The German financial regulator Bafin subjected the company to a special audit and found deficiencies in the organization and corporate management, as the SDAX company surprisingly announced on Saturday evening. The broker responds to the criticism and expands its board of directors. In the meantime, day-to-day business is going even worse than previously thought: the board of directors cut its already subdued business forecast for the current year. The dividend under consideration will probably not exist either.
According to the announcement, Bafin submitted its audit report to the broker back in November. flatexDEGIRO did not give an exact date. However, as a result of the examination, the Bafin will “impose, among other things, that the company must ensure proper business organization”. In addition, she had “ordered temporary additional capital requirements”.
According to its own statements, the company has now “initiated various measures to meet the regulatory requirements within a specified time frame”. The company will continue to work closely with Bafin. The in-house flatexDEGIRO Bank has already got a head of risk in Matthias Heinrich. There have also been organizational changes in the management of the internal controls, risk management and reporting departments.
According to the announcement, the Supervisory Board and Management Board have also decided to capitalize flatexDEGIRO Bank AG with a further 50 million euros from their own funds. So far, the core capital of the flatexDEGIRO group is 180 million euros. The surplus for the current year should also be retained in full, it said. The management thus sees all future growth efforts “sufficiently financed” and without the “need for capital measures”.
The board of directors will also be strengthened. The previous CFO, Muhamad Chahrour, will be promoted to deputy chairman and head of day-to-day operations (COO) on January 1st. He should perform these functions both at flatexDEGIRO itself and at flatexDEGIRO Bank. He will continue to be responsible for the operational and commercial development of Degiro and the strategic development of the group – together with CEO Frank Niehage. The group’s new Chief Financial Officer will be Benon Janos, who has previously held the same position at flatexDEGIRO Bank.
The previous two positions on the Management Board will become four in the course of this: Because at the turn of the year, the company will be getting a Chief Technology Officer (CTO) in the person of Stephan Simmang. Like the new CFO Janos, the manager comes from within the company – and both were formerly with the US investment bank Goldman Sachs. In addition, the previous HR manager Christiane Strubel is to move up to the board as soon as all the regulatory requirements for this are met.
Supervisory Board Chairman Martin Korbmacher rated the steps as logical. “The successful growth of flatexDEGIRO into Europe’s leading online broker also requires us to adapt our internal structures and management bodies to this new size.”
At the moment, however, there is little to be seen at flatexDEGIRO from the steep growth course of the Corona years. High inflation rates, energy prices and geopolitical tensions continue to have a negative impact on the trading activity of private investors in Europe, flatexDEGIRO further announced. Already after the third quarter, the Management Board had had to say goodbye to part of its annual targets.
Despite the first signs of an improvement in the stock market in October, trading by private investors has not yet returned to normal seasonal patterns, it is said. The management now only expects sales of around 380 million euros this year. It was only in October that Niehage reduced the target from 400 to 440 million to “at least” 400 million.
Adjusted operating profit is also unlikely to reach the targeted level. The Management Board now only expects an adjusted operating margin (Ebitda) of around 37 percent. So far he had had the previous year’s value of a good 42 percent in mind.
Nevertheless, Niehage sees no reason to throw in the towel. “External factors have taken retail investor trading activity from a record high early in 2021 to a record low in 2022.” This makes it the most difficult year for the online brokerage industry in Europe. Nevertheless, he expects 2022 to have the highest annual surplus of all time. In the coming year, the surplus will again benefit significantly from rising interest rates. He therefore expressed himself “very confident in continuing our profitable growth in 2023 and beyond”.
/stw/mis
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