Brewin Dolphin ready to back struggling investment banking arm in tough times

Published on Thursday 27 November 2008 20:31

BREWIN Dolphin yesterday stood by its investment banking arm even though it was a drag on the firm's profits last year and faces a "very tough" 2009.

Amid the financial market volatility, profits at in the asset management group's investment banking division plunged to 498,000 in the year to 28 September from 7 million last time.

Jamie Matheson, executive chairman of Brewin, which has a strong Scottish presence including offices in Glasgow, Dundee and Inverness, said: "The important thing is it (investment banking] did not lose money in the year. That is no mean feat.

"One is not looking to the division to do anything spectacular this year. It will be very tough for them. But it is an important business for us to be in."

Asset management was a much stronger performer in the year, with profits rising to 29.6m from 27.7m last time.

Matheson said the performance was helped by a migration of customers from advisory business to "discretionary", where the asset manager can use their discretion where to invest clients' money and which also enjoys better profit margins.

Matheson said it was "fair" to say that clients in such turbulent times were "enjoying more the ability to give the responsibility (for investment] to professionals, particularly professionals whom they know well".

Discretionary funds under management dropped 4.7 per cent to 10.2 billion (10.7bn), outperforming the 21.3 per cent fall in the FTSE 100 index and 14.6 per cent fall in the FTSE Apcims private investor index.

Brewin's total income in the year edged down to 206m (209m), while the total annual dividend rises 3.3 per cent to 7.1p, via a 3.55p final payment.

Overall pre-tax profits fell 13 per cent to 36.2m from 41.7m. Matheson said it was "too early to call" the end of the financial sector turmoil.

But he added: "If there's a lesson to be learnt it is that properly financed equity and strong balance sheets are the way to go.

"There's been a tendency to substitute debt for equity and to think debt is a form of equity. It is not. It is somebody else's cash and they will want it back.

Matheson also defended the decision to ditch the historic Bell Lawrie trading name in Scotland, revealed by The Scotsman earlier this month.

He said: "This decision was taken by the Bell Lawrie people in Scotland. It was not some edict from me. They felt there was value in adopting the pan-Britain Brewin brand."

Brewin's shares closed up 5.5p, or 5.6 per cent, at 103.5p.