LSE Ups its Stake in LCH, Sees Uptick in Revenue for Q3

The exchange operator is likely to control over 80 percent of the clearing house by the end of the year

The London Stock Exchange (LSE) released its financial results for the third quarter of 2018 this Friday. Alongside those results, which saw the firm increasing its year-on-year revenue, the stock exchange operator also released a statement saying that it has upped its stake in the London Clearing House Group (LCH).

According to the results released by the LSE this Friday, the exchange saw its revenue grow from £443 million ($576.76 million) in the third quarter of last year to £464 million (£604.10 million) in the third quarter of this year. That was equivalent to a five percent year-on-year increase.

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That growth was largely a result of an increase in revenue in the firm’s information services division. Last year, the LSE reported total third-quarter revenue for its information services division of £182 million ($236.95 million). This year, that figure grew to £212 million ($276.01 million) – a 17 percent increase.

LCH Inflow to LSE

On top of its own revenue, the LSE also received an inflow of cash from its stakes in the LCH and CC&G. Both companies providing clearing and risk management services and income from their operations saw the LSE rake in £57 million ($74.21 million) over the course of the third quarter of this year. That was a 36 percent increase on last year’s £42 million ($54.68 million).

As a result of that additional £57 million, and an additional £1 million in “other income,” the LSE saw a total income of £522 million ($679.61) for the third quarter of this year – an eight percent increase on last year’s £486 million ($632.74 million). After taxes, the firm had a net profit of £465 million ($605.40 million) – also an eight percent increase on last year’s £430 million ($559.83 million).

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LSE ups its Stake

Outside of those financial results, the LSE also announced that it had upped its stake in the LCH. The exchange operator has gradually been increasing its majority stakeholder position in the clearinghouse over the past few years.

On this occasion, the LSE has upped its stake by an additional 15.1 percent – meaning it now controls over 80 percent of the company. According to a statement released by the LSE on Friday, it will pay up to a maximum of €438 million (£384 million) for that 15.1 percent share in the company.

A number of minority stakeholders will be selling their entire share in the LCH as a result of the group. The LSE listed Borsa Istanbul, CFT & Viel & Cie, Commerzbank, Deutsche Bank, Nasdaq, and Nomura as the companies it is buying out.

On top of this, a number of companies – Bank of America Merrill Lynch, Barclays, JP Morgan, Morgan Stanley, and Societe Generale – will be selling some of their stake in the firm.

Funding for the acquisition will come from the LSE’s cash and existing debt facilities at closing and will be accretive to earnings following completion. Assuming it gets the regulator’s nod of approval, the acquisition is likely to be completed by the end of 2018.

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