Deal or no deal? Peel Hunt blames bank bailouts and inflation as it expects to be ‘marginally loss making’
Peel Hunt warned that the impact of recent bank bailouts might impact its pipeline as the City broker continues to struggle amidst the dearth of deals.
In a trading statement at the end of its financial year, the investment bank said it has seen a “gradual improvement” in its pipeline.
However, it said “execution risk remains high in light of continuing negative macroeconomic news, most notably the recent bail out of a number of banking institutions on both sides of the Atlantic.”
The recent collapse of Silicon Valley Bank sent jitters through the financial system, sending share prices tumbling and forcing investors to safe havens the world over.
Regulators were forced to step in to prop up a teetering financial system, but the effects are still likely to spill over into the real economy, denting an already unsteady situation.
Peel Hunt has been facing difficulties as a result of the slowdown in capital markets activity. In its half year results released in December, the broker recorded a 99 per cent fall in profit.
For the full year it expects revenue to be around £82m, in line with market expectations but down from £131m last year. The company noted this performance came as capital market activity hit “historic lows” through the 2023 financial year.
Its expenses have also increased as a result of inflation and its IPO in 2021. The company now expects to be “marginally loss making” for the full year. Markets expected it to break even.
The bank said revenue from ‘execution services’ – which includes providing advice to asset and wealth managers – remains higher than pre-pandemic while revenue from research and distribution was “resilient” despite the drop in market activity.
Peel Hunt said its “robust balance sheet” has allowed it to exploit market dislocation to make investments in line with its strategy. It recently announced a new platform for retail investors alongside rival brokers.