Germany's Berenberg Bank
has received good press over the last months. For example, the FT
wrote about Berenberg's involvement in Talanx' recent IPO:
“Apart from being
Germany’s oldest bank, Berenberg is also a rapidly growing force in
equity capital markets, thanks in large part to the relations it has
fostered over the years between its traditional client base of
wealthy Germans and the world’s biggest fund managers. That
success, in turn, stems from its manageable size and its partnership
structure – a natural brake on risk and a natural motivator for
focusing on clients.”
The bank has been founded
in 1590 and is headquartered in Hamburg. Today, Berenberg's
staff amounts to 1,100; the bank has 9 offices in Germany and
9 offices abroad. However, in terms of revenues, it is still very
much focused on Germany: 80 % of its revenue is generated in Germany,
whereas only 20 % is generated abroad.
Heritage
After a glimpse at the
cover of its 2011 annual report, you will immediately understand what
this bank is proud of:
The “report on the
422nd financial year” describes it
more specifically:
- “Today, we are simultaneously the second oldest bank in the world, and one of the most dynamic in Europe.”
- “Our bank is characterized by a high level of continuity. We are proud of our corporate culture, which has matured over centuries, and proud of our many long-standing client relationships and the average length of service of our staff.”
- “[The core capital ratio of 14.1 %] is an expression and evidence of our conservative business policy.”
The bank is privately
held by the Berenberg family (>
25 %), Managing Partners (>
25 %), Christian
Erbprinz zu Fürstenberg (15 %), Jan-Philipp Reemtsma (15 %), and
Compagnie du Bois Sauvage S.A. (12 %). According to the bank, this
ownership structure guarantees a special kind of independence of its
employees who are free of corporate interests.
Financial
Performance
Looking at the financial
information, we can see that Berenberg has not only performed
strongly during the financial crisis but also has a very solid
business performance:
Business Divisions
Private Banking
Private Banking serves
wealthy private investors and families in protecting and multiplying
their wealth. Asset structuring is carried out on a quantitative and
qualitative basis. Berenberg puts a special emphasis on art: In 2011,
it has set up a subsidiary called Berenberg Art Advice, which answers
questions about art as an investment class and advises clients namely
on transactions and collection management.
Investment Banking
This business division is
organized in three segments, e.g. equities, financial markets, and
strategic advisory. The equities segment does equity research (400
European companies in 24 sectors), equity sales and execution, and
advisory on equity issues and IPOs. The financial markets segment
does fixed income research as well as fixed income and currency
trading. Finally, strategic advisory focuses on transaction advisory
and corporate broking services.
Asset Management
This business division
concentrates on quantitative investment strategies. Clients are of
institutional nature and include insurers, pension funds, banks, and
foundations.
Corporate Banking
Corporate Banking advises
small and middle sized companies on the selection and implementation
of optimum funding structures, with a special focus on the shipping
industry.
A general principle that
applies to the whole bank, is particularly true for the corporate
banking division: As a matter of fact, Berenberg does not want to
offer every single service possible. To the contrary, it targets
niche markets and tries to develop specialist know-how in those
areas. Examples include the shipping and real estate sectors.
Comment
Compared to annual
reports of universal banks, it is almost a pleasure to read
Berenberg's annual report. The bank's business model and big picture
are easily understandable. In my view, this straightforwardness is a
good concept in today's banking world, where banks are often blamed
for being over-complicated and carrying systemic importance.
However, while reading
about Berenberg, you get sometimes the impression that it is not
really a “bank” as most ordinary persons would understand the
expression. For example, Berenberg's corporate banking division only
seems to have a “support function” in order to generate business
opportunities for the other divisions of the bank. Consequently,
Berenberg is more an advisory firm that provides comprehensive
financial consulting and corporate services than a traditional bank.
From this perspective, it is right that Berenberg is at the same time
a very traditional and progressive financial institution.
Resources:
- Berenberg Bank Annual Report 2011
- “Talanx offers lesson on big bank failings” - Financial Times October 22, 2012
