Bloomberg News

LCH.Clearnet Profit Climbs on OTC Business, LSE Purchase

February 15, 2013

LCH.Clearnet Ltd., the world’s largest interest-rate swap clearinghouse, said full-year profit almost tripled as revenue from over-the-counter business climbed.

Profit after tax rose to 59.7 million euros ($79.6 million) from 21.2 million euros in 2011, the company said in a Regulatory News Service statement today. Net revenue climbed 24 percent to 426.2 million euros. Operating expenses rose 8 percent to 298.7 million euros.

“The group’s revenue base continues to diversify across its products and services,” LCH said in the statement. “As the OTC businesses grow, the proportion of the group’s revenues derived from other asset classes will reduce.”

In the past year, the London-based clearinghouse has agreed to sell a stake of as much as 60 percent to London Stock Exchange Group Plc and renegotiated the terms after European rules showed it would require a capital increase.

It also applied for a license to operate in the Australian market, and bought International Derivatives Clearing Group LLC from Nasdaq OMX Group Inc. and other investors.

LCH is also in talks with Singapore Exchange Ltd., as the operator of Southeast Asia’s biggest stock market seeks to take a stake, according to three people familiar with the negotiations. LCH is introducing new over-the-counter services, including one for foreign exchange, and negotiating new rules as regulators around the world seek to push more trading onto clearinghouses following the financial crisis.

The U.S. began the Dodd-Frank regulatory overhaul in 2010 in reaction to the role of swaps contracts in helping to fuel the 2008 credit crisis. The European Commission has sought to introduce a similar framework for the 27 member states of the European Union.

LCH’s SwapClear business reported clearing revenue rose 36 percent to 59.8 million euros from 44.0 million euros in 2011. The increase was down to new members, existing members moving from the introductory to the standard tariff and the growth of client clearing, the firm said today.

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To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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