ICAP Sees Rising Full-Year Profit Following Cost Cuts

ICAP Plc, the world’s largest broker of transactions between banks, said it expects full-year profit to rise after eliminating jobs and cutting compensation.

Pretax profit before exceptional items for the 12 months through March 2014 will be “marginally ahead of the prior year” after increasing 1.5 percent to 139 million pounds ($221 million) in the first half, the London-based company said in a statement today. Revenue fell 1.3 percent to 736 million pounds in the first half, while costs declined 40 million pounds.

“Notwithstanding the decline in revenue and the continued investment in the business, our operating margin has improved,” Chief Executive Officer Michael Spencer said. “We have made good progress despite the subdued market conditions over the summer and uncertainty created by the implementation of new financial markets regulations in the U.S.”

ICAP shares rose 4.1 percent to 391.80 pence in London. They have gained about 28 percent this year.

Statutory pretax profit dropped to 40 million pounds in the first half from 68 million pounds, following settlement payments and legal fees associated with the Libor probe.

‘Surveillance Tools’

The firm said it continues to cooperate with regulators investigating the manipulation of ISDAFix, a benchmark used in the credit derivatives market, and with the European Commission and the Department of Justice on their probes into Libor.

Three former ICAP brokers charged in the U.S. over their involvement in Libor-rigging will be interviewed by U.K. prosecutors within weeks, two people with knowledge of the probe said earlier this month. Global regulators have fined banks including UBS AG, Barclays Plc and ICAP about $3.7 billion for distorting Libor and similar benchmarks.

ICAP has “no current reason to believe” that its brokers were involved in attempts to manipulate foreign exchange markets, or participated in the electronic conversations between traders being examined by regulators, said Duncan Wales, who oversees legal, risk and government affairs functions at the company, on a conference call today.

“We have our risk and compliance people look at market flows, we have surveillance tools, we have automated and human systems around that sort of thing,” Wales said. “But we can’t tell what’s going on outside the firm. We see trade flow, we see execution going through the platform and we can monitor that but we don’t know what we don’t know from the outside.”

An instant-messaging group involving traders at firms including Citigroup Inc., Royal Bank of Scotland Group Plc and Barclays is being scrutinized by regulators investigating potential manipulation of the foreign-exchange market, four people with knowledge of the probe said last month. Over at least three years, the dealers exchanged messages via Bloomberg terminals outlining details of positions and client orders, and made trades before benchmarks were set, two of the people said.

ICAP said it will pay an unchanged interim dividend of 6.60 pence per share for the fiscal first half.

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