The persistent weakness of Asian markets took its toll on interim results at Flemings, the privately owned investment bank, which yesterday announced a 22 per cent drop in six-month pre-tax profits to pounds 76m.
About half of Flemings' business is Asian-related, including Japan. "The markets where we play to our strengths have been very difficult. Most Far Eastern markets are down in dollar terms, and some regional markets have taken very substantial hits," said John Manser, group chief executive.
Half-year pre-tax profits to 30 June at Jardine Fleming, the group's Asian arm, slumped to pounds 52m from pounds 93m. "Growth rates continue to be strong in Asia, and that will eventually be reflected in stock market valuations, but not while governments there continue to rein in on monetary policy," said Mr Manser.
Flemings has also been concentrating on setting up a broking and branch network in Latin America, the last remaining gap in its international coverage, but this has put pressure on costs. The investment bank's performance in the UK and US were described by Mr Manser as steady, but insufficient to compensate for the Asian weakness. "1995 will go down as the year of the developed market, not of developing markets. We just have to regard it as swings and roundabouts," he said.
The bank, which is 35 per cent owned by the Fleming family, with the remainder held by employees and institutions, has increased the interim dividend to 7p from 6.5p, reflecting "substantial dividend cover".
With Flemings' corporate finance benefitting from the surge in UK mergers and acquisition activity, and a strong focus on building up research and sales capacity in European securities, a persistent area of weakness remains retail asset management.
Overall, funds under management increased, largely thanks to the appreciating market, by 14 per cent to pounds 53bn, with a pounds 2.5bn net inflow of funds. But Save & Prosper and Flemings in Europe are suffering from low volumes and pressure on charges in the competition to win business.
Mr Manser expected the turbulence in UK banking and investment banking to continue. But he said it was too early to tell the effect of balance sheet size and mass on smaller operators in the market, and their ability to continue to attract good people.Reuse content