Sharebroking and investments: Back to business for brokers as merger mania recedes

By Nick Stride

Friday 22nd March 2002

After years of upheaval on both the "buy" and "sell" sides sharebroking last year settled down to the business of making money.

While 2000 saw a rash of takeovers, mergers, and market exits the only significant development of the past 12 months has been Credit Suisse First Boston's decision to sell its private client operation to its own staff.

Under that deal CSFB retains its institutional desk, its corporate finance function and its team of analysts and will provide research to First New Zealand Securities, the private client business.

The relationship is similar to those of UBS Warburg and ASB Securities, and of ABN Amro and ABN Amro Craigs. In all three cases the international partner retains the big dealmaking facilities - corporate advisory and finance, and servicing institutional clients - and has a relationship with a retailer for distribution clout.

CSFB's move follows those in previous years of Deutsche Securities, Merrill Lynch, and JP Morgan, all of which left New Zealand private client broking.

It leaves the industry split into three models - private client only, the investment bankers, and those, like ABN Amro, Macquarie Bank, and JB Were, who do both.

The different models are geographical, too - local, international, and regional - and reflect the way sharebroking and investment banking players have reorganised themselves, in terms of reach and what sort of business they chase, to do only what they feel they can do best.

Some local private clients have had a bewildering time of it.

At that end of the market the relationship between clients and their advisers is crucial and some have followed advisers from Ord Minnett to JP Morgan to Macquarie Equities, or from Merrill Lynch to ABN Amro Craigs and other houses.

Brokers expect the industry to settle down now, although speculation abounds that somebody, perhaps Challenger International, will make an offer to buy Forsyth Barr.

Things have also settled down on the "buy side" after years of rationalisation and merger activity among banks, insurance companies and fund managers.

ANZ Bank and Dutch giant ING announced recently they had signed a memorandum of understanding to investigate merging their Australian asset management arms but it is still unclear whether there will be any implications on this side of the Tasman.

In New Zealand ING owns Armstrong Jones, which manages money for WestpacTrust.

ANZ's assets are managed by Challenger unit Coronet.

It is also unclear what effect CSFB's withdrawal from private client broking will have on the turnover rankings.

The Stock Exchange releases these figures to brokers without any names to identify who did deals other than their own.

An informal system of information swapping and informed speculation establishes the pecking order.

The current "order" places JB Were first followed by CSFB, ABN Amro/Craigs and Salomon Smith Barney.

With the exchange headed for a new era under demutualisation most of the old hands prevalent at the top of broking houses only two or three years ago have left the industry.

Their replacements are in optimistic mood as they anticipate a rejuvenated capital market under the new NZSE board.

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