FRANKFURT (Reuters) - Britain’s departure from the European Union offers an historic opportunity for Deutsche Boerse to expand its business and to secure a larger portion of the euro clearing business, the exchange’s new chief executive said on Monday.
Theodor Weimer assumed the helm of the German stock exchange at the start of the year aiming to open a new chapter after the Deutsche Boerse was beset by an insider trading scandal, a failed merger with its London counterpart and a profit warning.
The changing of the guard comes at an important moment for Deutsche Boerse. It hopes to profit from Britain’s decision to leave the EU, scheduled for March 2019, by capturing a larger portion of the lucrative euro clearing market that is currently centered in London.
“Post-Brexit offers a historic moment in time for us here in Frankfurt,” Weimer said in his first public remarks as CEO.
“Let’s ensure together that euro clearing lands in the strongest economy of Europe,” Weimer said, speaking to an invitation-only audience of 1,000 of Frankfurt’s financial elite gathered at the company’s flashy headquarters, The Cube.
Weimer said he would focus on growth and the future after Deutsche Boerse’s recent woes.
“Yes, there were mistakes, and naturally consequences will have to be taken,” Weimer said. “We can’t simply look away. This is not nice, but my job is first and foremost to look to the future.”
Weimer said he saw numerous growth opportunities, pointing to the index business and trade in currencies, commodities and fixed income. “We can, and we want to, and we will grow,” he said.
Euro clearing is one of the main battlegrounds between London and Brussels in divorce talks that will shape how Europe’s financial market is divided up post-Brexit.
The European Commission proposed in June last year to give EU regulators the power to force London’s main clearing house to relocate if it wants to continue doing business in the single market after Brexit. But the European Parliament aims to soften those plans, an EU lawmaker said this month.
A clearing house stands between two sides of a trade and is backed by a default fund to ensure a transaction is completed even if one side goes bust.
Weimer, the former head of UniCredit’s business in Germany, succeeded Carsten Kengeter, who resigned last year amid an investigation into alleged insider trading that had its roots in the failed merger with the London Stock Exchange. Kengeter denied any wrongdoing.
But the failed merger and the investigation cast a shadow over the company.
Joachim Faber, chairman of the company’s supervisory board, said in introductory remarks on Monday that the firm had again “found our enthusiasm” after an “especially difficult year”.
Still, Deutsche Boerse faces obstacles. Market volatility, which helps drive trading and revenue, remains low.
In October, Deutsche Boerse warned that profit for 2017 was “very likely” to fall short of its target for an increase of between 10 and 15 percent. It cited “prevailing negative cyclical effects”, like low volatility, as the main obstacle.
Weimer began his career in consulting for McKinsey and then Bain, before becoming an investment banker with Goldman Sachs where he was promoted to partner in 2004. He joined Italian bank UniCredit in 2007, initially as head of global investment banking.
Deutsche Boerse has been trying to repair relations with its home region after it said it would move its headquarters to London as part of the proposed LSE tie-up. Weimer said on Monday he was committed to keeping headquarters and management local.
Reporting by Tom Sims; Editing by Adrian Croft