ICAP raises guidance as voice broking revenues revive

Date: Wednesday 01 Feb 2012

Inter-dealer broker ICAP said profits for the current fiscal year will be towards the top end of expectations.

The current range of analyst pre-tax profit forecasts for the year to March 31st runs from £336m to £358m, with a median figure of £347.4m.

In a statement covering trading since October 1st, 2011, the group said revenues from its electronic foreign exchange and fixed income platforms (EBS and BrokerTec) in the final three months of 2011 were 7% lower than in the corresponding quarter of 2010 at $730bn.

Total average daily volumes on the BrokerTec platform were $594bn, a decrease of 8% on the previous year, in part due to the historically low US yield curve.

Average daily volumes on EBS decreased 6% year-on-year to $136 billion for the quarter, partly due to lower volumes in some of EBS's strongest currency pairs resulting from central bank intervention policies in Japan and Switzerland.

The group noted that the year-earlier period was a particularly strong one for the company, but also conceded that continued uncertainty in the Eurozone plus constrains on market liquidity had dampened volumes, especially with customers disinclined to open new trading positions ahead of the year-end.

Since the new year started, however, the group has seen signs of a recovery in its voice broking revenue, the part of the business that was especially hard hit by market conditions at the end of 2011.

On the other hand, volumes on ICAP's electronic platforms in January are down 19% year-on-year, although, once again, the group pleaded strong comparatives as a mitigating factor.

"Like everyone else we saw a significant reduction in risk appetite in November and December. In January we saw encouraging signs of activity starting to return, albeit cautiously in some markets," disclosed Michael Spencer, the group's Chief Executive Officer.

The company said that in response to changing market conditions it has been trimming headcount in parts of the business not doing so well and hiring in other parts of the business that are doing well. To date, it has reduced its cost base by a net £20m compared to the prior year.



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