Following a difficult year for all eBrokers, Comdirect has come up trumps to make a small profit in Q1 2002. However, the results were inflated by recent cutbacks at home and abroad; the firm is unlikely to remain in profit by year-end. It should consider following its rivals by forming a new partnership to strengthen its market position.
German eBroker Comdirect has made a pretax profit for the first time.
Comdirect, the largest German online broker, has entered pretax profitability over Q1 2002. Over Q1 2001, the company disclosed pretax losses of E19.8 million, whereas a year later this figure is hovering around E298,000 in profit.
The turnaround has primarily been the result of drastic cost cutting programs in Germany, as well as abroad. Operations in Germany were reduced by almost a third, and the company has completed the closure of its units in Italy and France. But although the company has, at present, returned to profitability, it will be difficult to sustain such a performance.
Although the cutbacks have saved the broker from spiraling into debt, the downgraded customer base will hurt Comdirect in the long term. It has embarked on an expensive marketing campaign in an attempt to bolster revenues, but covering its costs could be a tough task in the current market conditions. Since its flotation 18 months ago, Comdirect’s share price has fallen from E30 to E7.95.
The broker, 58%-owned by Commerzbank, is unlikely to remain in profit by year-end and will have to consider alternative options. All online brokers have suffered over the past year with depressed share trading, which has forced many to merge with rivals, such as Ameritrade’s acquisition of Datek in April.
At the start of this month BNP Paribas scooped up fellow German broker Consors for the bargain price of E485 million. Combined with BNP’s subsidiary Cortal, it has now become the largest eBroker in Europe trading under the name CortalConsors.
Given these changes, it could be a wise move on Comdirect’s part to keep an eye out for possible partnerships. Perhaps it should give flagging competitor DAB, which has found itself in similar difficulties, a call.
Related research: Datamonitor, 2002: Bundling eFinancial Services: An alternative proposition for eBrokers