Germany’s big three online brokers Consors, Comdirect and DAB will all report results this week.
While no one can accuse the online brokerage industry of failing to innovate in the face of adversity, the cost of trying to lure more customers in the face of a plainly unattractive market is really hurting the online brokers. What is more, it increasingly seems that none of them has a clear idea of how to move forward. Compounding their troubles, recent economic data from across Europe suggests that things are not getting better.
In such circumstances, most analysts usually expect acquisition activity – and indeed there has been a small amount of reshuffling in the industry. But on the other hand, what major financial services firms would want to buy a brokerage now? It would soak up investment for a limited return at this stage. Would-be suitors will prefer to wait it out and pay a slight premium in anticipation of growth in earnings.
Possibly then the only hope for the online brokers is the unthinkable – some mega-merger activity. To most outsiders, this seems the most reasonable course of action. All the brokers have similar customer bases, very similar technology and almost identical aspirations. Their problem is spiraling costs, which can only really be controlled by scale.
The main obstacle to this course of action, however, seems to be pride. Each firm is fiercely independent and has designs on being the European number one. But perhaps now it is time to put pride to one side and focus on the only real course of action left open to brokers if they are to drive their industry forward.
