Warburg jumps back: MAM performance boosts investment bank's second half

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The Independent Online
THE fortunes of SG Warburg Group, the London investment bank, bounced back in the second half of its financial year after Britain's exit from the exchange rate mechanism last September.

A big boost came from its 75 per cent-owned subsidiary Mercury Asset Management, which roared ahead with pre-tax profits up by 26 per cent and paid a 30 per cent higher dividend.

Lord Cairns, Warburg's chief executive, summed up the bank's experiences when he said that 1992 was 'very much a year of two halves. After Black Wednesday the markets got de- constipated.'

Falling interest rates and a rebounding stock market led to Warburg making twice as much profit in the second half as in the first. Market- making activities, which the bank wants to expand further, particularly benefited.

Warburg's pre-tax profits fell 11 per cent to pounds 148.2m, after a loss of pounds 11.6m caused by a German consumer leasing business, which it closed during the year. The final dividend was 19p, an increase of 1p.

Mercury Asset Management's pre- tax profits rose to pounds 82.3m, with earnings per share 28 per cent better at 32.6p.

'Clearly MAM had a splendid year and produced a higher proportion of our profits than in any previous period,' Lord Cairns said.

MAM's funds under management grew by almost a quarter to pounds 49.7bn. Of this, funds from private investors rose from pounds 3.5bn to pounds 4.8bn and money managed for international clients increased by nearly 50 per cent to pounds 9.4bn.

Hugh Stephenson, MAM's chairman, said the company's investment in computer systems had been justified by the results.

Operating costs had increased by only 5 per cent over the past two years, when funds under management had increased by a third. MAM's expansion into overseas markets was largely being managed out of London, keeping down overheads.

Warburg made a provision of pounds 16m on its pounds 30m exposure to Isosceles, the troubled supermarkets group, which is in the middle of a lengthy restructuring.

Lord Cairns said Warburg was focusing the business by merging the fixed-interest, treasury and money- market sides, and cutting costs in its Japanese operations.

The US side was very encouraging, he said, and was attracting more business.

He said the era of the global investor had arrived, with Warburg involved in more than 650 transactions for issuers based in more than 30 countries. Its sales team had active relationships with clients based in more than 50 countries.

Lord Cairns said the current year had started 'in reasonable style but conditions could change, making it difficult to look more than a few months ahead'.