Bloomberg News

ICAP Sees Full-Year Profit Meeting Reduced Analyst Estimates

February 01, 2012

(Updates with shares at close in fifth paragraph.)

Feb. 1 (Bloomberg) -- ICAP Plc, the world’s largest broker of transactions between banks, said full-year profit will be in a lower range than analysts estimated in November as the sovereign debt crisis curbed investor risk appetite.

Pretax profit, ICAP’s preferred measure of performance, for the fiscal year ending March 31 will be at the “upper end” of the current range of analyst estimates of 336 million pounds ($528 million) to 358 million pounds, the London-based broker said in a statement today. ICAP said in November it expected full-year profit would be in analysts’ then range of 358 million pounds to 390 million pounds.

“Like everyone else we saw a significant reduction in risk appetite in November and December,” Chief Executive Officer Michael Spencer said in the statement. “In January we saw encouraging signs of activity starting to return, albeit cautiously in some markets.”

ICAP said central bank and government efforts to stimulate the markets, including the European Central Bank’s offer of unlimited three-year loans to EU banks in December, had improved liquidity conditions in the region. Since the start of this year, the MSCI World Index has rebounded 5.1 percent.

ICAP closed up 7.7 percent at 362 pence in London trading, for a market value of about 2.3 billion pounds. Before today, the stock had fallen 37 percent in the past year.

Revenue from continuing operations fell 7 percent in the fiscal third quarter from the year-earlier period, ICAP said. Revenue in the nine months to Dec. 31 was down 2 percent on the comparable period in 2011.

ICAP said the debt crisis has prompted it to cut staff in units with declining profit and add employees in growth areas such as commodities and financial futures. The broker said today it has reduced costs by about 20 million pounds.

“There has been a recent pick-up in activity that we had hoped for,” JPMorgan Chase & Co. analysts Paul Measday and Rae Maile, who have a “neutral” rating on ICAP, wrote in a report to clients today. Though “the cost-cutting suggests to us that management expects that the market environment will remain challenging for the time being.”

--Editors: Edward Evans, Jon Menon.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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