Shares Lower As The Moscow Exchange Reports 2012 Earnings and Volume Results

The newly public Moscow Exchange (MOEX) has reported 2012 figures, with the trading venue hitting year over year growth in

The newly public Moscow Exchange (MOEX) has reported 2012 figures, with the trading venue hitting year over year growth in both income and revenues. For 2012, Net Income grew 22% to RUB 8.2 billion ($260 million) on 27% revenue growth of RUB 21.55 billion ($690 million).

Along with Money Markets, FX Trading was singled out by the MOEX as a driver of the firm’s growth. During the year, trading volume rose 34% to RUB 117 trillion ($3.76 trillion), with the unit generating RUB 2.08 billion ($70 million) in fees and commissions. The growth offset the exchange’s largest unit by revenues, Securities Market. Overall volumes of the division that includes both equities and bond trading were down by 21%, with a 41% fall in stock volumes.

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Commenting on the overall results as well as in regards to FX trading, Mr. Evgeny Fetisov, Chief Financial Officer of the Moscow Exchange, said, “Our results were very strong in 2012, with trading volumes across all markets totaling RUB 369.7 trillion, a 24% increase versus combined MICEX and RTS volumes in 2011. In particular, FX, Money Market and Derivative trading volumes were higher as a result of organic growth and new products and innovations, while global factors negatively impacted equities volumes resulting in lower trading volumes in that segment.”

As seen below, shares of the MOEX are currently trading around 49.00, below their February IPO level of 55.00/share.

moscow exchange

ANALYSIS OF FY 2012 FINANCIALS
Total Revenues. Revenues were up 27% YoY to RUB 21.55 bln. Revenue growth for the year was driven by growth in derivatives fees and commissions, higher volumes on FX and Money Markets as well as increased interest income.

Securities Market. Fee & commission income from the securities market decreased 26% YoY to RUB 3.08 bln. Total trading volume in 2012 was RUB 24.1 trn, down 21% YoY. The 41% decline in equity volumes was offset by trading in bonds that was up 19% YoY. Total capitalization of the Exchange’s equity market amounted to RUB 25.2 trn (US$ 816.9 bln) by YE 2012. The decline in equity trading volumes was largely driven by the negative backdrop for equity markets globally.

Foreign Exchange Market. Fee & commission income from the FX market increased by 28% YoY to RUB 2.08 bln. Trading volumes on the FX market totaled RUB 117.0 trn, up 34% YoY. Growth on the FX Market was driven by both favorable market conditions for this segment and as well improvements adopted by the Exchange.

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Money Market. Fee & commission income from the money market increased by 108% YoY to RUB 2.01 bln. Total trading volume on the money market including repo transactions and lending market amounted to RUB 179 trn (with the repo volume reaching RUB 169 trn), an increase of 45% YoY. The growth was due to the Central Bank of Russia’s implementation of monetary policy and economic stimulus via the Exchange.

Derivatives Market. Fee & commission income from the derivatives market increased by 56% YoY to RUB 1.25 bln. The trading volume amounted to 1.06 bln contracts representing RUB 50.0 trn, down 3% YoY. Open interest reached RUB 270.0 trn by YE 2012, up 24% YoY. During 2012 trading volume in some specific instruments increased significantly: volume of USD/RUB FX futures was up 91% YoY, OFZ futures were up 191% YoY.

Depositary and Settlement Services. Fees & commission income from depositary and settlement services increased 8% to RUB 1.92 bln.

Other Revenues. Other revenues increased by 56% YoY to RUB 1.11 bln. The biggest contributors to this line are revenues from the sale of IT services (RUB 528.15 mln, up 149% YoY) and revenues from the sale of information (RUB 404.00 mln, up 45%).

Interest & Other Finance Income. Interest & other finance income increased by 45% YoY to RUB 10.03 bln. This was primarily due to an increase in funds available for investments (RUB 285.86 bln as of YE 2012, up 6% YoY) and a more favorable interest rate environment.

Cash and Cash Equivalents. The Exchange cash position³ at YE 2012 totaled RUB 31.61 bln. The Exchange had no debt as of year-end 2012.

Expenses. Operating expenses in 2012 increased by 23% YoY to RUB 9.42 bln, driven mainly by growth in personnel expenses4. Significant savings came from lower spending on professional services (RUB 826.03 mln, a decrease of 26% YoY), rent and office maintenance as well as advertising and marketing costs (RUB 492.16 mln and RUB 273.49 mln, respectively, down 3% YoY for both costs lines).

Capital expenditures for the FY 2012 totaled RUB 1.81 bln, most of which related to renovation costs of a new office building for the National Clearing Centre and National Settlement Depository on Spartakovskaya street, which totaled RUB 1.22 bln.

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