London-listed forex, CFDs, and spread betting brokerage IG Group Holdings reported on the outcome of its third quarter for fiscal 2019 that ended on February 28. The company posted another decline in quarterly revenues as ESMA’s new rules and low volatility have impacted the retail brokers business materially.
During the quarter revenues declined by 12 percent to £108 million. The decline was more pronounced in the UK and EU region, where income declined by 15 percent to £56.9 million. Revenues from the APAC region also declined by 11 percent quarter-on-quarter to £35 million.
The only regional growth came from the EMEA region outside of the ESMA-regulated jurisdiction, where IG posted an income increase of six percent to £11.3 million.
Client Numbers Remain Solid
The total number of active clients of IG Group remained consistent with previous results, rising by one percent to about 125,600. Clients in the EU and the UK also increased by one percent to 51,800. IG Group Holdings reports that the number of new customers who signed up during the quarter also increased to 7,742 from 7,553, maintaining consistency.
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As already mentioned, the low volatility theme across global financial markets didn’t spare the company. The shift to professional clients didn’t prevent IG Group’s revenues from this segment to decline 20 percent during the quarter.
At the same time, only 14 percent of 1,425 applications for professional clients got approved by the broker. The professional clients segment still accounted for the bulk of revenues from the EU and the UK at £37.1 million, while retail clients accounted for £19.8 million.
Year To Date Revenue
Reflecting the shifting market landscape, year-to-date revenues of IG Group declined by a whopping 27 percent from the ESMA region (39 percent from EU and 22 percent in the UK) to £202.4 million (from £278.4 million a year ago).
While EMEA ex EU and APAC compensated with increases of 22 and seven percent respectively, the company’s strategic shift to professional clients is not paying off during the times of extremely low volatility across financial markets.
As a result, the market is punishing IG’s shares since the open, tanking below 500 pence per share. The stock was trading above 920 pence per share as recently as August last year before the market realized the seriousness of the impact of ESMA’s new regulatory framework on the retail broking industry.