Michael Marks, chairman of Smith New Court, conceded yesterday that changing circumstances in the financial community may force the independent stockbroker to consider a merger.
The hint, coming as SNC announced drastically reduced profits, was seen as further evidence of pressure on London's smaller financial institutions to find well-capitalised partners to underpin global ambitions.
Mr Marks said he remained convinced that SNC, which has stuck to its equity broking business and has a 20 per cent share of the UK equity market, was in a long-term growth industry internationally and currently was able to raise enough capital to fuel its needs.
"However, we do not have our heads buried in the sand and if we needed to raise a billion pounds then we would have to think again," he said.
Shares were boosted by market speculation that the remarks opened the door for a possible takeover of SNC, which is 25 per cent owned by NM Rothschild. They closed up 21p at 438p.
Yesterday SNC announced that pre-tax profits had fallen by 67 per cent from pounds 95.2m in 1994 to pounds 31.2m in 1995. Mr Marks said bonuses throughout the business would be well down.
Management blamed the collapse in investor confidence last year, and the slump in equity trading volumes of 5-7 per cent in Britain and up to 50 per cent in Asia.
However, Mr Marks gave an upbeat forecast of future trading and raised the total dividend by 1p to 11p. He said international capital flows continued to increase. He added that SNC had used profits from boom years to expand away from its reliance on the domestic market, notably building up in Japan as well as in other parts of South-east Asia, Latin America and South Africa.
The international contribution to net income has risen from 41 per cent just three years ago to 58 per cent today.
This strategic shift has been accompanied by a reduction in the predominance of market making, whose share of net income has dropped from 57 per cent in 1993 to 41 per cent today. The return on capital last year was 14 per cent.Reuse content