A cautious entrance by Nordea Bank Polska
A general lack of confidence on the bond market does not necessarily rule out success for a new brokerage house
Nordea Bank Polska is to launch a new brokerage house by the end of this year. The brokerage will initially specialize in offering bonds and shares in investment funds. This development is per-ceived by some as a tentative sign that the brokerage market may have turned the corner after shrinking for three consecutive years. Others, however, point to Nordea's "soft" entry strategy, which does not envisage offering stocks in the initial period, as a sign that costs of operations are too high.
By Aleksander Nowacki
"We do not expect to be the only new entrant in the near future," says Jacek Adamski, director of the corporate products department at Nordea Bank, and the future head of the brokerage house. "The market is ripe for new instruments, and for new institutions to offer them." He pointed out that the decision not to offer stocks would reduce the amount of house dependence on the vagaries of the market. Rather than banking on the continuing bull market, Nordea's opportunities are based on offering products that are new to the local market.
Leszek Milczarek, fixed-income analyst at CA-IB, says that the debt market has been through a crush this year and that "tough times call for innovative measures." He expects a number of structured instruments to be introduced in the near future, which could, for example, combine elements of debt and stock instruments.
"Such products are already available in the world," he says. "All it takes is the will and the expertise to bring them to this country." He is, however, skeptical about the timing of the enterprise.
"Had it emerged a year ago, it would have been a hit," he says. "But now the moment is largely past." Investors on the bonds market are by now "in a little bit of a panic." That, he explains, may reduce the business for the house, at least in its initial period.
Although Nordea's "soft" entry strategy is being criticized by some, it has won praise from others. The brokerage will start by offering shares in investment funds and bonds issued by Nordea Bank itself. The offer would later be extended to savings and debt products offered by the group's operations abroad.
"It certainly makes sense to specialize, as it allows cost-cutting," says Maria Dobrowolska, Chamber of Brokerage Houses president, who "welcomed the news of Nordea's decision, as a sign that a market players are becoming more optimistic about the prospects for the market."
The three-year slump on the stock market has seen the number of brokerage houses drop from forty-nine in 2000 to just thirty-five at the moment (excluding the Nordea venture). Last year, their combined earnings amounted to zł.30.7 billion, though this was due mostly to asset management services, while the core business of broking was making losses.
According to Dobrowolska, Nordea's decision to enter the market through the debt market should be "a very important piece of news to both the Warsaw Stock Exchange (WSE) and the Securities and Exchanges Commission (KPWiG)." It is an indication, she says, that the costs of other activities are too high.
"The rules and regulations in the EU are even more restrictive, and they will have to be introduced here as well in the near future," counters a KPWiG spokesman. "These complaints bear no relation to the truth." WSE president Wiesław Rozłucki could not be reached for comment last week.
