Irish Stock Exchange eyes Brexit opportunities as profits surge 21%

The Irish Stock Exchange's (ISE) chief executive, Deirdre Somers, said the bourse operator is "well positioned" for Brexit challenges and opportunities as it reported a 21 per cent profit increase in 2016.

Profit after tax at the company, owned by a club of Dublin-based stockbrokers, rose to €8 million from €6.6 million for the previous year as listing revenues for international debt, funds and equities increased 5 per cent to €19 million and operating costs dipped.

Last year, the ISE consolidated its position as the leading international centre for the listing of funds and second most popular hub for bond listings across 68 exchanges, according to World Federation of Exchanges data.

The number of stock trades increased by 17.4 per cent to a record 6.6 million, according to the bourse's latest annual report, obtained by the The Irish Times ahead of publication through the Companies Registration Office.

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“2016 was a standout year for the ISE as we continued to develop our domestic and international business lines,” said Ms Somers. “As a significant exporter of financial services into the EU and beyond, we are well positioned to embrace the challenges and opportunities of Brexit.”

Ms Somers, who has previously been vocal on the lack of a co-ordinated Government strategy to win business from London as the UK exits the European Union, is known to be actively pitching Dublin as a location for a dual listing of overseas companies, as well as ways to expand its debt- and funds-listings activities. The bourse established a Brexit board subcommittee last year to evaluate risks and opportunities.

Uncertainty

The level of new equity listings – or initial public offerings – weakened last year, in line with international markets, amid concerns about the prospects of the global economy and uncertainty caused by Brexit and the US presidential elections.

However, activity has picked up this year, with the Government's €3.4 billion sale of a 28.8 per cent stake in AIB to stock market investors, the largest IPO so far in 2017 in Europe, as well as listing of wind energy company Greencoat Renewables.

The ISE became a public limited company in 2014 as it demutualised after 221 years – a move that allowed its then six remaining founding members to share a €27.5 million windfall. One of the six, Royal Bank of Scotland, subsequently exited its investment, leaving Davy with a 38 per cent stake, Goodbody Stockbrokers with 26.7 per cent, Investec with 18.5 per cent, while Cantor Fitzgerald and Campbell O'Connor each hold 8.4 per cent.

The stockbroking firms received no dividend last year from the ISE, where average employee numbers rose 8 per cent to 121. The company’s short-term investments rose to €47.8 million from €42.2 million.

Pressing ahead

Meanwhile, the Government confirmed in July it is pressing ahead with plans to set up an Irish system to settle shares and other securities traded on the ISE, as it deals with the fallout from Brexit.

For the past 20 years, the settlement of trades has been carried out by a UK-based Central Securities Depository (CSD) called Crest, which is operated by Euroclear UK & Ireland in London, making the State the only EU member that doesn't have such a system. Euroclear UK & Ireland would lose the right to passport services into the Republic under a so-called hard Brexit.

Minister for Finance Paschal Donohoe said on July 27th he was encouraging applications to the Central Bank to set up a CSD in Ireland. Euroclear UK & Ireland's owner, Brussels-based Euroclear, has signalled its interest in setting up a new CSD in Ireland.

The ISE is a shareholder in Euroclear. The ISE’s annual report shows that it purchased 6,030 shares in Euroclear plc from the ISE OldCo Ltd, the group’s main company before the 2014 corporate restructuring, for €4.55 million.