discontinued. Simultaneously, Rylberg and Poulsen entered into an agreement with the bank to buy out its subsidiary, Saxo Properties A/S, which is due to close in April 2013.

Saxo Bank said in its financial statement that assets under management in 2012 rose nearly 50% to a record high of Dkr49 billion from Dkr33 billion in 2011. Total client collateral deposits during the period were up 14% to more than Dkr40 billion.

Fournais and Christensen said in a joint statement: "Saxo Bank's performance in 2012 was unsatisfactory, but explainable with the overall economic climate. We have demonstrated that Saxo Bank is able to go through an economic recession and stagnation without losing profitability. Following the restructuring last year, we are now extremely well positioned for growth and profitability in 2013.

"Market activity is somewhat rebounding, and Saxo Bank's net profit for the first two months of 2013 is already higher than for the full year of 2012."

Meanwhile, Gain Capital Holdings said it made significant progress in its diversification strategy through organic initiatives and targeted acquisitions. "Notable achievements include the growth of our institutional platform, GTX, which more than tripled its revenue year-on-year, as well as the purchase and successful integration of futures broker Open E Cry (OEC), which helped drive a 44% increase in client assets to $446 million at year-end. In our core retail OTC business, we expanded our product offering to include more than 450 CFD and FX markets, from 70 in 2011, and launched new international services," said chief executive Glenn Stevens.

In December, Gain completed the acquisition of the US business of GFT Forex, and earlier this year acquired the US business of FX Solutions, illustrating that it has become a partner of choice for M&A transactions, it said.