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LSE Profit Jumps on Earnings From Italian Counterparty

May 18 (Bloomberg) -- London Stock Exchange Group Plc, Europe’s oldest independent bourse, said fiscal second-half profit quadrupled, boosted by money earned from deposits at its Italian central counterparty.

Net income for the six months ended March 31 climbed to 405.9 million pounds ($641 million) from 89.4 million pounds a year earlier, according to Bloomberg calculations based on full-year results in a Regulatory News Service statement today. Net treasury income, LSE’s earnings from deposits at its Italian central counterparty, more than doubled to 126.9 million pounds.

Chief Executive Officer Xavier Rolet is trying to diversify LSE’s business away from traditional equities after losing market share to alternative trading systems. In December, LSE agreed to buy the 50 percent of FTSE International Ltd. it didn’t already own from Pearson Plc for 450 million pounds in cash. In March, LSE announced it would purchase a majority stake in LCH.Clearnet Group Ltd.

“While the current run rate of treasury income is not sustainable, the benefits of the recent deals are still to flow through the profit and loss account and we expect to upgrade our forecasts quite significantly,” James Hamilton, an analyst at Numis Securities, wrote in a note today. “The LSE has largely rebalanced and repositioned itself in the recent past.” He raised his recommendation to buy from add.

LSE shares rose 27.5 pence, or 2.9 percent, to 992 pence at the close of trading in London.

Capital Markets

Sales from capital markets, where LSE makes money from company listings and trading, climbed 3.6 percent to 301.9 million pounds. Revenue from post-trade services increased 2.3 percent to 101.6 million pounds.

Information-services revenue rose 27 percent to 218.9 million pounds and sales from technology services gained 8.2 percent to 52.6 million pounds.

The exchange is conducting a study on how it distributes company statements, fueling speculation that banks and brokers will have to pay to receive the information.

The exchange plans to expand its FTSE index business into the U.S. and emerging markets, Rolet told reporters on a conference call today.

“Cost is not just a discipline, it’s becoming part of our DNA,” Rolet said today.

LSE scrapped its bid for TMX Group Inc. last year after failing to win support from the Canadian company’s shareholders.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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