ICAP Says Revenue Slipped 6% in Final Three Months of 2013

ICAP Plc (IAP), the world’s largest broker of transactions between banks, said revenue in the three months to the end of December fell 6 percent from the year-earlier period, with a “slower” December than anticipated.

The firm said its expectations for full-year pretax profit are unchanged, according to a statement today. ICAP may post a profit of between 274 million pounds ($447 million) and 295 million pounds, according to analyst estimates compiled by ICAP.

“Trading activity across many markets was down in the third quarter, compared to the prior year,” Chief Executive Officer Michael Spencer, 58, said. “Although market conditions remain difficult, we saw a modest improvement in activity in January.”

ICAP said banks’ efforts to shrink their balance sheets, together with disruption linked to the introduction of platforms known as Swap Execution Facilities crimped the performance of its global broking unit. The Dodd Frank Act of 2010 included provisions to push the trading of swaps from largely unregulated trading away from exchanges to more transparent systems. Major swap dealers will have to use SEFs for interest-rate derivatives from Feb. 15, Spencer said.

“This may be a non-event, but equally there are a few differing interpretations on the small print which may mean volumes shrink temporarily,” he said on a conference call.

Photographer: Chris Ratcliffe/Bloomberg

The ICAP Plc logo is seen on the company headquarters at 2 Broadgate in London. Close

The ICAP Plc logo is seen on the company headquarters at 2 Broadgate in London.

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Photographer: Chris Ratcliffe/Bloomberg

The ICAP Plc logo is seen on the company headquarters at 2 Broadgate in London.

The stock fell 0.1 percent to 388.8 pence as of 8:27 a.m. in London trading, for a market value of 2.5 billion pounds.

ICAP said in November it has been cutting jobs and pay to reduce costs in a bid to bolster earnings as revenue dropped in the first half of the year. The company said today its cost-reduction plan remains on track.

Interdealer brokers such as ICAP act as a go-between for banks that trade bonds, stocks, currencies, energy and derivatives. They profit when prices fluctuate because more traders use the products they trade.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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