IG ups marketing and adds low-risk products amid regulatory crackdown

IG Group posted a strong set of interim results, though profits were limited by significantly increased marketing spending and developed new lower-risk products to assimilate to the tighter regulatory environment.

The effect of the marketing spend was evident in a 22% year-on-year increase in active customers, new client numbers rising 59% and revenue in the second quarter reaching a record £133.4m, up 23% on the prior year.

For the half year to 30 November net trading revenue climbed 14% to £244.9m as

With the increased marketing leading to a 23% rise in operating costs, profit before tax rose only 6.7% to £105.2m and diluted earnings per share by 7.8% to 22.55p.

An interim dividend of 9.42p per share is intended.

IG admitted to a new uncertainty of outlook created by a number of regulatory developments after the end of the period.

This included December's warning to the industry from the UK financial watchdog, the Financial Services Authority, that it intended to clamp down on higher-risk leveraged trading, limiting leverage to 50:1 for experienced clients and 25:1 for inexperienced clients, with regulators in several European countries putting out similar announcements.

IG said on Tuesday that the Dubai regulator was in discussions with IG and others about the outcome of a review into highly-leveraged products, which the company said it expected "to have some impact on its business in the country", which accounted for 15% of net trading revenue in the period.

IG has been looking at widening its service offering for a while now and, following its addition of stock broking last year, this month received a licence to offer a discretionary managed investment service in the UK, in partnership with BlackRock, and intend to launch a smart portfolio ETF product in the UK in the near future.

It has also rolled out a new 'Limited Risk' account, with no-negative guarantee, around the world, while also withdrawing its Sprint binary betting product from being offered to new clients.

"We welcome the intentions of the FCA and other European regulators to improve consumer outcomes across the industry, and we believe that IG's Limited Risk account will play an important role in this," said chief executive Peter Hetherington, adding that around half of the accounts in the UK are being opened on this basis now.