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M&A and IPO rush boosts Numis profit prospects

Run of IPOs and deals in City drives Numis profit forecasts up, with more activity to come in the last months of 2021
M&A and IPO rush boosts Numis profit prospects
  • Supercharged deal space drives investment bank's profit expectations up
  • Numis soon to be joined by Peel Hunt as a listed bookrunner and broker

Surging M&A activity and private financing rounds have powered investment bank Numis (NUM) to a much-improved topline for the 12 months ending 30 September. 

The bank now expects full-year revenue of £215m, compared with £155m last year, with profits expected to be "significantly higher" than the £37m posted last year.

Most of that growth seems to have come from advising the booming M&A sector, related in no small part to the unprecedented level of private equity acquisition activity, but also to clients in the bubbling fintech sector; the investment banking business is expected to book £150m of revenues, 50 per cent more than 2020.

Although the IPO market was quiet over the summer, Numis said it would launch several IPOs in the coming months, and it has already acted as joint-bookrunner to Oxford Nanopore for its recent flotation. It has also allocated more capital to its trading books as equity markets have performed strongly. Fellow investment bank Peel Hunt will soon join Numis in the listed space, announcing last month it would join the Aim junior market after doubling sales in its 2021 financial year. 

As ever with investment banks, investors can never be quite sure how long the good times will last and forecasting Numis’ performance next year – there is only one covering City analyst – is more a question of guesswork than meaningful analysis. Over the long term, the shares tend to do well with a total return of four times that of the FTSE All-Share over a 10-year timeframe.

Taking the long view is the only reasonable strategy because, if the tide goes out suddenly on market activity, then the bank’s profits will crater as quickly as they have rocketed. We maintain our long-horizon buy call. 

Last IC View: Buy, 355p, 29 Jul 2021