German exchange group Deutsche Börse enjoyed what it described as its second-strongest quarter ever in Q3 2008, posting a 10% increase in sales revenue and a 5% jump in earnings before interest, tax and amortisation. But analysts were unimpressed with performance of Xetra, the group’s electronic equities platform.
In a research note, Commerzbank equity analyst Roland Pfaender described Xetra’s performance as “slightly disappointing”, pointing out that revenues declined 12% year on year to €99.9 million, costs increased 13% to €44.5 million and earnings fell by 27% to €56.7 million.
He added, however, that the exchange group’s overall Q3 sales and earnings figures were ahead of both consensus and Commerzbank’s own estimates.
Deutsche Börse blamed the drop in Xetra revenues on investor restraint in cash market trading caused by uncertainty in the markets, particularly during July and August. It added that the trading volume on Xetra in Q3 fell by 18% to €540.3 billion, from €602.2 billion in Q3 last year.
However, the proportion of algorithmic trading on Xetra grew to 44% in Q3 2008 from 42 percent in the same quarter last year.
Deutsche Börse attributed its strong overall Q3 performance to stable revenue performance in its two largest business areas – derivatives exchange Eurex and post-trade services provider Clearstream –
and the consolidation of the International Securities Exchange, which the group bought last year.
Commerzbank’s Pfaender said the performance was triggered by the sharp fluctuations seen in stock markets in recent months. “Deutsche Börse should continue to benefit from high volatility in the market,” he wrote in the research note. “Q4 2008 volatility reached peak levels in October and remained above average at the beginning of November.”