Fintech Group's (DE:FTKG) brokerage business benefited from the jump in volatility in Q1. Volatility has since abated, but the business stands to benefit from a new ETP partnership with Goldman Sachs (NYSE:GS) announced in March. Meanwhile, FTG remains well positioned to benefit from a strengthening German economy and the eventual rise in interest rates. Despite being the fastest-growing major broking business in Europe, the shares continue to trade at a discount to the brokerage sector.
Investment case: Combining a bank with technology
A key differentiator is that FTG also owns a bank and a software business, which uniquely gives it exposure to the bulk of the value chain. Flatex’s >200k customers are among the most active in the market, generating c 47 trades per customer per year. We see upside possibilities from the sale of FTG products to non-FTG clients, and we see the potential for fee increases given the rate per trade has remained unchanged for 11 years. Additionally, FTG is a play on a strengthening economy and subsequent rising interest rate environment as the group stands to benefit from interest income on its extensive customer deposits. With the ECB deposit rate at minus 0.4%, we believe there is more scope for rises than further declines.
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