Saxo Bank has seen a lot of change lately. And much of it the good variety.
The company has a new largest-shareholder in Chinese industrial giant Geely Group. Co-founder Lars Seier Christensen, although not involved in day-to-day management for two years, cut his formal ties to the company by selling his stake to Geely. There have been a number of recent management changes at various levels, although Lars’ long-term partner in the business, co-founder Kim Fournais, remains at the helm as CEO.
But again, things are clearly going well for Saxo Bank. The company reported a 27% revenue jump in 2016 to $425 million. Trading volumes are strong. Client deposits are at an all-time high. And the Geely connection opens new avenues for Saxo Bank in China, which (as we’ve reported several times) has been a key focal point for the Copenhagen based broker for the past couple of years.
So what does the Geely Group investment mean for Saxo Bank, especially in China?
Is an IPO in the near future?
How is Saxo Bank dealing with the rapidly changing regulatory landscape in FX?
We’re pleased to speak today with Saxo Bank CEO Kim Fournais on all these topics, and more. Here is what he had to say.
LR: Hi Kim, and thanks for joining us today. We know that the deal between Lars Seier Christensen and Geely Group was a private agreement between two parties, but there seems to be a lot at stake for Saxo Bank from the transaction, especially given your recent push on several fronts into China. How does this fit with, or change, your China plans?
Kim: Partnering with Geely creates an even stronger foundation to capitalise on the many global opportunities not least the opportunities in the growing Chinese and Asian markets. We have had an office in Hong Kong for many years and we established an office in the Shanghai Free-Trade Zone in September 2015. We have signed extensive financial technology partnerships as part of our Greater China strategy and with Geely as a partner, we are even better positioned to grow in the Chinese and Asian markets.
LR: Lars hadn’t been involved in the day-to-day management of Saxo Bank for two-plus years already, but it must seem now like the end of an era and the beginning of a new one for you, given how long the two of you were partners in the business. What are your feelings at this stage, as you look both back and forward?
Kim: Lars and I have been business partners for almost 25 years which is probably longer than an average marriage. Therefore this agreement also marks the end of a very important chapter for Saxo Bank and for me personally. I understand that it was a natural next step for Lars to sell his shares and even though Lars will no longer have a formal stake in the firm, I know that his passion for the bank lives on.
With Geely as a partner we start a new chapter for Saxo Bank looking to take the bank to new highs and reach our full potential. Geely has shown an impressive ability to foster solid and profitable growth in their portfolio companies, and Geely has a deep understanding of Scandinavian business values and culture and I am sure we have some very exciting years ahead of us.
LR: There has been some speculation that the deal between Lars and Geely helps set up Saxo Bank for an IPO in the near future. Can you shed any light on that? Do you think that a year or two from now we in the general public might be able to own and trade Saxo Bank shares?
Kim: An IPO is a scenario we are working with but, as we have communicated before, it is not planned for the near future. Geely has a healthy long-term version for Saxo Bank, and I do not see this change in shareholder affecting the timeline for a potential IPO.
LR: How do you view the regulatory changes underfoot in Europe, such as banning bonus payments, limiting trading leverage, and (in some jurisdictions) advertising restrictions? It would seem to us that this would bode well for the larger brokers who traditionally didn’t rely nearly as much on those things.
Kim: A number of European regulators have issued proposals on how to better guide and protect clients trading on margin. We welcome these proposals and are fully supportive of the aim of ensuring better protection of clients and better alignment between the interests of clients and their banks/brokers. The margin trading industry is not sufficiently focused on protecting clients’ interest and some providers offer excessive leverage resulting in the possibility of frequent stop-outs which leads to clients eventually losing money on their trading instead of making money.
Saxo Bank has made the strategic decision not to offer clients, what we consider, irresponsibly high leverage and, in turn, Saxo Bank’s interests are fully aligned with the interests of our clients.
We expect the proposed caps on leverage to lead to rising standards in the industry which will be positive for investors and traders and for Saxo Bank. Some of the suggested changes are likely to lead to a more level playing field with focus increasingly turning to services, quality of execution, platform robustness and depth of product offering.
We expected this shift to occur and we believe that we are well positioned to grow Saxo Bank in this environment.