Tullett Prebon, ICAP Advance After UBS Upgrade: London Mover

ICAP Plc (IAP) and Tullett Prebon Plc (TLPR), two London-based brokers, led financial stocks higher after they were upgraded by UBS AG on prospects of higher trading volumes.

ICAP, the biggest broker of interest-rate swaps between banks, rose as much as 4.6 percent to the highest intraday price in more than 11 months. The shares were up 3.5 percent at 361 pence at 11:20 a.m. It was the best performer in the Stoxx 600 Financial Services Index.

Tullett Prebon, an interdealer broker that lines up buyers and sellers of securities for banks, rose as much as 5.7 percent and was up 4.7 percent to 287.9 pence, the highest price since Feb. 25. It was the fifth-best performer among the 600 members of the FTSE All-Share Index.

UBS upgraded both ICAP and Tullett Prebon to neutral from sell, citing valuations as well as the likelihood of increased trading volumes. Both companies have underperformed financial stocks by about 35 percent over the past year and exchanges by about 30 percent, the bank said.

“This underperformance has been driven by a relative de-rating and weak earnings momentum,” UBS said in a note to clients. “We see risks to the upside on both fronts.”

Interdealer broker trading volumes are up 9 percent in May from April and 6 percent from a year ago, UBS said. The volume of shares traded on the FTSE All-Share Index (ASX) last year was the lowest this century, according to data compiled by Bloomberg.

UBS raised its 12-month share price target for ICAP by 11 percent to 340 pence from 305 pence and removed the stock from its least-preferred list. It increased the price target for Tullett Prebon by 12 percent to 280 pence. The bank also raised its earnings estimates for both companies.

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

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