Growth in new funds helps Morgan Grenfell to 50% rise: Merchant bank 'firing on all cylinders' as each division shows improved earnings

MORGAN Grenfell, the British merchant bank owned by Deutsche Bank, yesterday announced pre-tax profits up 50 per cent to pounds 80.2m after a year in which the chief executive Michael Dobson said it was 'firing on all cylinders.'

The figures impressed merchant bank analysts and confirmed a positive trend seen recently from other merchant banks such as Schroders. Like Schroders, Morgan won significant new funds under management, up nearly pounds 5bn to pounds 20.5bn. It also made profits in all its divisions including corporate finance, banking, treasury and debt trading. The one main surprise for analysts was that Morgan made just pounds 16m profit from fund management - some were expecting more than twice that figure.

Mr Dobson denied that Morgan had made significant profits from Black Wednesday, although foreign exchange, interest rate and derivatives markets had an excellent year.

The main profit growth came instead from activities such as international mergers and acquisitions, which now account for 80 per cent of all Morgan's pounds 8bn of corporate finance work against just 20 per cent six years ago. In Europe 'we capitalised on the unique advantage of being part of the Deutsche Bank group, ranking first by number of European cross-border transactions,' Mr Dobson said.

He said Morgan saw Europe as the cornerstone to its expansion plans and was adding to staff in Milan, Paris and Frankfurt. John Craven, chairman, said that although Germany was entering recession, many companies were looking to relocate outside the country and Morgan was 'perfectly placed' to win this business.

Although the UK M&A market was not very active last year, Morgan advised on public takeover bids valued at pounds 2.7bn and ranked first by number of transactions, advising such clients as Redland, RHM and Bowater.