By
Lawrie Holmes
Last updated at 10:39 PM on 23rd July 2011
For a number of struggling brokers, the decision by investment banks to raise basic salaries in response to the bonus tax could not have come at a worse moment.
As mergers and market listings have dried up, the rise in salary demands has meant the cost base of traditional stockbroking has outstripped revenues generated.
The response from the firms, many of them listed, has been to seek buyers for their broking arms, give them away, or even offer a cash incentive to take them on.
Bad balance: Cost base of stockbroking is outstripping the money it generates
Arbuthnot Banking Group, one of the
oldest names in the City, is understood to be in talks with a number of
rivals to take on its broking arm, which is expected to report a loss of
about £6 million this year. The group, which runs two successful
private banking divisions, is thought to be offering about £2 million as
an incentive.
Rivals Arden Partners and Panmure
Gordon are thought to have talked to Arbuthnot in recent days about
acquiring the arm, but it is not known how advanced the talks are.
Ambrian, a broker specialising in
natural resources, is thought to have put itself up for sale and begun
talks with a rival over its acquisition.
Elsewhere, Matrix Corporate Capital, a
mid-tier broker, revealed last week it would close down most of its
operations as traditional broking commissions dry up. Only Matrix’s
energy, real estate and investment funds teams are likely to survive.
An industry observer said: ‘About half of broking fees in London will dry up. Many firms will be forced to close.’
Evolution Group, which is also thought
to have been approached to take on Arbuthnot’s broking arm, is reducing
its securities business to focus on building up its wealth management
arm. It bought a private-client business from French bank BNP Paribas
earlier this month.
While brokers have been suffering,
insurers’ share prices rose last week on the back of perceived interest
from Swiss giant Zurich Financial Services.
Life insurer Aviva was considered the
most likely bid target, pushing its shares up 4.2 per cent on Thursday
and by a further 1.3 per cent on Friday.
RSA also benefited from rumours of Swiss interest, but talk of interest from Aviva further complicated the picture.
The rumours even spread to an unlikely idea that insurers Prudential and Resolution could mount a joint bid for Aviva.
But Friday’s continued improvements
for Aviva need to be set in the context of a boost for the FTSE 100
after the European Central Bank agreed a deal on Greek debt. Following
Thursday night’s deal, the Footsie closed up 0.6 per cent on Friday to
close at 5,935.
<!–esi
–>
Print this article
Read later
Email to a friend