ICAP Full-Year Profit Falls Amid ‘Challenging’ Conditions

ICAP Plc (IAP), the world’s largest broker of transactions between banks, said full-year revenue and operating profit declined amid “extremely difficult” trading conditions.

Revenue for the 12 months through March fell 5 percent to 1.4 billion pounds ($2.4 billion), the London-based company said in a statement today. Operating profit declined 4 percent to 295 million pounds, missing the 304.5 million-pound mean estimate of six analysts surveyed by Bloomberg.

“Trading conditions have been and are likely to remain extremely difficult,” Chief Executive Officer Michael Spencer said in the statement. “The low interest rate environment, muted foreign-exchange rate volatility and continued uncertainty over the long overdue economic recovery have inevitably impacted revenue.”

ICAP shares were little changed at 389.80 pence by 12:52 p.m. in London. They have dropped about 14 percent this year.

Profitability was being eroded as banks scaled back their trading operations, particularly their fixed-income, currencies and commodities divisions, the firm said. To counter this drop in revenue, ICAP is reducing headcount in less profitable areas of its business and restraining pay elsewhere, it said.

Photographer: Chris Ratcliffe/Bloomberg

Michael Spencer, chief executive officer of ICAP Plc. “The low interest rate environment, muted foreign-exchange rate volatility and continued uncertainty over the long overdue economic recovery have inevitably impacted revenue,” said Spencer in the statement. Close

Michael Spencer, chief executive officer of ICAP Plc. “The low interest rate... Read More

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Photographer: Chris Ratcliffe/Bloomberg

Michael Spencer, chief executive officer of ICAP Plc. “The low interest rate environment, muted foreign-exchange rate volatility and continued uncertainty over the long overdue economic recovery have inevitably impacted revenue,” said Spencer in the statement.

Libor Investigation

Spencer said an investigation into the manipulation of yen Libor made the past year “difficult.” ICAP paid 55 million pounds to the U.S. Commodity Futures Trading Commission and the U.K. Financial Conduct Authority to settle a probe relating to the involvement of its brokers in assisting bank traders seeking to manipulate the London interbank offered rate for the Japanese currency.

Three ex-ICAP employees have been charged in the U.K. and the U.S. for conspiring to help former UBS AG trader Tom Hayes rig yen Libor. Spencer said he stood by a previous statement that the firm had no reason to believe that its brokers had been involved in attempts to rig the foreign-exchange market.

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: Gavin Finch in London at gfinch@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net Steve Bailey, Frank Connelly

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