ICAP 'resilient' in face of tough Brexit outlook

Group revenue from continuing operations for the quarter increased by 2% on a constant currency basis and by 7% on a reported basis over the same period last year.

ICAP’s board said overall market conditions have been mixed as the “malaise” in global financial markets, low interest rates and bank deleveraging persists, though trading activity levels saw a spike around the time of the EU referendum in the UK.

“I expect 2016/17 to be an exciting and challenging year for ICAP as we transition to become NEX Group plc, the leading venue for electronic transactions in OTC products and post trade services,” said CEO Michael Spencer.

“Our industry position, built around market-leading products and services developed over many years, provides us with an outstanding opportunity to deliver long-term profitable growth.”

The FTSE 250 firm said revenue in its electronic markets division decreased by 2% on a constant currency basis during the period, and increased by 3% on a reported basis in the first quarter.

On the BrokerTec platform, average daily volume decreased in US Treasuries by 17% to $142bn, in US repo by 7% to $202bn and in European repo by 2% to €175bn.

Average daily volume on EBS decreased by 15% to $83bn for the first quarter, the company reported, as volatility remained low.

ICAP said revenue did not decrease in line with volume as a result of changes to the product mix and the effect of the volume-based tiered tariff structure.

In its post-trade risk and information business, revenue increased 6% on a constant currency basis and 12% on a reported basis compared to the same period last year, with continuing demand for risk mitigation products a key driver, particularly for TriOptima.

During the quarter, triReduce extended its customer base by completing the first successful compression cycle for cleared euro interest rate swaps at Eurex Clearing, and expanded its product range by adding an inflation product for compression.

The repository reconciliation offering from triResolve, which aligns the records of the reporting parties with those of global trade repositories, was continuing to grow with the user base during the period reaching more than 1,700 parties.

ICAP said the division’s performance also benefited from the performance of Reset in which the core business saw improvement in its US dollar revenue, following the significant impact in the prior year of low short-dated interest rate volatility and the ECB’s quantitative easing programme.

In the company’s discontinuing operations, revenue at IGBB was flat on a constant currency basis and increased by 2% on a reported basis, with trading activity continuing to be impacted by ongoing structural and cyclical factors, according to ICAP’s board.

This was partly offset, however, by increased activity following the result of the UK EU referendum in late June.

ICAP said good progress was made with the continued roll-out of Global Broking’s e-commerce solutions and hybrid footprint, including an increase in the number of customers using buyside portal TrueQuote.

"We have made a good start to the year and remain cautiously confident looking ahead despite a more uncertain macroeconomic outlook for the UK and the global economy since the Brexit vote in the UK on 23 June,” Spencer commented.

“The referendum result was a tremendous shock to global financial markets but our platforms demonstrated resilience.

“We handled more than $200bn of FX volume on 24 June on our EBS platform demonstrating deep and reliable liquidity throughout a period of extreme volatility,” he added.

Spencer said that, prior to the UK referendum, the company was looking towards a “long and slow journey” back to more normal market conditions following the Fed’s decision to raise interest rates in December.

“This journey looks more uncertain now although the subsequent decline in sterling in the FX markets does provide us with a significant windfall benefit.”