Melbourne brokers merge in tough market
Two Victorian stock brokers with origins dating back to the 19th century will merge to create a company with $8 billion in funds under advice.
Stockbroker E.L. & C. Baillieu will merge with smaller rival F.W. Holst, aiming to capitalise on their common base of high net worth clients.
The privately owned Melbourne-based firms, will together have more than 50,000 clients.
Baillieu has more than 65 advisers in institutional sales, retail broking and wealth management, while Holst has about 25 advisers. Financial terms were not disclosed.
“The merger we are announcing today not only makes perfect strategic sense – it will also round out our offering to clients, combining Holst’s and Baillieu's experience and expertise in retail and institutional broking, equity research, financial planning and corporate services," said Baillieu managing director Gavin Powell.
"The merged entity will be well positioned to continue to expand its presence across Australia, particularly in the Sydney retail broking market," he said.
Mr Powell denied that competition from online rivals was the driving factor, instead blaming the drop in retail investment activity.
"What’s changed rather than competition in the industry at the moment is that retail investors are fairly nervous and haven’t been investing in the market the way they were pre-GFC,’’ he said.
“You only have to look at ASX figures in the number of trades they’ve been doing," he said. "(It is) down a far way from the peak,’’ he said.
Shares on the ASX200 peaked at 6828 in November 2007, only to plunge to 3145 in March 2009 in the throes of the GFC. Since then they have struggled to rise, trading at 4364 today.
“Hopefully that will change in time,” said Mr Powell. “Just at the moment that’s happened.”
F.W. Holst has 50 staff in Melbourne and Geelong. E. L. & C. Baillieu has about 150 staff in Melbourne, Sydney, Perth, Bendigo and Newcastle.
BusinessDay understands a “small number” of layoffs may result from today’s announcement.
Financial sector weakens
Declines in the stockbroking sector follow a broader trend of weakness in the financial services sector following the global financial crisis. ANZ said it would cut 1000 workers by September of this year, while Westpac has cut 560 roles.
Investment bank UBS said in January that Australian banks and financial services companies may eventually eliminate 7000 jobs in by 2013 as they trim labour costs that account for for the majority of expenses.
Traditional brokerages have come under strain in recent years, both by a rocky sharemarket that has turned investors off from equities, as well as the same technological changes that have undermined media and retail sectors.
Online brokerages such as Commonwealth Bank-owned CommSec and Bell Direct have won business by offering low-cost transactions and desk-top interfaces for who rely less on personal advice for investment decisions.
High frequency trading, while in its infancy in Australia, represents another challenge. HFT overseas has lifted the use of computers in trading, narrowing the demand for traditional buy-and-hold investment services.
Baillieu was founded in 1889, while Holst was founded in Ballarat in 1893.
The announcement follows the takeover last week of Sydney-based broker which BBY took over Cameron Stockbrokers.
Over the past year, Intersuisse Group bought Austock Securities, while Bell Potter merged with Southern Cross Equities.