LONDON--Interdealer broker ICAP PLC Wednesday said tougher
regulations and sleepy markets weighed on its business in the year
to March 31, with revenues falling 5% from a year earlier.
"Trading conditions have been and are likely to remain extremely
difficult," Chief Executive Officer Michael Spencer said. Efforts
by banks to scale back their trading operations, particularly in
fixed income, currencies and commodities, are a drag, he added.
Overall, ICAP reported a pretax profit of GBP122 million pounds
($205.61 million), compared with a pretax profit of GBP66 million a
year earlier, when earnings were hit by goodwill impairment
charges. Pretax profit, before acquisition and disposal costs and
exceptional items, amounted to GBP272 million compared with GBP284
million.
Revenue fell to GBP1.39 billion from GBP1.47 billion.
London-based ICAP said the weak trading trend seen in the second
half of fiscal 2014 has continued into the new financial year.
Persistent low volatility in the market pushed trading volumes on
ICAP's currencies trading platform EBS to a record low of $68.5
billion a day on average in April, down 47% from the year before.
The company said that multi year lows in volatility in major
currencies were among the drivers of the fall in volumes.
"Factors such as the low interest rate environment, muted
foreign exchange rate volatility and continued uncertainty over the
long overdue economic recovery, have inevitably impacted revenue,"
Mr. Spencer said.
The chief executive noted the company's "difficult year" also
included a GBP55 million legal settlement with authorities in the
U.K. and U.S. over the involvement of some of its employees in
efforts to manipulate a key interest rate benchmark. "We have
learned lessons from this experience and have taken steps to
strengthen the business," Mr. Spencer said referring to criminal
charges filed against ICAP's former employees in relation to the
Libor investigation.
Mr. Spencer reiterated that ICAP hasn't found evidence of
wrongdoing in relation to the foreign exchange and Isdafix probes.
In November Mr. Spencer said it had "no current reason" to believe
its employees were linked to the probe.
He said he has come to see dealing with regulatory issues of all
kinds as "a normal burden and challenge of life."
The company hasn't set an extra budget for fines, he added.
Meanwhile, ICAP continues to favor a shift from voice to
electronic brokerage. ICAP, which currently employs about 2,000
voice brokers, with an additional roughly 1,000 support staff in
voice brokering, will "redeploy" some staff to electronic trading
operations and other areas of the business, he said. ICAP also said
it is restructuring pay for voice brokers, to increase the
proportion of variable compensation.
Write to Chiara Albanese at chiara.albanese@wsj.com and Jenny
Strasburg at jenny.strasburg@wsj.com
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