ICAP slumps on Credit Suisse downgrade

ICAP was under the cosh on Monday as Credit Suisse downgraded its stance on the stock to ‘neutral’ from ‘outperform’ and cut the price target to 450p from 475p following the full-year 2016 results, with the valuation up with events.

CS said the downgrade reflects weak electronic volumes and lower NewCo earnings estimates resulting from higher retained costs.

“We continue to model for the whole of ICAP plc, including the businesses being sold, and cut our FY17-18 EPS estimates 5-8% on lower electronic volume growth and higher cost assumptions.”

The bank said ICAP’s full-year 2016 results were weak, with trading pre-tax profit of £203m, down 11% year-on-year amid poor volumes and ongoing investment. Credit Suisse had pencilled in profit of £206m while consensus had it at £209m.

Finance costs and the group tax rate were in line, resulting in trading EPS of 24.6p, 2% shy of consensus of 25.2p.

CS said that even though consensus forward EPS estimates have fallen around 10% year-to-date, risks still look skewed to the downside.

“While the company has indicated that global economic uncertainties and oil price reductions have generated spikes in volumes, overall market activity remains subdued.”

At 1018 BST, ICAP shares were down 4.6% to 411.96p.