DGAP-News: Baader Bank improves annual results in 2016 and systematically continues the realignment of its group strategy

Baader Bank improves annual results in 2016 and systematically continues the realignment of its group strategy

- Baader Bank generated earnings before tax at group level of EUR -2.1 million, which represents a
EUR 5.5 million improvement compared with the previous year. Baader Bank, as a company, is closing the financial year 2016 with break-even earnings before tax of EUR 4,000.

- Its strong market position in the core German-speaking markets was confirmed in both market making and the capital markets. Despite a generally stagnant environment, it also achieved an increase in market share in the cash equity business.

- Baader Bank has established itself as a strong partner for both traditional and digital asset managers, and now provides the full range of banking services to fintechs, including the currently largest European robo-adviser.

- In the area of asset management services, Baader Bank more than doubled the funds under its management.

Unterschleissheim, 17 March 2017
The earnings before tax of Baader Bank Group improved to EUR -2.1 million (+72%) in 2016. Baader Bank AG, in its stand-alone financial statements, was able to generate break-even earnings of EUR 4,000. Despite an overall fall in 2016 in securities turnover on German stock markets of around 16%, the company was pleased to be able to maintain its trading income, derived primarily from market making, at a constant level of EUR 52.8 million. The increase in non-stock market business made a significant contribution. Net commission income decreased to EUR 40.7 million (-19%). Lower brokerage and transaction fees, a lower volume of issues and structural one-off effects at the Swiss group company Baader Helvea set the tone here. Net interest income and current income increased to EUR 3.2 million (+29%). Overall, the total income of Baader Bank Group in 2016 was EUR 100.5 million (-10%).

Group costs fell steeply compared to the prior year, to EUR 102.6 million (-14 %). Personnel, administrative and other operating expenses fell, in some cases substantially, compared to the previous year, and were below budget overall. As well as the lower variable remuneration elements that are profit-linked, the main cause was the cost reduction measures introduced in 2015 and fully effective in 2016.

At the balance sheet date, there was no exceptional amortisation of associated companies in Baader Bank Group, nor any impairments of non-current assets. EUR 584,000 was transferred to the reserve for general banking risks. Including this reserve, Baader Bank Group had equity of EUR 118 million (-3%) as of 31 December 2016. The equity ratio shown on the balance sheet at the year-end remained unchanged at 17%.

"In view of the clear drop in turnover of securities on German stock markets, the steady level of trading income at Baader Bank is a clear indication of our strength in market making", stressed Nico Baader, Chairman of the Board. "By applying a strict risk policy we have managed to avoid the amortisation and valuation losses we suffered last year, and to further develop our market areas with strategically valuable investments." With an excellent equity ratio, this banking institution is ideally equipped to face future increases in capital and investment requirements.

Business report 2016

Baader Bank has maintained its leading position as a Market Maker on the German stock markets. It was retained as a specialist on four of the five flotations in the Prime Standard segment of the Frankfurt Stock Exchange. The bank was able to expand its collaboration with partner banks in off-market trading substantially during 2016. Almost all major direct banks in the German-speaking region now use its trading products. This means it has now reached the position of a market leader in this sector too.

"Significant changes are currently reshaping the systems and structures of the German stock exchange landscape. The change-over from classic price determination in closed order books to differentiated multi-market-maker and quote-request models is leading to a shift in securities turnover towards the platforms that run these models," explains Nico Baader.
In view of this, Baader Bank adjusted its systems in 2016 and proactively built up its skills in the market making area, in order to meet all the prerequisites needed to exist in this newly formed market environment.

In Investment Banking, Baader Bank strengthened its position by acquiring further international customers, gaining market share in the cash equity business, and high-quality capital market operations.

Top places in the 2016 Extel Survey also testify to the bank's strong market presence as a local Multi-asset Broker in the core markets of Germany, Austria and Switzerland. There were also top spots for equity sales and execution services in the German Equities categories. In the second half of the year, Baader Bank made some promising extensions to its skills in the areas of CSA brokerage and clearing services.

In the Capital Markets sector, Baader Bank assisted and implemented a total of 4 capital placements with an issue volume totalling around EUR 80 million acting as a so-called Bookrunner. In addition, Baader Bank advised on more than 40 transactions with an issue volume exceeding EUR 1.2 billion as Technical Lead and service provider for major name clients who demand top quality service and execution. In a sluggish market, the bank's market share in 2016 for equity capital markets took it to a solid sixth place in the league tables for transactions of up to EUR 100 million, based on the overall number of flotations and equity transactions in Germany, Austria and Switzerland. For transaction volumes up to EUR 250 million the institution was one of the top 15 banks.

During 2016, Baader Bank shifted its focus towards collaboration with fund managers, family offices and asset managers and extended its product range of Banking Services for their end customers in the area of accounts and custody business.
This will enable it to meet the needs of digital asset managers and fintechs, a growing presence on the market, and the clearly increasing demand for trading, IT and regulatory expertise. As an outsourcing partner, Baader Bank offers the full spectrum of banking services for asset management processes, and also offers existing market interfaces, combined with high quality and security standards.
Europe's largest market player in digital asset management and other successful robo-advisers already actively use the services provided by Baader Bank.
The volume of assets in custody rose by 73% during the financial year 2016 to around EUR 1.6 billion, the number of custody accounts increased from 3,300 to just short of 5,800 (+75%). This business area also has huge potential in terms of the generated order flow.

The assets under management by the Asset Management Services at the end of 2016 totalled EUR 5.35 billion, an increase of 118.2% over the prior year. The number of clients rose to 56. In addition, Baader Bank currently acts as the buy side trading desk for over 140 funds.

Outlook for 2017

"Baader Bank has a very strong position in its core markets, and will be able to exploit consolidation trends in market making and multi-asset brokerage to its advantage. In addition, the capital markets area will be successful, with favourable conditions for capital raising and IPOs", Nico Baader is convinced.
With two further successful product areas in banking services and asset management services, the group is constantly evolving to become a leading provider of full service bank and corporate brokerage services within Germany, Austria and Switzerland. "Thanks to the integrated business model, combined with involvement in the positive trends of our newly acquired customer groups, such as asset managers and fintechs, Baader Bank will find its way back to solid earnings and become more attractive to shareholders", says the Chairman of the Board.

Baader Bank AG's group accounts for 2016 will be made available in early May 2017, when the AGM is called, on the Baader Bank website, under the heading "Financial Reports".

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