Revenues Fall at ICAP, But Shares Move Higher

UK Interdealer ICAP announced its full year financial results for the period ending March 31 2013. For the year, revenues fell 12% to £1.472 billion, with Earnings Per Share declining 68% to 6.7p. Profits before tax dropped 20% to £284 million. During the year, Electronic Markets and Post Trade Risk and Information composed 66% of the firm’s operating profit.

Among key developments during the year, ICAP mentioned the creation of the Global Broking division, strengthening of EBS and the launch of i-Swap in US dollars. The firm also stated that it had achieved £60 million in cost savings, which was £10m more than previously announced. They added that this would equate to £80 million in annualized savings, £20 million more than previously announced.

In ICAP’s prepared statement, Michael Spencer, Group Chief Executive Officer, said: “This has been an extraordinarily tough year in the wholesale financial markets. Trading activity across all asset classes was negatively affected by a combination of cyclical and structural factors including the depressed global economy, a low interest rate environment and lack of clarity around some aspects of regulatory reform. ICAP's financial performance reflects these extremely challenging conditions.

“Despite the current climate, we’re keeping our focus on the long term, delivering on our strategic goals and priorities. We’re investing, innovating and adapting the business to ensure it will thrive in the new financial landscape that is being shaped by profound regulatory changes. Wholesale financial markets are vital to the global economy and ICAP plays a critical role in increasing the transparency and efficiency of the markets and reducing risk.

“ICAP continues to benefit from its diversified business and global reach. Our electronic, post trade risk and information businesses now contribute 66% of operating profit. We have deepened our relationships and aligned our interests with our customers by partnering with them in i-Swap and Traiana.

In its Outlook, ICAP stated that “the new financial year has started encouragingly with an upturn in trading activity seen in April. Market conditions, however, remain fragile and unpredictable.” However, they refrained from providing any financial guidance but concluded “we continue to drive efficiencies within the organisation and improve the ongoing flexibility of its cost base. That said, investment for future growth remains a key priority, financed by the strong cash generation of the business and the delivery of cost savings.”

FX & Traiana

Commenting about its eFX Trading Platform Trading Platform In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real Read this Term EBS, ICAP stated that revenues fell only 11% to £137 million, despite a 24% decrease in trading volumes during the year. They added that the platform continues to hold a leading position in global EURUSD and USDJPY trading. (Volumes in the latter helped EBS start 2013 on a very positive note).

In terms of NDFs, ICAP stated that “activity in NDFs continued to grow, both in average daily volume, which increased by 645% over the prior year, and in the average number of daily trading counterparties which increased by 70% over the prior year.”

Regarding post-trade tools which includes ICAP’s Traiana division, ICAP stated that “demand for improvements in the efficiency of post trade processing and for reductions in the capital allocated to existing positions continued to provide opportunities for ICAP’s range of PTRI businesses. As a result, revenues at Traiana climed 19% to £43 million. It was also mentioned that Traiana continues to expand its Harmony Network to non-FX asset classes, stating “Harmony is now connected to nine of the top ten futures brokers, positioning Traiana to expand services to Buy-Side Buy-Side The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim The buy-side is comprised of firms in the financial industry that purchase securities and are accompanied by account investment managers, pension funds, and hedge funds.The buy-side is composed of those that buy and invest large sums of securities with the intention of generating a lucrative return or have their funds managed. The Buy-Side ExplainedIn terms of Wall Street, the buy-side includes investment institutions that purchase securities, stocks, or other financial instruments with the aim Read this Term firms and reinforce its value proposition to sell-side firms.”

On the news, shares of ICAP (IAP.L) are higher by nearly 10% to 326.20p