City’s newest investment bank bemoans high interest rates as ‘drag on demand’ for UK equities
The City’s newest investment bank and wealth manager Cavendish Financial has slumped to a loss in its maiden set of results as it struggles with a listings drop-off, despite dealmaking staying “resilient”.
Cavendish, which was formed by the £43m merger of Cenkos and Finncap in September, posted a £2.4m loss in the six months to 30 September 2023.
Finncap and Cenkos reported a combined £2.6m loss in the same period last year while operating as separate companies.
Cavendish’s total assets climbed to £67.6m from the two firms’ combined £51.6m last year.
In the period following the merger, cash has risen to £17m to 30 November, which the firm said was driven by the completion of more than 20 transactions.
Investment banks in the City are struggling with a death of new listings, with many swinging to a loss this year.
The London Stock Exchange saw just 23 floats in the first nine months of 2023, compared to 45 last year.
“With relatively higher yields available to investors on cash deposits we continue to see a drag on market demand for UK growth equity,” Cavendish said on Tuesday.
“This has continued to adversely impact equity transactions and trading, but private and public M&A activity remains resilient.”
The firm’s investment banking revenue dipped to £16.8m from £20.7m year-on-year, while consolidated revenue dropped to £13.4m from £16.4m.
Cavendish said this fall reflected “lower [equity capital market] and private M&A activity during the summer months across the UK markets”.
“Perhaps most pleasing has been the positive feedback received from existing clients, with us achieving our goal of providing enhanced service through our much deeper resource, efficient business model and renewed energy,” said co-chief executives Julian Morse and John Farrugia.
“Whilst we intend to make strategic hires, our teams are settled and we are well positioned to benefit from improving market conditions when they come.”