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Retail funds, capital-raising fees help Craigs double profit in 'difficult' market

Thursday 7th June 2012

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Craigs Investment Partners more than doubled its profit last year as the brokerage half owned by Deutsche Bank benefited from KiwiSaver inflows and reaped fees from equity and debt capital raisings.

Profit rose to $5.3 million in calendar 2011, from $2.3 million a year earlier, according to the annual report, lodged with the Companies Office. Revenue rose 11 percent to $75 million.

“In a very difficult market overall we had a good year,” chairman Neil Craig told BusinessDesk. Craigs has more than $6 billion under management in KiwiSaver and other funds, which made “an on-going contribution last year.”

Among mandates Craigs won in 2011 were joint lead manager and underwriter for Contact Energy’s $351 million rights issue, joint lead manager for Summerset Group’s $123.6 million initial public offering and co-lead manager of Trade Me’s $363.5 million IPO. It was also arranger and lead manager for state-owned Genesis Energy’s $275 million bond sale.

Craig said there has been "a reasonably tough start to the year" in 2012. "ECM (equity capital markets) at this point is not there and we're very much looking forward to the government programme (of asset sales) and Fonterra coming to the market."

The 2011 results show the firm got its biggest revenue gains from commissions, which jumped 41 percent to $10.9 million. Fees rose 8.5 percent to $38.8 million and brokerage rose 5.6 percent to $25 million.

"All parts of our business had some growth," Craig said. For retail and wholesale stock broking, though, growth was "at the margin."

Operating expenses rose 5.3 percent to $68.2 million. Benefits for employees, who own most of the other half of the firm, rose about 11 percent to $45.4 million.

Neil Craig started the Craigs side of the business as Craig & Co in 1984. ABN Amro bought 50 percent in 2001 of what became ABN AMRO Craigs and that holding transferred to a group of Fortis, Royal Bank of Scotland and Santander that acquired the Netherlands-based firm.

Two years later ABN AMRO Craigs bought back the half-stake, renaming the firm Craigs Investment Partners. In 2010, Deutsche Bank took a 49.9 percent holding.

BusinessDesk.co.nz

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