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July 24, 2020updated 21 Aug 2020 12:56pm

Leonteq H1 2020 profit plunges due to turmoil caused by Covid-19

Swiss derivatives boutique Leonteq has reported an 82% slump in H1 2020 net profit hit by the Covid-19 pandemic.

Performance highlights

The firm’s net profit in H1 2020 was CHF5.5m, versus CHF30.2m in the prior year.

The firm’s total operating income was CHF103.5m in the first six months of this year, down 17% from CHF124.6m a year ago.

Net trading result of CHF -107.1m was affected by hedging-related losses due by oil price swings and cancellation of dividend payments.

A year ago, the firm’s net trading result stood at CHF7.5m.

Investments in key strategic initiatives led to a 5% rise in total operating expenses to CHF98.7m.

The pandemic coupled with the oil price shock led to increased volatility in the global capital markets in March and April. This impacted all asset classes underlying structured products.

The capital markets recorded significant recovery in May and June.

Amid these conditions, Leonteq’s net fee income surged 76% to CHF213m in H1 2020 from CHF120.9m in the previous year.

The firm registered double-digit growth in all regions where it operates.

In the Swiss market, the firm’s net fee income jumped 56% to CHF82m.

In Europe and Asia, the figure soared 105% and 34% to CHF113.2m and CHF17.8m, respectively.

Leonteq CEO Lukas Ruflin said: “Our results for the first half of 2020 prove that Leonteq can weather the storm in real periods of market stress and safeguard its profitability.

“While the bottom-line result is disappointing, we are encouraged by the further strengthening of our client franchise and the significant progress we have made by diligently executing the strategic priorities we defined two years ago.”

Outlook

Leonteq intends to continue making investments in key initiatives.

It plans to spend around CHF200m for the full year 2020.

Nearshoring to Portugal 

Leonteq has launched an initiative to explore nearshoring options and chose Lisbon, Portugal, as the location for this move.

The first phase of the nearshoring operations will involve building a serviced office set-up, a work that is anticipated to wrap up by the final quarter of 2020.

External IT development specialists, along with personnel in shared services functions, will be employed.

In Phase 2, the firm will set up an office with up to 100 designated roles along the entire value chain. Phase 2 is expected to be operational by the end of 2022.

Banking partnership

Besides, Leonteq established direct connectivity between its digital marketplace and the electronic trading platform of Barclays.

The bank will be the first third-party issuer on Leonteq’s automated multi-issuer platform for clients in Switzerland as well as in select European and Asian markets.

Leonteq recently also partnered with Blackrock, Basler Kantonalbank, and Rand Merchant Bank to develop structured investment products.

Meanwhile, Leonteq appointed Markus Schmid, Chief People Officer, as an additional executive committee member, effective 1 October 2020.

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