ICAP slumps on Barclays downgrade

Shares in interdealer broker ICAP were under pressure on Friday after Barclays downgraded the stock to ‘equalweight’ from ‘overweight’ and cut the price target to 500p from 600p pointing to a lack of earnings momentum.

The bank noted that ICAP shares were a strong outperformer from January to May but have since come off and are now only up 1% year-to-date versus the FTSE All Share.

“Our analysis of ICAP’s electronic volumes shows weakening trends in recent months contributing to this. Volume comps get tougher from September 2015 onwards and the European investment banks are continuing to shrink their FICC divisions,” it said.

Barclays said ICAP has attractive electronic and post-trade assets. However, its voice broking division operating margins have slumped to only 8% and volume recovery appears to have stalled.

“We would like to see further progress on rationalising cost base in the voice division,” analysts at the bank said.

They added that earnings momentum has stalled and pointed out that ICAP has seen consensus downgrades since May with the 2016E EPS cut by 4% since that time.

At 1020 BST, ICAP shares were down 2.7% at 450.20p.