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Deutsche Says Second Writedown on ISE Business to Cut Net by $291 Million

Deutsche Boerse AG, Europe’s largest securities exchange, said it will take a second writedown on its International Securities Exchange business that will cut “in the range of” 220 million euros ($291 million) from 2010 net income.

Deutsche Boerse will take an impairment charge in the range of 450 million euros for 2010, the exchange said in a statement today, adding “the impairment charge will be partially offset by a reduction in deferred tax liabilities relating to ISE.”

The exchange also said a one-off gain related to its Clearstream unit will “have a positive impact on earnings of about 440 million euros.”

Deutsche Boerse owns the Frankfurt stock exchange; Clearstream, Europe’s second-biggest securities-settlement company; Eurex Clearing AG; and a holding in Eurex, the region’s largest futures market. Eurex bought International Securities Exchange in 2007. On Oct. 28, Deutsche Boerse said in a statement that it may have to take a charge for ISE, citing “still pending regulatory approval for certain functions and the subdued trend on the U.S. options market.”

In the fourth quarter of 2009, the company recorded its first pretax charge for ISE, of 415.6 million euros, after growth in options trading slowed during the year. Deutsche Boerse partly offset that writedown with a gain of 66.7 million euros from the cancellation of an insurance policy.

ISE’s share of options on U.S. equities and exchange-traded funds has declined to the lowest level in more than seven years as venues operated by Nasdaq OMX Group Inc. and NYSE Euronext have gained volume. ISE handled 19.2 percent of options trading in September, its lowest level since April 2002, according to data compiled by Chicago-based Options Clearing Corp. which clears and settles trades of exchange-listed contracts.

ISE Impairment

“The ISE impairment is well flagged and is already discounted in the current share price,” Christian Muschick, an analyst at Silvia Quandt & Cie., said in a Dec. 8 note to investors. “We therefore see a good chance that it will not surprise negatively, but contrary will help sentiment as a major source of uncertainty should be gone.”

Muschick forecast a 450 million-euro impairment. He has a “buy” rating on the stock and a price target of 58 euros.

ISE’s market share shouldn’t dip further, Gregor Pottmeyer, Deutsche Boerse’s chief financial officer, told analysts on a conference call on Oct. 28.

Deutsche Boerse’s shares rose 1.4 percent to 49.95 euros at 5:19 p.m. in Frankfurt.

To contact the reporter on this story: Nandini Sukumar in London at

To contact the editor responsible for this story: David Merritt at

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