Publicly traded investment houses posted an aggregate loss of NIS 263 million for the fourth quarter of 2008, compared with an aggregate net profit of NIS 110 million for the corresponding quarter of 2007. Aggregate revenue plummeted to NIS 347 million from a quarterly average of over NIS 500 million in 2007.
The problem was not limited to the fourth quarter. Full-year losses totaled NIS 348 million, and the investment houses' aggregate NIS 1.4 billion revenue in 2008 was 34% less than in 2007.
The full-year revenue and net profit of Israel's publicly traded investment houses were:
2008 was the year of the hangover for Israeli investment houses, following the binge of the previous four years. As is usually the case of hangovers, the recovery will be hard and painful, and investment houses are now licking their wounds from last year's losses and destruction of value, layoffs, and withdrawals of investments.
One of the main reasons for the plunge in revenue was mutual funds, which hit the investment houses with a one-two punch. The first was the plunge in stock markets, which prompted investors to withdraw their money from the mutual funds, and their aggregate assets under management were 46% less at the end of 2008 than a year earlier (not including money market funds). The second blow was the transfer of assets from equity and fixed-income funds, on which the investment houses charge management fees, to money market funds, on which they did not. The result was reduced revenue and profits. Money market funds' aggregate assets under management reached a peak of NIS 35 billion last year.
Things have been looking up since the beginning of 2009, however. The shares of publicly traded investment houses have risen 50-100% since the beginning of the year. In comparison, the performance of bank stocks has ranged from slight increases to a loss of 7%. The correction in investment houses' shares comes after their shares plummeted last years, bringing their market cap close to their shareholders' equity, excluding goodwill. The jump this year is in some ways a rebound from the sharp drops in 2008.
Although only the results of publicly traded investment houses is disclosed to the public, information is available about some privately owned investment houses, especially the ones that are units of public companies.
The situation at the privately owned investment houses in 2008, was unsurprisingly, just as grim as at the publicly owned companies. Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) subsidiary Harel Finance Ltd., for example lost NIS 153 million in 2008, compared with a net profit of NIS 44 million in 2007. Most of Harel's loss was due to a NIS 126 million write-off on Harel Pia Mutual Funds Management Ltd., which it acquired from Bank Leumi (TASE: LUMI).
Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) subsidiary Migdal Capital Markets Ltd. lost NIS 75 million in 2008, after writing off NIS 20 million on Dikla Mutual Funds Management Ltd., which it acquired from First International Bank of Israel (TASE: FTIN1;FTIN5).
Published by Globes [online], Israel business news - www.globes-online.com - on April 2, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009