Bid battle intensifies as Collins Stewart profits take a plunge

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Indian financial services group JM Financial is believed to have joined the bidding fray for City broker Collins Stewart, which reports first half profits this week.

The Mumbai-listed group is the latest firm to be linked to the broker, with Japanese investment bank Nomura, Israeli conglomerate Delek, Australia's Macquarie Bank, Iceland's Straumur and Indian brokerage house Religare all mooted as possible acquirers of the Terry Smith chaired house.

Last Wednesday Collins Stewart revealed that it had received a preliminary approach, with many watchers assuming it to be Nomura, which indicated an interest last December. In the wake of the announcement of an approach, shares in Collins Stewart surged in value, climbing from just over 60p to close at 105.5p on Friday.

Analysts expect first-half profits at Collins Stewart to have plunged in the wake of the credit crunch, which has hit London's smaller stockbroking arena paticularly hard. Pre-tax profits could be as low as £25m, down from the £52m banked in the first half of 2007.

"Collins Stewart must be bleeding because I know that we are," said one City rival. "It's not going to be good for them this week because there is just nothing happening. If anyone tells you otherwise, they are lying. Any take out of Collins Stewart is going to have to come at more than 140p, I'd guess."

In May, the broker Arden Partners slashed its earnings forecast for Collins Stewart after it issued a very weak outlook statement. Smaller City brokerages have seen their share prices slashed in recent months, with a dearth of listing and corporate activity hitting firms hard.

London attracted only 18 new listings in the three months to July, raising £3.2 billion. Of those, just six were UK companies, raising £94.7m on the Alternative Investment Market.

The likes of Evolution, Panmure Gordon and Numis have all suffered share price slumps during the first half of the year.

The bid battle for Collins Stewart comes as Mr Smith presides over a merger between his Tullett Prebon voice-broking arm and rival GFI. The tie-up, which Mr Smith said last week was likely to be agreed as early as September, would see the creation of a £1.6bn rival brokerage to ICAP, which sits at the helm of the UK inter-dealer broker market.