Kleinwort profits turn the corner

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The Independent Online
THE CITY believes Kleinwort Benson's six-monthly results show that the merchant bank has turned the corner after a number of disappointing years. Profits were up from pounds 42.2m to pounds 45.8m despite choppy market conditions, writes John Willcock.

Although dealing profits halved, the quality of Kleinwort's earnings improved dramatically. Fees and commissions from the main investment banking division rose 42 per cent to pounds 156.4m for the six months to 30 June.

These fees now represent 71 per cent of all Kleinwort's operating income, up from 51 per cent last time.

The interim dividend was up 12.5p to 6.75p, and the shares rose 3p to 497p, after being 8p ahead.

Philip Gibbs, an analyst with BZW, said: 'These are impressive results in a bad environment. Lower dealing profits mean that quality of earnings has improved. There are signs of an increase in market share in corporate finance and investment management.

'Kleinwort is settling down after the strategic mistakes of the late 1980s. The potential for profits is quite good, if it can get dealing profits back up.'

The bank invested heavily in new activities, including about 100 new staff, but costs grew by only 4 per cent. Investment management gained new momentum with profits up from pounds 12.1m to pounds 19.6m. Funds under management rose 8 per cent and now exceed pounds 19bn.

Lord Rockley, chairman, said: 'The management structure we have put in place is working well. We are winning business.'

Kleinwort was the number one adviser on mergers and acquisitions worldwide in the first half of the year, advising on the BAe/Rover deal and Commercial Union/Groupe Victoire. The bank has carved out a niche in privatisations and advised on PowerGen, the Italian electricity company Enel, and Tupras, the Turkish oil sell-off.